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Costa Mesa directs staff to study hotel tax and business license tax options for Nov. 2026 ballot
Summary
Council voted 4–2 to direct staff to conduct a comprehensive review of two potential November 2026 ballot measures: a change to the transient occupancy tax (TOT) and a modernization/increase of the business license tax; staff said each 1% TOT yields about $1M/year and that the business license tax has not been significantly updated since 1985.
The City Council on Dec. 2 authorized staff to study two potential general‑fund ballot measures for the Nov. 2026 ballot: (1) an adjustment to the transient occupancy tax (TOT), commonly known as the hotel tax, and (2) a restructuring or increase of the business license tax.
What staff proposes to study: Finance staff recommended a comprehensive review to model revenue outcomes, equity effects and likely voter support. The presentation noted each 1 percentage point of TOT would generate roughly $1 million annually for the city. City staff advised engaging consultants and stakeholders, including the business community and hospitality partners, to develop options and outreach.
Business license tax context: Costa Mesa’s business license structure dates to 1985 and currently collects roughly $700,000–$900,000 annually; neighboring cities with different structures collect materially more. Staff recommended minimizing or exempting small, locally owned businesses from significant new burdens and designing a phase‑in to reduce sticker shock.
Process and vote: FIPAC recommended study of both measures; council discussion focused on whether to limit review to TOT only or study both items. The council voted 4–2 to direct staff to study both TOT and a revised business license tax for a possible November 2026 placement, with staff noting that the council must adopt specific ballot language by early August 2026 to meet election deadlines.
Next steps: Staff will conduct revenue modeling, stakeholder outreach (including the Chamber and Travel Costa Mesa), vet legal constraints on tax indexing, and return with recommended language and fiscal analysis for council consideration.
