Carmel-by-the-Sea council directs staff to pursue language for possible November 2026 TOT increase after heated public debate
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Summary
After a staff presentation showing a 2‑point TOT increase (10%→12%) could yield about $1.8M, hoteliers warned of lost occupancy and reinvestment impacts; council voted 4–1 to ask staff to draft ballot language and return in April for review.
The City Council opened a detailed discussion about whether to pursue an increase in the City’s transient occupancy tax (TOT), a tax paid by short‑term lodging guests. Marissa (city staff) explained the legal and electoral options and presented revenue scenarios that estimated a 2 percentage‑point increase—from 10% to 12%—could generate approximately $1.8 million annually but emphasized actual receipts would depend on tourism conditions.
Marissa summarized the legal framework: a general tax (simple majority approval by voters) requires a four‑member council vote to place a measure on the ballot and must appear on an even‑year November ballot; a special tax (dedicated revenue for a specific purpose) requires two‑thirds voter approval and a three‑member council vote. “This is going to be a two‑part presentation,” Marissa said, explaining the council needed to direct staff on timing, rate and whether the measure would be general or special.
Hotel owners and business groups responded with robust opposition. Mark Watson (hotelier and Busy Carmel treasurer) and other lodging representatives presented a packet arguing the staff report was incomplete and urged more stakeholder engagement. "Raising the TOT now doesn't necessarily protect the city's finances from the long term fiscal impacts," Mark Watson said, arguing higher effective lodging costs could reduce overnight stays and merchant spending.
Carrie Theis, a resident and innkeeper, told council the timing was poor: she said a wave of new hotel rooms is expected across the Peninsula and a higher TOT could push price‑sensitive visitors to other jurisdictions. "New room supply floods the market and could have an effect on what we're doing every day," Theis said, asking council to consider a broader menu of revenue options before requesting a tax increase.
Several council members pushed back and asked for more data. Councilmember Hans said he and the Finance Committee had reviewed revenue options and that a modest TOT increase to bring Carmel closer to neighboring jurisdictions’ rates is one of the least‑bad options to help close a multi‑million‑dollar capital funding gap. “If we do this, any incremental revenue should be devoted exclusively to capital expenditures,” Hans said, stressing he expected a council policy to earmark funds for capital projects even if ballot language remains a general tax.
After extended council debate and public testimony, Councilmember Jeff moved to direct staff to draft ballot language and return with proposed language in April and a resolution by the July meeting to place a measure on the November 2026 ballot if the council so chooses. Hans seconded the motion. In a roll call, Councilmembers Baron, Bueter, Delves and Dramoff voted yes; Mayor Byrne voted no. The motion passed 4–1.
Councilmembers and staff emphasized the direction was exploratory: staff will prepare draft language, schedule further stakeholder outreach and present final language and analysis to the council in April. Any final decision to place a measure on the ballot would require a subsequent council resolution that complies with state election deadlines.
Next steps specified by council: staff to return in April with draft ballot language and additional outreach and analysis, including more detailed revenue modeling and stakeholder engagement; if the council decides to proceed it would adopt a resolution by the July deadline to place a question on the November ballot.
