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Murrieta adopts tiered hotel development impact fee tied to AAA diamond ratings
Summary
Council approved a resolution to reestablish a tiered development impact fee for hotels, tying DIF rates to AAA diamond ratings with lower fees for higher-rated hotels; staff said most current proposals would fall into the 3-diamond category and that reductions are expected to be recouped by hotels through increased transient occupancy and sales tax revenue.
The Murrieta City Council unanimously adopted a resolution July 15 to reestablish a tiered development impact fee (DIF) program for commercial lodging, tying rates to the AAA Auto Club's diamond ratings rather than a list of amenities.
At the staff presentation, the city explained the approach: base the hotel DIF on the city's existing commercial DIF ($13.27 per square foot) and apply percentage reductions by AAA category. Under the proposal, budget entry-level hotels (approved/budget) would pay 75% of the current DIF (presented as $9.95/sq ft), 3-diamond hotels would pay 50% ($6.64/sq ft), 4-diamond hotels 25% ($3.32/sq ft), and 5-diamond (world-class luxury) would be exempt from the DIF under the staff scenario discussed in the presentation.
Staff noted the program would exclude time shares, short-term vacation rentals and fractional ownership properties. The presentation cited the city's prior hotel DIF program and said the rewrite was intended to reduce confusion about what constituted an "amenity" and to make Murrieta more competitive in recruiting higher-brand hotels.
"If the Ritz Carlton Murrieta wanted to come and create the Ritz Carlton Murrieta, we would propose not to charge them a development impact fee," the staff presentation said, presenting the city view that higher-end hotels produce tax revenue that would offset lower DIFs. Patrick Ellis, representing the Chamber of Commerce and Explore Murrieta, testified in support, saying the change gives the city a tool to recruit higher-brand hotels and compete for projects now under review.
Council members asked about how many pending hotel applications exist and which tiers those projects would fall into; staff said several pending projects would likely match the 3-diamond tier. Following the public hearing, Mayor Pro Tem LaValle moved to adopt the resolution (referenced in the record as resolution number '2 5 4 8 6 9'), Council Member Lisa DeForest seconded, and the motion carried unanimously, 5-0.
Staff said the DIF rates would remain tied to the city's commercial DIF schedule and would change with CPI adjustments as the base DIF changes.
