2023 June 23 Oppose unless amended SB 584 Short term rental tax

June 23, 2023

Honorable Chair Jacui Irwin
Assembly Committee on Revenue and Taxation
1020 N. Street, Rm 167A
Sacramento, CA 95814

Honorable Chair Buffy Wicks
Assembly Housing and Community Development Committee
1020 N. Street, Rm 156
Sacramento, CA 95814

RE: OPPOSE UNLESS AMENDED – SB 584 (Limón) AS AMENDED MAY 18, 2023

Honorable Chair Irwin and Chair Wicks, 

On behalf of the counties of Nevada, Placer, and Marin, we write to express our joint opposition – unless amended – to Senate Bill 584 (Limón), as amended May 18, 2023, proposing to institute a 15% excise tax on short-term rentals (STRs) that generate over $100,000 in revenue in a calendar year. Proceeds would be dedicated to provide grants for the creation of “labor force housing.” 

While we appreciate the intent to provide ongoing funding for workforce housing solutions, we are concerned that SB 584 will have adverse unintended consequences to local jurisdictions, jeopardizing the viability of current and future revenue generating mechanisms.  Statewide, there are more than 400 cities and 55 counties that impose a local Transient Occupancy Tax (TOT) with an average rate of 10%.  These TOT rates have taken many years to reach their current levels and are often increased incrementally and approved by local voters.  

SB 584 would layer an additional mandated 15% tax on top of any local TOT, thereby jeopardizing future voter approval of existing local TOTs that serve many communities directly, including for affordable housing, economic development, business improvement districts, and enhanced fire/emergency services. It may become exceedingly more difficult for local governments to raise or preserve their local TOTs with a new baseline state TOT of 15%.

Specifically, SB 584 takes a one-size-fits all approach and fails to consider pre-existing local initiatives where housing and community development are already funded via TOT, approved by local voters.  A state-wide taxing initiative focused on developing workforce housing should consider pre-existing local averaging rates and only apply if there is no existing local TOT which furthers local services with nexus to affordable housing/community development.  

For example, Marin County voters approved Measure W, a 2018 TOT which recognizes the impacts of the millions of visitors to the coastal West Marin area each year. A 4% increase in TOT (10% to 14%), Measure W generates $1.3 million annually for the community’s highest priorities to offset visitor impacts, specifically including enhanced fire/emergency services and long-term community housing.  Should SB 584 be passed in its current form, this would mean a sudden increase to a 29% TOT in West Marin, and voters would be far less likely to approve any increase in the local Measure W to further advance local priorities.

In 2022, Placer County voters passed Measure A – a 2% increase in TOT (12% total) which will result in an additional $4 million annually to maintain and address North Lake Tahoe’s local critical quality of life services.  This increase in TOT addresses local needs such as workforce housing; reducing traffic congestion and trash/litter in public places/streets; maintaining public beaches/parks/trails/shoreline recreation areas; and other general services.  If SB 584 were to pass, this would bring the general TOT rate in Placer County to as high as 27%.

Second, SB 584 fails to include a Return To Source mechanism to ensure local jurisdictions are able to apply housing dollars best where funds are generated, and there is no aspect of local control in project selection that is key to other voter-approved local TOTs.  For example, the Town of Truckee and Tahoe City in Nevada County and Placer County, respectively, are overwhelmed by the lack of workforce housing due to second homes, and a paralyzing booming recreational economy that has resulted in area median income (AMI) well above the state that effectively shuts the door on competitive grant dollars when competing with other areas of the state.

Additionally, SB 584 would place rural communities that often serve as tourism and recreational hubs at a disadvantage through a competitive grant process where more urban municipalities would have further competitive capacity.  

Finally, SB 584 does not include critical transparency requirements to disclose STR location/contact data for compliance enforcement.  Without an ability to review, evaluate, follow-up, and enforce STRs and associated platforms, SB 584 lacks a critical operating ingredient necessary for success. 

For these reasons, Nevada County, Placer County, and Marin County must respectfully oppose SB 584 unless amended to 1) exempt pre-existing TOT communities with voter-approved TOT’s dedicated at least in part to affordable housing or community development, 2) include a Return To Source provision ensuring that locally generated funds are distributed back to the community source of origin where collected, and 3) require the transparent disclosure of STR location/contact data to local governments for compliance enforcement. 

If you have questions, please contact Karen Lange of Shaw, Yoder Antwih, Schmelzer & Lange at 916-446-4656 or xnera@FLNFYcnegaref.pbz. 

Sincerely,

Ed Scofield, Chair
Board of Supervisors
County of Nevada

Jim Holmes, Chair
Board of Supervisors
County of Placer

Stephanie Moulton-Peters, President
Board of Supervisors
County of Marin