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Pleasanton residents will be voting on increasing the city’s hotel tax rate during the Nov. 3 general election following the City Council’s unanimous decision last week to place the revenue measure on the upcoming ballot.
The general tax measure, which will need a simple majority vote to pass, seeks to increase the city’s hotel tax rate from 8% to 10% starting July 2027. The measure stipulates an additional increase from 10% to 12% would take effect the following year, which the city says could generate up to $2.8 million annually once the full increase to 12% is realized.
“While our fiscal challenges will require fiscal discipline, I do believe asking the voters for the Pleasanton transient tax to increase, which hasn’t changed since 1983, is appropriate and reasonable at this time,” Pleasanton Mayor Jack Balch said during the July 7 council meeting.
Pleasanton has been dealing with fiscal challenges with its budget over the past couple of years, including a structural deficit.
“The city is facing a structural budget gap, which simply means our costs are going faster than our revenues,” Aaron Zavala, assistant to the city manager, told the council last week.
“In the 10-year financial forecast we reviewed with you on May 19, the baseline projects ongoing annual general fund shortfalls,” Zavala added. “This is before the additional gap we face in infrastructure funding.”
Zavala said the city has been addressing this structural deficit in two ways; reducing spending and pursuing new revenues like the transient occupancy tax increase. A TOT — also known as a hotel tax — is a tax on short-term stays at hotels and motels.
“It is one of the few revenue tools where the cost falls mostly on visitors, rather than Pleasanton residents,” Zavala said.
According to Zavala, Pleasanton has the lowest TOT compared to other cities in Alameda County at 8% — the majority of others have a tax rate between 10% and 14%. The city hasn’t increased its hotel tax in 43 years, he added.
After directing staff to mobilize around the hotel tax nearly one year ago, staff began talking to hotel managers throughout the city and surveyed residents to see whether the two groups would support such a measure on the November ballot.Â
Zavala previously said residents, for the most part, supported the increase while the hoteliers’ stance on the increase was mostly neutral, with the caveat that they had requested the two-year step up versus a one-year increase from 8% to 12%.
Following the city’s evaluation on the feasibility of passing the hotel tax increase measure, staff presented the draft ballot language and related information to the council on June 2, which is also when the council signaled to staff to finalize all of the documents needed to place the measure on the ballot.
According to the measure’s ballot language, the revenue generated by the hotel tax increase could be used to maintain city services including, but not limited to, police and fire, park and street maintenance, recreation programs and other general government needs.
“This measure is a meaningful, visitor-funded step that keeps dollars here in Pleasanton for the services our residents rely on,” Zavala said.
During the June 2 meeting, the council was aligned on the tax rate increase, except for councilmembers Julie Testa and Jeff Nibert, who both pushed for the full transition from 8% to 12% to occur in the first year.
Testa held her stance last week, saying she did not believe the increase should have been phased over two years because it leaves money on the table but she still supports the measure.Â
Interim City Manager Joe Calabrigo noted how the projected $2.8 million from the 12% increase would offset the current structural deficit — which he said is in the ballpark of between $7 million to $8 million — by roughly a third. The city previously placed a half-cent sales tax increase, Measure PP, on the November 2024 ballot to further offset that deficit but failed to get enough support from residents.
Despite disagreeing with the phased approach, Testa voted along with the rest of the council to place the measure on the November ballot.
“I still have absolute support for putting this on the ballot,” Testa said. “I think it is needed and I believe it will be strongly supported by the community.”
“It’s not enough to replace Measure PP … but we can’t not take this opportunity to at least support our budget deficit,” she added.
Nibert also said as the city continues to pursue economic growth and vitality to address its structural deficit, there is “no way we can grow Pleasanton” enough to get out of that financial hole over the next few years. Still, he said the hotel tax would at least bring in consistent revenue annually.
Councilmember Craig Eicher also noted that while the hotel tax increase, if passed, will help Pleasanton generate new recurring revenue without raising taxes on residents or local businesses, it is just one of the many actions the city is taking to stabilize its budget.
“In addition to this modest revenue generation tax, we will need to continue our efforts at growing our city’s economy, while also aggressively managing our budget to ensure future balanced budgets while meeting the service needs of our community,” Eicher said.
Following last week’s approval, the city attorney will work on preparing an impartial analysis of the measure, which will be due to the city on Aug. 5. The council also formed an ad hoc committee composed of Eicher and Nibert that will work on drafting a primary argument in support of the measure on behalf of the City Council.Â
That pro argument, along with any opposition argument, will be due to the city clerk’s office on Aug. 13 — any rebuttal arguments will be due Aug. 20.
