Monterey City Council considering raising hotel tax to make up for revenue lost due to Covid-19.

Six years ago, the Monterey City Council made a promise to hotel owners. In exchange for hotels taxing themselves to pay for the $60 million Monterey Conference Center renovation, the council would not increase the transient occupancy tax – a percentage of each hotel bill to pay for city services – until the bonds used to finance the construction were paid off.

That was in ordinary times. The city is now in an extraordinary time when the Covid-19 pandemic is putting a TOT increase back in play.

The reason is a grim economic reality facing the city: a $13 million general fund deficit this year and a projected $21 million deficit next year, mostly due to the city’s dependence on TOT revenue. According to the March/April reporting period, TOT is down 79 percent from the same time last year, from $3.7 million to $772,000.

City Manager Hans Uslar proposed to the Monterey City Council on July 7 that to put a TOT increase from 10 to 12 percent on the Nov. 3 ballot. If passed, it’s projected to bring in somewhere between $2.8 million and $5.6 million.

It’s a layered proposal that includes separating the two-percent increase from current TOT revenue, 16 percent of which goes into a neighborhood improvement projects fund. Uslar argued that program is well funded at $3.9 million annually; he wants any increase to go into the general fund.

Monterey County Hospitality Association Board Member Rick Aldinger told the council a TOT increase was a bad idea when the industry is struggling. Anything higher than a 1-percent increase “could be crippling at this time.”

Some councilmembers were leaning toward a phased approach, with 1-percent to start, increasing to 2 percent. Council is set to discuss the proposal July 21, followed by a vote on July 29 to meet a deadline for placing measures on the ballot.