SAN DIEGO (CNS) - San Diego's hotel tax will increase Thursday, years after it was approved by voters and as the city faces an ongoing budget crunch.
Approved by 65.24% of San Diego voters in 2020 as Measure C, the ballot measure will increase the city's Transient Occupancy Tax (TOT) by varying rates depending on the hotel's distance from the San Diego Convention Center.
Currently, the TOT rate in San Diego is 10.5%. On Thursday, this will increase to 11.75%, 12.75% and 13.75% -- the highest rate closest to the convention center. The city estimates it will generate an additional $82 million in fiscal year 2026 and $1.04 billion in additional revenue in the first 10 years.
The tax applies to anyone who stays in a property for less than 30 days, so hotels, motels, recreational vehicle parks and bed and breakfasts are all included.
For the first five years, 59% of the money generated will go towards the convention center's expansion project and other support. The remaining 41% will go towards the city's efforts to address homelessness. Starting in year six, only 39% will be allotted to homelessness, and 10% will go towards road repairs throughout the city.
San Diego's Office of the City Treasurer sent letters last month to lodging operators, property management companies, and online hosting platforms notifying them of the TOT rate increase.
While the increase was approved five years ago, multiple legal challenges delayed its implementation. Initially, it appeared as if Measure C had failed, because it needed two-thirds of voters to approve it and fell just one percentage point short.
In 2021, the San Diego City Council voted 6-3 to change the amount needed to pass to a simple majority, claiming the state constitution overrules the city-written ballot material. According to the California constitution, tax hikes can be approved with a simple majority.
"Voters should be able to rely on ballot materials," then-Council President Pro Tem Stephen Whitburn said at the time. "But the constitutional right is more fundamental. We need to go with the state constitution and 65% of voters and say it was approved."
The three dissenters claimed approving the ballot measure set a bad precedent and sent a disheartening message to voters who may already be distrustful of government.
"The will of the voters must be maintained," said then-Councilwoman Monica Montgomery Steppe, who argued the ballot language was clear. "This can breed more cynicism during a time when faith in the government is at an all- time low."
Mayor Todd Gloria, a major proponent of Measure C, applauded the council's vote.
"Today's affirmative vote by the City Council to validate Measure C is a necessary step to finally put to bed the long-awaited and much-discussed expansion of our Convention Center in addition to addressing two of our city's most significant challenges: combating homelessness and getting San Diegans back to work," he said. "The people of San Diego asked us to take up this measure and an overwhelming majority voted to support it. It's time we implement the will of the voters."
Despite the challenges, a San Diego Superior Court judge ruled last year that a simple majority was sufficient, allowing the city to move forward with the tax increase.
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