Age-old T.O.T. collection issue revisited
Using your finger to plug a leak will generally only work for so long. While the finger-in-the-dike approach is a popular problem-solving technique within local government circles, The Town of Mammoth Lakes recognizes it’s foregoing a significant amount of Transient Occupancy Tax revenue by not adequately policing property owners who rent out their places without paying tax.
In order to help truly fix the crack in the system rather than just add more stopgaps, a TOT Committee was formed in the summer of 2010, at the request of the Mammoth Lakes Town Council. The group, consisting of Mammoth Lakes Tourism Executive Director John Urdi, MMSA’s Tom Smith, Recreation Commissioner and lodging property owner Teri Stehlik, and lodging property owner Cheryl Witherill presented its findings to Council during a workshop on Wednesday.
Though an ordinance is already in place that states owners of rental properties must collect TOT and pay a portion of it to the Town, scant enforcement of this ordinance has made it easy for those wishing to avoid payment to do so. So easy in fact, that offenders blatantly advertise their properties online without a worry of getting caught.
“The Town has not enforced what’s on the books,” admitted Councilmember John Eastman.
Currently in Mammoth, the Town taxes room rentals at 13%. According to information on the Town’s website, “transient rental or occupancy in defined as rental or occupancy of a structure
for sleeping or lodging for 30 consecutive days or less, in exchange for a fee or other similar consideration. Renting a property for transient use requires a Town of Mammoth Lakes business license and registration and remittance of Transient Occupancy Tax.”
The town is also specifically zoned to allow transient rental in certain areas but not in others.
Lodging owners and operators, however, claim these rules aren’t always being followed; an oversight that is costing the Town a minimum of $400,000 in TOT revenues in the winter months alone.
In 2009, the Mammoth Lakes Lodging Assn. estimated that there was a total of $800,000 in unreported income during the winter season due to owners renting illegally.
Just two years later, the Lodging Assn. has revised that number dramatically upward, to $3.1 million during the winter months alone. 13% of $3.1 million would equate to nearly $400,000 in lost tax revenue.
When asked why this number has leapt so dramatically, Stehlik said “The number increases tenfold daily because of the ease of the internet [in listing and booking].”
Note that these numbers are just for condominium TOT. They do not include the single family homes that are also being rented illegally in town. However, the Committee requested that the homes be dealt with on a separate track after condo compliance was under control.
The Committee’s game plan is to amend the Town’s current ordinance in several ways and then fully enforce it. If the Committee gets what it wants, the current section of the code that forgives those earning less than $5,000/year to require a license would be amended, a mandatory form would be posted in all units that includes a copy of the business license and rental rate, all units would have a local 24/7 contact who also has a business license, businesses would have to begin reporting occupancy monthly rather than quarterly, and more.
The Committee also requested that a letter, which was first drafted in March 2009 when the Lodging Association first brought TOT issues to light, but never made it to Council for approval, be sent out to all property owners. The letter combined a soft letter that the Town had been using for property owners and a firmer letter that it had been sending out to business owners.
“We put the two letters together to give all property owners a better understanding of what TOT is and what it is used for,” Witherill explained. “The letter also explained that the Town was moving forward with stronger enforcement of penalties for those who did not comply.”
The letter seems to have stopped at the Finance Department and never made it to Council for review.
“It’s our assumption that it sat on Brad Koehn’s desk,” Witherill told The Sheet. Apparently it had been the Town’s practice to send out the two original letters every five years or so.
Finally, the Committee requested that penalties be raised to the maximum and that the Town hire full time employees for enforcement of these penalties.
Local community member and property owner John Vereuck pointed out that there would need to be incentive for enforcement to make it work.
“I continue to be embarrassed that we have not been able to get our arms around this,” stated Council member Rick Wood, who applauded the Committee’s work and said that going forward he was supportive of not giving people the benefit of the doubt.
Mayor Skip Harvey was also embarrassed that the letter drafted in 2009 never made it to the Council level and was never distributed. He was in favor of getting the updated ordinance in place with enforcement on a parallel track by the end of the summer so the process would be updated and ready for the 2011/12 winter season. He suggested hiring an outside source for enforcement, which would receive a percentage of the revenue collected.
Council encouraged the TOT Committee to continue moving forward and to work with the Town Attorney, Andrew Morris to determine what can and cannot be done in terms of amending the ordinance and enforcing stronger penalties.