If you’ve visited and stayed in a commercial lodging or resort establishment just about anywhere in the world, chances are you’ve paid some form of Transient Occupancy Tax (TOT). Destinations, such as Mammoth Lakes, catering to tourism-based visitation clientele rely on it as a source of revenue.
In Mammoth, the Town code defines TOT as “a 13% tax that is charged for the privilege of occupancy of any transient occupancy facility.” The tax is required to be paid to the operator of the transient occupancy facility at the time the rent is paid, and it is the operator’s responsibility to remit the TOT to the Town.
Who has to remit TOT? According to the Town, if you rent a unit as a transient rental, even if it is only for one weekend a year, you need to pay TOT. This includes single-family homes and other units that are NOT permitted to rent nightly, but are doing so illegally.
Only certain areas of town zoned accordingly permit transient use. Certain Homeowner Association regulations, such as those found in master plans, CC&Rs or project conditions of approval, might allow transient rentals within a particular development. For now, transient rental of single-family homes is prohibited; during its Dec. 19 meeting, Mammoth’s Town Council deliberated on whether to have Town Staff proceed with an analysis of whether or not such rentals make sense for the town.
Recently the Town stepped up its efforts to collect TOT, making up for years of a lack of enforcement not only in who was paying in, but also who was registering their property as a taxable nightly rental. According to Town Senior Planner Sandra Moberly, before recently establishing the Town’s TOT Enforcement Committee, the average number of TOT certificate registrations was 10 annually. This year, with the increased crackdown, that number of new certificates since enforcement began in August 2011 has grown to 137.
Internally, staff from both the Community & Economic Development and Finance departments conduct Internet and field research to ferret out potential TOT violators, who are sent warning letters, and later slapped with citations and legal action if warnings don’t do the trick. Setting a goal of $500,000 through 2012, as of the end of November, the TOT program had netted $443,544.49, including roughly $100,000 from a single remitter.
“The community is getting more engaged,” Town Recreation Manager Stuart Brown commented. “People realize how important it is to the town, for everything from snowplowing, to operating the pool and public safety.”
Meanwhile, the Town has assessed 26 properties for back taxes, but Moberly maintained it is somewhat flexible, and is working with property owners to arrange payment plans and appeal hearings when necessary. With 118 cases closed, there are still 79 open cases pending, including one appeal for a waiver or relief that will be heard by Council early this year.
“There are appeals, and we’re willing to work with remitters, as long as they have proper documentation,” Town Manager Dave Wilbrecht said. “We don’t want to be capricious or arbitrary.” Wilbrecht went on to explain the Town is “exercising the full capacity of the law,” calculating tax owed on the full three years back allowable by law, if applicable.
“We’re not picking on people, but the reality is people have to pay their fair share,” Mayor Matthew Lehman stated. “TOT ties directly into restructuring and the budget. Collecting what’s owed is one of the best ways to generate revenue, and some of that goes to Mammoth Lakes Tourism to help drive visitation, which generates more TOT, so it’s a snowball effect.”
The TOT Enforcement Committee is diverse, made up of Town officials, including Moberly, Lehman, Mammoth Lakes Tourism Director John Urdi and others, and lodging community stakeholders, such as Teri Stehlik and Cheryl Witherill, among others.
“It’s a dedicated group,” Lehman opined. “And for lodging, it’s not so much about finance as it is data collection.” Lehman and Brown pointed to occupancy figures gleaned from TOT remittals, which are important for lodging, restaurants and local businesses to staff and stock accordingly for busy periods. “They can see whether marketing is working, when the phone rings, who’s booking and from where, and how they are pacing months out into the future,” Brown added.
“It’s an excellent example of a government/private partnership that really works,” Lehman enthused.
The Mayor articulated a three-phase plan, starting with education efforts directed in part to property owners who might not have been aware they needed to pay TOT. Phase 2 involves changes to staff procedures and policy, including a shift from the old, outdated M-TRIP data processing software to newer, broader and more efficient BASICGOV software. The third phase takes that to the next level, adding user-friendly automation for payments via credit card and eCheck, which is expected to be online by spring.
“[M-TRIP] was very unsophisticated,” Wilbrecht noted. “John Urdi brought in a lot of knowledge capacity and we needed something more for data, such as Average Daily Rates and pacing, and how to track them.” How much BASICGOV helps cover the Town’s recent reductions in personnel remains to be seen, but it will handle permitting, payments and accounting for a host of Town functions, far more than M-TRIP was capable of.
“Previous enforcement was cumbersome, and took too much staff time and effort. Users would end up being billed for and remitting the wrong amounts, either too much or too little. People would overpay, but would rather do that and not have to deal with the headaches of addressing the problem. The new system helps them calculate exactly how much they owe,” he added.
Wilbrecht said TOT enforcement brings a sense of equity and fairness. “Those who rent illegally don’t have the same cost structure factored in, and their profit makes for an uneven playing field. Everyone gets the same benefits from TOT, but illegal renters don’t pay into those benefits.”
Lehman added that levels of service often aren’t as good with illegal nightly rentals. “You can get cheap rentals on websites such as VRBO (Vacation Rent By Owner), but you run into problems,” he said. “Part of TOT is supporting our lodging partnership and making sure the guest experience is up there.”
This year’s robust snowpack has definitely made for equally robust holiday visitation. According to Town projections, occupancy during the Christmas period was in the 70-80% range, likely due to school break schedules and that Christmas fell on a Tuesday. Dec. 28-31 jumped to 96%, falling off only 15% through Jan. 3, holiding at 81%. For comparison, the midweek rate last year was only 56%, and the New Year’s Day and beyond figures are up 25% from the same time last year.
“It’s too early to estimate revenue … all I have is anecdotal lots of smiling happy faces, record weeks and full rooms comments [from lodging partners],” Urdi commented. “Since we don’t get TOT results for 45 days past the end of the month (properties can take until Jan. 31 to file for December) and even then we don’t have everything because smaller properties report quarterly, but I’ve got lots of great feedback from local businesses.”
In addition, Urdi added that year-over-year air load factors (or occupancy on planes) were strong for December, and look great for January as well from all markets. Los Angeles is up 1%, San Francisco is up 12.5%, San Diego is up 14% and John Wayne Airport in Orange County is up 7.5%.
“Keep in mind last December air and occupancy was still decent because people were pre-booked due to the HUGE winter the year before; things then fell apart in January,” Urdi noted.
If you have questions about TOT enforcement, or would like to report suspicious activity or rental advertisements, contact the Town’s anonymous hotline at 760.934.8989, ext. 275, or email: TOT@ci.mammoth-lakes.ca.us. If you have additional questions regarding the business license or TOT registration process, contact the Finance Department at 760.934.8989, ext. 245.