Early results show Fort Bragg residents voting to hike sales, hotel tax

This is a developing situation. Updated information will be published at the top of this article.

FORT BRAGG, CA., 11/5/24 — Fort Bragg voters appear to be approving a windfall to the city treasury by passing two new taxes, which the city says will be paid primarily by tourists.

With 29.3% of the early vote in, both taxes have so far received more than 70% of the vote, with only a simple majority needed for each to pass.

Measure U will increase the hotel and motel tax

Coasting with 79.2% of the vote is Fort Bragg’s proposed Measure U, a transient occupancy tax (TOT) that will hike the city’s hotel and motel tax from 12% to 14% – one of the highest in the state, equaled by the likes of Beverly Hills and Los Angeles. 

Willits has a TOT tax of 9%, Ukiah 10% and Point Arena 12%.

Measure T will increase the city’s sales tax

City voters are also voting in favor of a second tax increase, Measure T, an increase to the sales tax collected within the city, with 71% yes votes. If Measure T gets a majority vote, it will raise sales taxes in the city by 0.375 cents. 

The city introduced Measure T partly to beat the county to the punch, as the state now caps the sales tax that city and county can collect at 2%. 

Why the city proposed the new taxes

The City Council voted in July to bet on two taxes for the Nov. 5 ballot after hearing projections about rising costs and flat revenues.

During a mid-year budget workshop, city staff presented a budget picture for the next five years that involved cuts if tax increases were not made. The city also needed to address worries about the less than hoped for returns on the city’s investment in the state’s retirement fund, CalPERS.

“Both of these measures are paid predominantly by tourists and visitors to our city,” Fort Bragg City Manager Isaac Whippy told the council in July. Whippy told the council that proposing the two tax measures would help fund essential services and community priorities. 

Will tourists care about the increased TOT tax?

Scott Schneider, general manager of the Noyo Harbor Inn, told the city council at the July meeting that he agreed with the city that the increasing tide of tourists who consume many of the local services should pay their fair share. He will have to charge guests two more dollars on every hundred dollars spent.

“It’s definitely on the higher end, on the lines of Beverly Hills, Los Angeles and San Francisco, but I also don’t see people not coming here because of this increase,” he said.

He said more importantly might be the city and the Skunk Train resolving their differences.

“Without the Skunk Train we would probably lose about 30% of those dollars,” Schneider estimated, based on discussions with his guests.

City chose to beat the county to the punch on the sales tax

Schneider called the sales tax hike a “no-brainer” based on the fact that if the city didn’t do it, the county would.

Fort Bragg’s council rejected putting a similar sales tax on the ballot in 2022, when three other sales tax measures were on the ballot in the county related to fire and other issues. The city rate already has a local special sales tax of 1% and the county has a sales tax of 0.625%.

Per state law, the combined rate of all local sales taxes generally cannot exceed 2%. The state has a 7.25% sales tax rate. If this new sales tax passes, and votes are leaning towards just that, people buying something (except food, medication) at a retail store in Fort Bragg would pay an estimated 9.25% cents on every dollar spent. The state sets a maximum of 2%, so either the city or county would get the increase, and the city acted first. 

“If you look at these two jurisdictions, the city and county, based on what has been going on and how the money is being managed, who would you want to be able to utilize this money to provide public services?” said Councilman Lindy Peters at the July meeting.

The TOT tax generates $3.2 million per year with an increase from 12% to 14% creating an extra $400,000 per year, Whippy told the council. Fort Bragg will have the highest TOT tax rate in the county at 14%. California cities charge a median 10 percent TOT.

These taxes will help the city avoid a deficit

For fiscal year 2025, the general fund budget is balanced with a small surplus of $47,000, Whippy said.

“However, this balance is precarious and will require drawing on the $4.7 million in reserves in future fiscal years to maintain,” he explained. “The primary issue is the inadequate growth of general fund revenues to cover the increasing expenditures, particularly those related to pension costs. The fiscal year 2025 forecast indicates that the city will continue to rely on reserves and implement ongoing budget-balancing strategies, including expenditure reductions. This leaves very little capacity to replenish general fund reserves or introduce any new programs or initiatives.”

Whippy estimated that without the new taxes, the general fund would face an annual deficit of between $548,000 and $963,000.

Although the tax is not earmarked to be spent in a certain way, the city did a community needs survey in May, which was presented alongside the tax measure at the July meeting. 

The language of the ordinance uses the word “hotel” only, but city codes show the new tax would apply to any rental lasting fewer than 30 days. Vacation rentals are strictly regulated in Fort Bragg, allowed only in the central business district, on the second or third floor above commercial-use buildings. 

The city estimates that city residents pay about 27 percent of the city sales tax, tourists 40 percent and locals who live outside the city 33 percent.

Paul Clark, a longtime advocate for smaller government, said he and others have supported the numerous bonds and measures but have only seen the government grow.

“What is the plan to reduce costs in Fort Bragg other than grant this and grant that?” he asked. “Could this city even exist without grant funding? I am opposed to more tax increases until we see a plan to reduce costs.”

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