Tourism brings in nearly half of Solvang’s general fund revenue, but those dollars aren’t stretching as far as they once were, City Manager Randy Murphy told the Sun.
“Ultimately, inflation impacts on everything post-COVID is crazy. We renewed our contract with the sheriff’s department, and that cost went up 30 percent. We are paying about $3 million a year for our law enforcement contract,” Murphy said. “We were looking at the horizon, and we realized we didn’t have enough money.”
Solvang’s general fund budget this year sits at about $10.9 million. To boost city revenue, the City Council voted to place a 2 percent transient occupancy tax (TOT) on the ballot in November—increasing the rate from 12 percent to 14 percent.
In June, the Santa Barbara County Board of Supervisors approved putting a similar rate hike on the ballot for hotels in the unincorporated parts of the county (a 2 percent hike to 14 percent). TOT increases need support from 50 percent of voters plus one to pass.
TOT is charged to visitors who pay the rate when staying at hotels, motels, or short-term rental properties for 30 days or less. Solvang’s current TOT brings in about $5 million to its city services, and the city last increased its TOT to the current 12 percent in 2015, Murphy said.
“The things we’re focused on are providing more money for road repair improvements, recreation programs for seniors and kids,” Murphy said, adding that the increased revenue could also help the city keep up with the tourism impacts on the city.
“Solvang’s population is just over 6,000, but the latest numbers related to the number of visitors we get is about a million and a half per year,” Murphy said. “We are a small town with big city populations any given weekend—30,000 visitors on average per week.”
Local hoteliers approached the city with concerns over the city having higher rates than neighboring Buellton, Murphy said, so the city manager approached his Buellton counterpart, Scott Wolfe, with Solvang’s plans, and Wolfe took it to the City Council.
“They came forward and asked us to consider it, and the City Council felt it was worth at least looking into,” Buellton City Manager Wolfe said.
Wolfe said he then spoke with Shelby Sim, the president and CEO of Visit the Santa Ynez Valley—an organization of hospitality entities—about supporting the project. While Sim said organization members didn’t necessarily want the TOT increase, he didn’t want to see uneven rates between Solvang and Buellton.
“Whereas, we cannot support this increase to our visitors, especially during an off year, we do feel it should be an even playing field across the valley as far as TOT goes,” Sim told the Sun. “So it makes sense to have Solvang, Buellton, and the county on the ballot simultaneously.”
Buellton’s proposed 2 percent increase would also take TOT to 14 percent, which funnels into the city’s general fund. This fiscal year, Buellton has $11 million in total revenues, with $4.2 million from TOT. Buellton voters last approved a TOT increase in 2012 from 10 percent to 12 percent.
“If the TOT increase passes, we would be looking at nearly $5 million—roughly $665,000 increase to TOT. It would be about 43 percent,” Wolfe said. “The benefits to the city are essentially just an increase in general fund revenue. Right now, the city is not in bad shape from that perspective, but we have incurred a large number of expenses—some anticipated, some not.”
The new library and improved park amenities along with safety improvements to Highway 246 are needed for the city, but the cost has caused “some pause to these improvements,” he said.
“What we’re trying to convey to the public here is that TOT is one of the types of tax measures that tend to be a little less controversial than most because the residents here aren’t the ones on the hook for it. The folks paying it are the ones visiting town,” Wolfe said. “As tourism grows here in our city, the impact or percentage of its impact on our infrastructure system grows and we need to keep up on that.”