New venues help increase county's TOT revenue

Good economic conditions have contributed to an increase in San Diego County’s transient occupancy tax revenue, and an increase in the number of places to stay in unincorporated San Diego is also a factor in the increased TOT revenue.

On a countywide basis, TOT revenue increased from $5,105,749.14 in fiscal year 2017-2018 to $5,784,173.63 for 2018-2019. Fallbrook’s TOT revenue increased from $338,613.53 to $540,602.11, although a late-received payment credited to the first quarter of 2018-2019 rather than the fourth quarter of 2017-2018 contributed to that increase as well as economic growth. Pauma revenue rose from $68,236.69 to $75,514.63. Bonsall lodgers paid $15,514.92 during 2017-18 and $23,355.54 in 2018-2019.

“TOT has been up everywhere, and it’s been up for a number of reasons,” San Diego County treasurer-tax collector Dan McAllister said. “I think the first and foremost one is there’s a good economy.”

The transient occupancy tax, which was reduced from 9% of the unit rate to 8% in October 2007, is collected from occupants of hotels, motels, bed-and-breakfast venues, mobile home parks, private campgrounds and other structures occupied or intended for occupancy by non-residents for lodging or sleeping purposes.

“There are more places to stay than there were before,” McAllister said.

McAllister said that bed-and-breakfast venues and agri-tourism venues increase the mobility of tourists to stay in places such as Ramona and Fallbrook.

“I think the bed-and-breakfast industry has expanded,” McAllister said. “There are great numbers of them all over the county of San Diego.”

The 2018-2019 figures included increased revenue over 2017-2018 of 81% in Spring Valley, 59.6% in Fallbrook, 50.5% in Bonsall, 33% in Borrego Springs and 27.4% in Ramona.

“Those are all areas where there have been more added to the mix,” McAllister said.

Two communities which were not on previous TOT reports are listed in the 2018-2019 totals. Vallecitos collected a yearly total of $4,085.99, and San Pasqual had 2018-2019 revenue of $237.54, all of which was in the fourth quarter.

“They have started to generate TOT money,” McAllister said.

Accommodations existed in those communities previously.

“They just weren’t active as TOT generators,” McAllister said. “There was nothing to report before.”

As bed-and-breakfast facilities become known, they are used more, which increases TOT revenue.

“Now we’re seeing that increase, which is good,” McAllister said.

Annual revenue from Rancho Santa Fe increased from $1,646,513.40 to $1,654,197.85 despite a second-quarter drop from $422,274.92 to $367,469.77. Rancho Santa Fe is the closest unincorporated community to the Del Mar Thoroughbred Club, which hosted the Breeders’ Cup in November 2017, so the decrease for 2018 indicates an economic impact from the Breeders’ Cup rather than general economic growth between 2016 and 2017 and the numbers could result in a similar increase when Del Mar hosts the 2021 Breeders’ Cup.

“The Breeders' Cup was a real big shot in the arm for us,” McAllister said.

McAllister said that the Breeders’ Cup experience could have a positive impact on a Del Mar fall meet when the Breeders’ Cup is in Arcadia or Kentucky.

“The interest level has grown,” McAllister said.

Del Mar has had a fall meet every year since 2014. The 2014 second-quarter TOT revenue increased from the previous year by 43.8% for Rancho Santa Fe and 12.6% countywide while for the first quarter of that fiscal year revenue was up 25.4% for Rancho Santa Fe and 25.3% for the entire unincorporated county.

“The Del Mar racetrack has instituted and maintained fall racing,” McAllister said.

Agri-tourism includes wineries, and McAllister said he believes that agri-tourism lodging rather than winery patronage is a bigger factor in the Ramona increase.

“Some of these wineries that are smaller are not overnight yet,” McAllister said.

Currently, most visitors to local wineries do not stay overnight, but the growth of the winery industry could create changes.

“In the next five years or so we’ll probably be seeing more generation in that area,” McAllister said.

McAllister cautioned that future increases are not guaranteed.

“We can’t predict what the economy’s going to do,” he said.

During fiscal year 2013-2014 unincorporated El Cajon lost its entire TOT revenue when the Singing Hills Resort became part of the Sycuan Indian Reservation trust land. The TOT is not collected for lodging facilities on Indian reservations or other areas where the county has no taxing power. Despite the opening of a hotel adjacent to the Sycuan casino in March 2019, fourth-quarter TOT revenue for unincorporated El Cajon increased from $4,956.28 in 2017-2018 to $6,777.19 for 2018-2019.

Campgrounds at county parks are not subject to the TOT. If a private campground has a membership program, a member or a member’s guest is exempt from the TOT. A timeshare unit used by an ownership partner or an owner’s guest is not subject to the TOT; although if a unit is rented to the general public, it is subject to the tax for that period.

A federal or state officer or employee on official business does not pay the TOT, nor does any foreign government officer or employee exempt under federal law or international treaty. The tax is not collected if the regular rent is $4 a day or less of if the lodger receives a free room where the only compensation received is publicity for the lodging site. A unit which is occupied or rented by the same person for more than 30 consecutive days is not subject to the TOT.

The facility operator must submit payment to the county on a quarterly basis by the last day of the month following the end of the quarter. If a facility ceases operation, payment must be made within 30 days after the operator ceases doing business, and if the venue is sold or its name is changed, the county must receive the TOT payments for occupancy before the sale or name change within 30 days of the transaction.

If the payment is postmarked by the end of the month following the quarter but not received by the end of that month, there is no penalty. The penalty for a payment one month late is 6% plus interest, the penalty for payments two months late is 12% plus interest, and 1% is added for each subsequent month. A late payment or a payment postmarked by the deadline but not processed by the sixth of the following month will be reported for the following quarter, which can cause annual fluctuations as was the case for Fallbrook.

The TOT is collected only from facilities in the county’s unincorporated area, and while the revenue is deposited into the county’s general fund the San Diego County board of supervisors traditionally uses the revenue for the county’s community enhancement program which is intended to promote tourism including visitors from other parts of the county. Community enhancement funds are allocated during the annual budget process and may be given to organizations in incorporated cities as well as in unincorporated communities.

The countywide TOT revenue for the first quarter of 2018-2019 was $1,763,594.10, while the July through September amount for 2017 was $1,390,914.05. Fallbrook generated $236,569.00 including late-processed payments during the first three months of 2018-2019, which is an increase from the $137,731.64 for 2017 and $139,830.28 in 2016. Bonsall facilities provided $3,072.10 in 2016, $5,625.52 during 2017 and $10,174.30 for 2018. Pauma’s revenue was $25,529.60 in 2018 compared to $15,612.49 in 2017 and $6,136.20 during 2016. The payments from Vallecitos for lodging between July 2018 and September 2018 were $1,204.26.

The second-quarter Rancho Santa Fe drop didn’t prevent the countywide totals for October through December from increasing over the 2017 amount. The unincorporated lodging facilities provided $1,169,171.01 in 2017 and $1,184,690.39 for 2018. Late processing dropped Fallbrook’s revenue from $96,434.41 for 2016 to $58,720.47 during 2017 and the Friendly Village produced $100,848.39 of second-quarter 2018-2019 revenue. Pauma’s contributions were $15,879.51 in 2016, $15,925.21 for 2017 and $14,142.98 in 2018. Bonsall generation increased from $3,485.19 in 2016 to $3,891.71 during 2017 to $6,535.82 for 2018. During the second quarter of 2018-2019 Vallecitos establishments were responsible for $81 of the TOT amount.

On a countywide basis third-quarter revenue for January through March increased from $1,294,552.28 in 2018 to $1,491,782.64 for 2019. Fallbrook revenue was $74,432.59 in 2017, $122,651.83 including late-processed payments during 2018 and $89,099.16 for 2019. Pauma facilities collected $12,894.00 for 2017, $11,553.82 in 2018 and $20,890.09 during 2019. Bonsall lodgers paid $1,315.64 during 2017, $4,402.70 in 2018 and $4,467.85 for 2019. The Vallecitos 2019 revenue for January through March was $156.24.

The fourth quarter covers April through June. The countywide total increased from $1,131,140.09 for 2018 to $1,344,106.50 in 2019. Late-processed payments dropped Fallbrook’s quarterly totals from $129,521.81 in 2017 to $19,509.59 during 2018, and the 2019 collections were $114,085.56. Pauma’s amount increased between 2017 and 2018 from $15,928.42 to $25,145.17 but declined to $14,951.96 for 2019. Bonsall’s quarterly generation between 2017 and 2019 increased from $1,417.18 to $1,594.99 to $2,177.57. The final quarter of 2018-2019 included $2,644.49 of Vallecitos payments.