County's TOT revenue increases 29.1%

Joe Naiman

Village News Reporter

The County of San Diego’s Transient Occupancy Tax Revenue for fiscal year 2020-21 increased by 29.1% from the 2019-20 total.

For the entire unincorporated county, collections totaled $5,387,799.05 between July 1, 2020, and June 30, 2021, including $411,798.69 from Fallbrook lodging facilities, $58,049.31 paid in Pauma Valley, and $3,678.55 of Bonsall collections.

During fiscal year 2019-20, the county collected $4,172,583.18 including $350,468.47 of Fallbrook revenue, $32,337.12 at Pauma Valley locations, and $3,487.83 from Bonsall lodgers. The county’s annual revenue was down from the $5,784,163.63 figure of 2018-19, which was the final full fiscal year before the coronavirus outbreak caused restrictions in March 2020, although the 2020-21 figure was still higher than the 2017-18 total of $5,105,749.14.

“It was good to see revenue going in a positive direction,” said San Diego County Treasurer-Tax Collector Dan McAllister. “Hopefully we’re on the mend.”

The Transient Occupancy Tax was reduced from 9% of the unit rate to 8% in October 2007 and 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.

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 of California 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 four dollars a day or less 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 prior to the sale or name change within 30 days of the transaction.

The TOT is collected only from lodging facilities in the county's unincorporated area, although the revenue is used for the county's Community Enhancement program and may be given to organizations in incorporated cities as well as unincorporated communities. Community Enhancement funds, which are allocated during the county's annual budget process, are intended to promote tourism including visitors from other parts of the county.

Various reasons other than decreased lodging can cause a decline of TOT revenue on a quarterly or annual basis from one year to the next. A facility may be closed for renovations or may outright cease business. Because a timeshare unit used by an ownership partner or an owner's guest or a private campground space used by a member or member’s guest is not subject to the TOT, the number of units available to the general public and thus subject to the TOT vary from year to year.

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. Some community losses may be due to a revision in the community definitions rather than to losses for a specific establishment such as the 2019-20 revision which converted what was called Pauma into separate Pauma Valley, Palomar Mountain, and Valley Center designations.

The coronavirus shutdowns began on March 12, 2020, and impacted three weeks of the 13-week fiscal year 2019-20 third quarter, but Transient Occupancy Tax revenue for San Diego County was down by 36.5% including 49.1% from Fallbrook and 86.78% for Bonsall. The decrease for the three communities which were Pauma in 2018-19 was 38.5%.

On a countywide basis the fourth-quarter decrease from 2018-19 to 2019-20 was 68.0%. Communities with luxury resorts had the highest drops including 86.8% in Rancho Santa Fe, 84.7% for Borrego Springs, and 71.9% in unincorporated San Marcos. With fewer facilities and nearly no luxury resorts Fallbrook fourth-quarter revenue only declined by 25.5%.

The county has been issuing housing vouchers which allow homeless residents to stay in motels or hotels. The agreement between the city or county and the facility may limit the amount the establishment can charge per room, but that amount would include all fees and taxes charged for a stay. Thus a housing voucher for no more than 30 consecutive days is subject to the TOT, and the use of Fallbrook lodging facilities to shelter the homeless also contributed to a lower decline. Bonsall fourth-quarter revenue declined by 84.3%.

During the first quarter of 2020-21, which covered July 2020 through September 2020, the county collected a total of $1,378,010.78. That equates to a 5.1% decrease from the 2019-20 first quarter of $1,453,359.97.

“Businesses during the first quarter did not recover to the levels they were prior to the shutdown,” McAllister said. “That, by the way, was expected.”

Rancho Santa Fe led all unincorporated communities with $366,662.42 of first quarter 2020-21 revenue, unincorporated Escondido paid $242,199.77, and Borrego Springs accounted for $173,602.81. Fallbrook ranked fourth at $125,285.36. Unincorporated San Marcos had $111,750.51 of revenue for the fifth-highest total; Ramona collected $92,224.60, and Julian provided $90,063.53 to rank seventh. The Pauma Valley quarterly figure of $12,109.77 ranked 13th while Bonsall’s $1,616.00 placed 23rd out of the 27 listed communities.

“During the summer of 2020 some of the COVID restrictions were lifted. People began to come out of their homes,” McAllister said.

“It’s no surprise that travel and recreation increased as the restrictions were lifted,” McAllister said. “That played into healthier bottom lines.”

Fallbrook had collections of $123,511.41 for the first quarter of fiscal year 2019-20; Pauma Valley collected $8,824.04, and the Bonsall revenue was $1,326.40. The Fallbrook revenue for the first quarter of 2019-20 ranked fourth behind Rancho Santa Fe, Escondido, and San Marcos.

The first quarter of fiscal year 2020-21 also included the San Diego County Board of Supervisors adopting the county’s 2020-21 budget. The budgeted TOT revenue was $2,585,395.00, so the actual $5,387,799.05 amount is 208.4% of the budgeted total.

The 2020-21 fiscal year was the first since 2014-15 for which the first-quarter revenue wasn’t the highest quarterly total.

For the second quarter of fiscal year 2020-21, which began on Oct. 1, 2020, and ended on Dec, 31, 2020, the county collected $1,145,729.03. That was a 15.0% decrease from the 2019-20 quarterly figure of $1,342,438.23.

For the second quarter of 2020-21, Fallbrook had $92,949.58 of TOT payments. That ranked sixth behind Rancho Santa Fe, Borrego Springs, Escondido, Julian, and San Marcos. Fallbrook’s 2019-20 quarterly figure of $96,261.62 also ranked sixth. Pauma Valley had $13,668.33 of second-quarter revenue for 2020-21 compared to $8,239.83 for that 2019-20 quarter. Bonsall’s quarterly figures were $927.94 in 2020-21 and $1,325.71 during 2019-20.

During the third quarter of 2020-21, the county collected $1,032,498.94 of revenue, which was an increase of 9.0% over the 2019-20 third quarter amount of $947,175.31 although less than the $1,491,782.64 of 2018-19 quarterly revenue. Fallbrook’s third-quarter revenue of $66,411.11 ranked sixth. Pauma Valley collected $12,089.43. The quarterly Bonsall revenue was $300.07.

For January 2020 through March 2020, the quarterly totals were $45,354.28 for Fallbrook, $10,121.08 for Pauma Valley, and $533.77 for Bonsall. The third-quarter 2018-19 collections included $89,099.16 paid by Fallbrook lodgers, $20,890.09 for the three-community Pauma area, and $4,467.85 from Bonsall.

The county’s fourth-quarter total for April 2021 through June 2021 was $1,831,560.30, which was a 326.3% increase over the $429,609.67 of April through June 2020 and was also higher than the 2018-19 quarterly amount of $1,344,106.50. Fallbrook was responsible for $127,152.64 in 2020-21, $85,341.16 in 2019-20, and $114,085.56 in 2018-19. Bonsall payments were $834.54 in 2021, $241.95 in 2020, and $2,177.57 in 2019. Pauma Valley collections were $20,181.78 in 2020-21 and $5,152.17 for 2019-20.

The Fallbrook annual figure ranked the Friendly Village sixth behind Rancho Santa Fe, Escondido, Borrego Springs, San Marcos, and Julian. Fallbrook had ranked fifth in 2018-19 and 2019-20.

Sixth is Fallbrook’s lowest annual ranking in the last decade while Julian’s 2020-21 annual revenue of $425,724.85 is that community’s highest. McAllister noted that eight new establishments opened in Julian during fiscal year 2020-21. “It’s changing. More people, more places, more activity,” he said.

During fiscal year 2020-21, a countywide total of 34 lodging establishments closed, including nine during the first quarter and 11 in the second quarter. The 34 closures matched the 2019-20 figure, when 52 new establishments began collecting Transient Occupancy Tax revenue. During 2020-21, unincorporated San Diego County saw 63 new establishments, including 25 in the fourth quarter. “They plowed ahead and I think in many cases got rewarded,” McAllister said.