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File #: 16-640    Version: 1 Name:
Type: Staff Report Status: Other Business
File created: 9/13/2016 In control: City Council
On agenda: 9/21/2016 Final action:
Title: TRANSIENT OCCUPANCY TAX COMPLIANCE AUDIT REPORT
Sponsors: Edith Ramirez
Attachments: 1. DavisFarr TOT Compliance Audit, 2. 11 Presentation
Date Ver.Action ByActionResultAction DetailsMeeting DetailsVideo
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CITY COUNCIL STAFF REPORT
MEETING DATE: SEPTEMBER 21, 2016

PREPARED BY: Edith Ramirez/Economic Development Director
APPROVED BY: City Manager

TITLE
TRANSIENT OCCUPANCY TAX COMPLIANCE AUDIT REPORT
END

RECOMMENDATION(S)
RECOMMENDATION
1. Receive the Transient Occupancy Tax (TOT) compliance audit report; and
2. Provide direction to staff to further review the City's TOT Ordinance (Municipal Code Chapter 3.24) and present recommendations on modifying the 30+ day exemptions policy.

BODY
COUNCIL PRIORITIES, GOALS & STRATEGIES:



Ongoing Priorities
Enhancing public safety
Maintaining fiscal responsibility
Preserving and cultivating public trust

2016 Focus Areas
Developing Our Community
Improving Our Communication

REPORT NARRATIVE:
The City collects a 10% transient occupancy tax (TOT) which is added to hotel/motel room night fees and is collected by the hotels to be transferred to the City. This revenue should correlate to occupied room nights. Morgan Hill has a total of 16 facilities that function as hotels, motels, or RV parks that rent rooms and collect TOT. The TOT collected goes directly to the General Fund to help pay for services provided to the community.

In May 2015, the City Council authorized the City Manager to negotiate and execute a contract with Hotel Appraisers and Advisors (HA&A) to perform a hotel market and TOT analysis to ascertain the strength of the hotel market in Morgan Hill. HA&A quickly ascertained that three hotels were largely functioning as de-facto housing facilities and did not include them in its study. The study of the 13 remaining hotels that collectively offer nearly 800 hotel rooms identified some discrepancies between hotel revenue and TOT collection, suggesting issues with under-reporting as well as over-collecting. HA&A's TOT analysis recommended the following: 1) periodic auditing to measure the accuracy of TOT collections, 2) improving reporting guidelines to quantify exemptions such as extended stays,...

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