Inn closure sends city tax receipts tumbling
By Jesse Phelps
At this point, city officials
probably wish they could just put their whole budgetary crisis
to bed. Unfortunately for them, that isn't happening.
A drop-off in revenues from the 10 percent transient occupancy
taxes, commonly referred to as "bed taxes," has them
scrambling to find ways to alleviate what is becoming a bigger
strain on city coffers than expected.
When figuring the city budget for the current year, City Manager
Dan Singer took into consideration the May closure of 150 rooms
at the Ojai Valley inn & Spa. On his recommendation, City
Council allowed the use of $750,000 in general fund reserves
to alleviate the expected shortfall for city revenues.
But about six weeks ago, Singer said, the inn decided it would
close all of its rooms for a brief period beginning in December.
That news, along with bed tax figures published by the Ojai Valley
Chamber of Commerce for the year to date, have city staff considering
measures including another dip into the reserves or a raise in
tax rates. But first, said Singer, the plan is to raise fees
for services such as approvals for new construction.
"We're bringing down some changes in our master fee schedule,"
he said. "These are either new fees or fees that need to
Singer said that staff did a good job anticipating the shortfall
in bed taxes and that his projections "were only off by
a fraction" for the year to date. But the closure of the
balance of the inn's rooms will create an extra, unanticipated
"We did not project the inn to be closed entirely for six
weeks," Singer said. "By the end of the year, we may
end up worse than we expected."
Projected or not, the bed tax numbers to date are daunting as
A look at the revenues from the last three years shows that,
in general, the busiest months for Ojai lodging are those in
the summer, with July and August representing the peak months
In 2001, according to figures furnished by the Ojai Chamber of
Commerce, taxes peaked at $171,467 in August after a haul of
$164,831 in July. This was up from January and February returns
of $116,636 and $119,860, respectively. By December, the figure
for the city was back down to $103,085, the yearly low.
In 2002, the pattern remained consistent. January and February
were down roughly 10 percent from the year previous, with returns
coming in at $102,725 and $108,737, respectively.
But things picked up once again in March, and revenues again
peaked during the vital summer months with an August return of
$182,615, a three-year high.
By December, however, the figure dropped below the $100,000 threshold
for the first time in the new millennium.
They haven't returned to that level since. In the wake of the
inn's expansion, the returns dipped below the $70,000 mark each
month, starting in May, reaching a low in September of $44,446,
dwon nearly 70 percent from the $132,908 collected in September
Singer said that the city anticipated that losses from the inn's
expansion might be made up through occupancy elsewhere but so
far that hasn't been the case.
"We anticipated some increase in (bed taxes) from other
facilities and we haven't really seen that, not yet at least,"
he said. "The other motels and hotels seem to be doing about
what they did a year ago or maybe a little less."
The chamber's Scott Eicher said that may be because others in
the valley's hospitality industry depend on events at the Ojai
Valley Inn & Spa for their own occupancy. "There is
a correlation," he said. "They depend a lot on overflow
business from the inn."
Singer pointed out that the renovations of the Oaks at Ojai and
the El Camino Motel also have a negative impact on returns. "While
their rehabilitation is a good thing, that hasn't helped either,"
Singer said that the bed tax revenues make up about 40 percent
of the total city revenue stream, with the balance coming from
sales and property taxes. And Eicher points out that, though
the chamber is a valley-wide organization, only tax dollars generated
within the city feed Ojai's budget.
Since Ojai is so reliant upon the inn for revenue, he suggested
that a partial solution would be to increase the profile of the
town as a whole through increased advertising, particularly to
The city should focus on ads in localized gardening or horse
journals, for instance, where rates may not be as expensive as,
say, Sunset Magazine, and increase its presence at trade shows
The key, he said, is marketing to state residents because research
shows that 80 percent of tourism in California is from Californians.
Meanwhile, while the October figures have yet to be released,
bed tax revenues are expected to increase again, if visitation
to the chamber of commerce is any indicator. The chamber's figures
for informational requests from visitors during 2003 show an
October upswing Eicher credits to Ojai's artistic community.
"The huge bump here in October is because of the Studio
Artists Tour and all the visitors that come in," he said.
In addition to the extra dollars spent on gas, food and art,
over the past two years, bed taxes have increased an average
of 20 percent from September to October, thanks to the tour.
And when the inn reopens, many other problems should be solved,
He said he thinks the council will be reluctant to dip further
into the reserves, but that they will likely "see the wisdom,
knowing that this is a very short term problem to get through."
The Ojai Valley News
to the news