Westminster City Council
SUBJECT
Title
Explore Opportunities to Generate Revenue for the City through Placing a Measure on the November 2026 Ballot to Increase the Transient Occupancy Tax Rate.
End
From: Christine Cordon, City Manager
Requested by: Administration
Prepared by: Erin Backs, Finance Director
____________________________________________________________
RECOMMENDED ACTION
Recommendation
Provide direction to staff regarding the potential placement of a measure on the November 3, 2026 ballot to increase the Transient Occupancy Tax rate in the City.
end
BACKGROUND
On June 25, 2025, the City Council received a report on exploring opportunities to generate revenue for the City as part of Strategic Plan Goal #1 - Achieve Financial Stability. One of the revenue sources reviewed was information regarding increasing the Transient Occupancy Tax (TOT) in the City of Westminster.
Other Orange County and Los Angeles County cities are considering TOT measures in November 2026 in anticipation of the Olympics coming to Los Angeles in the summer of 2028. Placentia, Orange, Costa Mesa, Redondo Beach, Hermosa Beach, and Rancho Palos Verdes are all evaluating this revenue option.
Transient Occupancy Tax also known as the “hotel tax” is a tax imposed for the privilege of occupying a room(s) in a hotel, inn, motel, tourist homes, non-membership campground, or other lodging facility, unless such occupancy is for a period of 30 days or more. Cities may also levy a tax on the privilege of renting a mobile home located outside a mobile home park, unless such occupancy is for more than 30 days or unless the tenant is an employee of the owner.
More than 400 cities and 55 counties impose a TOT. The most common rate is 10%, but rates range from 4% to 15.5%. Anaheim at 15% and Palo Alto at 15.5% are some of the highest rates imposed. The City of Westminster's rate is the lowest of the cities that were surveyed at 8%.
The following table shows the TOT rates of Orange County and Los Angeles County Cities from highest to lowest TOT.
|
City |
TOT Tax Rate (%) |
|
Inglewood |
15.50 |
|
Anaheim |
15.00 |
|
Santa Monica |
15.00 |
|
Garden Grove |
14.50 |
|
Culver City |
14.00 |
|
Laguna Beach |
14.00 |
|
Los Angeles |
14.00 |
|
Long Beach |
13.00 |
|
Monterey Park |
13.00 |
|
Tustin |
13.00 |
|
West Hollywood |
12.50 |
|
Alhambra |
12.00 |
|
Buena Park |
12.00 |
|
La Palma |
12.00 |
|
San Gabriel |
12.00 |
|
Seal Beach |
12.00 |
|
Stanton |
12.00 |
|
Santa Ana |
11.00 |
|
Aliso Viejo |
10.00 |
|
Brea |
10.00 |
|
Cypress |
10.00 |
|
Dana Point |
10.00 |
|
Fullerton |
10.00 |
|
Huntington Beach |
10.00 |
|
Laguna Hills |
10.00 |
|
Laguna Woods |
10.00 |
|
Lake Forest |
10.00 |
|
La Mirada |
10.00 |
|
Newport Beach |
10.00 |
|
Orange |
10.00 |
|
Placentia |
10.00 |
|
San Clemente |
10.00 |
|
San Juan Capistrano |
10.00 |
|
Whittier |
10.00 |
|
Yorba Linda |
10.00 |
|
Bellflower |
9.00 |
|
Downey |
9.00 |
|
Fountain Valley |
9.00 |
|
Costa Mesa |
8.00 |
|
Irvine |
8.00 |
|
Laguna Niguel |
8.00 |
|
Los Alamitos |
8.00 |
|
Mission Viejo |
8.00 |
|
Westminster |
8.00 |
As of April 12, 2021, the City contracted with the HdL Companies for collection of the TOT. TOT revenue is collected by the hotel operator and remitted to the City each month.
Westminster received $912,099 in TOT revenue during Fiscal Year (FY) 2024-25 and is projected to receive $905,000 in FY 2025-26. A 1% increase would generate approximately $113,000 in additional TOT revenue annually. If the City were to enact a 10% rate, the average in California, an additional $226,000 could be generated and a rate of 14% could generate an additional $452,000 annually.
Enacting a Tax
Any new or increased tax requires voter approval to become effective. The procedures for enacting any of these taxes are essentially the same. There are three possible routes to voter approval for any of these taxes:
1. Council-Initiated General Tax
A general tax is a tax imposed for “general government purposes” (i.e., a tax where proceeds of the tax are deposited into the City’s general fund and are not legally earmarked for a specific purpose) (Cal. Const. Art. XIII C, Sec. 1(a)). Such a tax requires the approval of a majority (50% + 1) of the votes cast on the measure at the election (Cal. Const. Art. XIII C, Sec. 2(b)).
The tax is proposed by Council adoption of a resolution submitting a tax ordinance to the voters. Unless the City Council declares by a unanimous vote that there is an emergency (usually a “fiscal emergency”), the election on the tax measure must be an election where a City Council seat is also on the ballot. (Ibid.). If the Council does declare an emergency, then the tax measure may appear on any ballot.
In either event, the resolution placing the matter on the ballot must be approved by a two-thirds vote of all members of City Council (i.e. four “yes” votes) (GC 53724(b)). The Council does not need to itself adopt the tax ordinance.
The resolution placing the measure on the ballot must be adopted no less than 88 days prior to the election date (EC 9222).
2. Council-Initiated Special Tax
A special tax is a tax imposed for “specific purposes, including a tax imposed for specific purposes, which is placed into a general fund” (Cal. Const. Art. XIII C, Sec. 1(d)). Such a tax requires the approval of two-thirds of the votes cast on the measure at the election (Cal. Const. Art. XIII C, Sec. 2(d)). Because of the higher voting threshold, it is relatively rare for a hotel tax to be proposed as a special tax.
A special tax may be proposed by Council adoption of a resolution submitting a tax ordinance to the voters. The tax measure can appear on any ballot and the resolution placing the measure on the ballot requires only a majority Council vote (i.e., three votes). The resolution placing the measure on the ballot must be adopted no less than 88 days prior to the election date (EC 9222).
3. Petition-Initiated Tax
Either of these taxes can be the subject of an initiative petition. To qualify by petition, the petition must be signed by no less than 10 percent of the voters of the city.
If a tax ordinance qualifies for the ballot via petition, the ordinance can (but is not required to) earmark the funds for specific purposes. Whether or not funds are earmarked, the tax measure will be adopted if a majority (50% +1) of the votes cast on the measure are in support of the measure (City & County of San Francisco v. All Persons Interested in Matter of Measure C (2020) 51 Cal.App.5th 703).
If a valid petition is submitted and certified by elections officials, the Council has a ministerial duty to adopt a resolution placing the measure on the ballot (EC 9215(b)). The measure can be placed by the Council on the ballot of any general or special election (EC 1405; California Cannabis Coalition v. City of Upland (2017) 3 Cal.5th 924). However, the election can be no later than the City’s next general election occurring not more than 88 days after the call of the election and can be no sooner than 88 days after the call of the election (EC 1405).
The deadline to file with the Orange County Registrar of Voters for the November 3, 2026 General Election is August 7, 2026.
Per previous direction, the City has contracted with FM3 Research, Inc. - also known as Fairbank, Maslin, Maullin, Metz & Associates - to conduct a survey gauging public interest. The results of the survey will be available mid-July, and the City Council may consider these results if there is direction to prepare a ballot measure for consideration at a special meeting prior to the August 7, 2026 filing deadline.
FISCAL IMPACT
There is no fiscal impact associated with this item; however, an increase in the TOT rate could generate additional revenue for the City of Westminster’s general fund.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
If the City Council is interested in pursuing a TOT increase measure, the deadline for placement on the November 3, 2026 ballot is August 7, 2026.
ATTACHMENTS
1. None
REVIEWED BY
Erin Backs, Finance Director
City Attorney’s Office
Christine Cordon, City Manager