City hopes 10% bed tax will allow city to offer rebates to developers to build the city’s first hotel
FARMERSVILLE – A little more than a year ago, Farmersville approved a tax rebate plan to help lure large hotel developers to its location off Highway 198 on the way to Sequoia National Park. But before it can provide developers with the tax rebate, voters must first pass the tax.
Farmersville residents will get their chance to decide matter this November after the city council voted 4-0 to approve placing a Transient Occupancy Tax (TOT) measure on the ballot. Better known as a hotel or bed tax, the TOT is a 10% tax on room bookings less than 30 days. The 10% rate would be equal to TOTs in Dinuba, Tulare and Visalia but more than the 8% charged in Exeter, Lindsay and Porterville. The tax can be a flat rate per night or a percentage of room fees charged by the hotel. In order to establish a TOT, Farmersville voters would have to approve the measure with a simple majority. The text of the tax measure will read: “Shall the measure enacting a ten percent (10%) Transient Occupancy Tax to be paid by hotel guests in the City of Farmersville providing funding for general purposes such as city services, programs, economic development, and capital improvements, which is expected to generate an estimated $185,000 annually per hotel and is effective until repealed by the voters, be adopted?”
Councilmember Paul Boyer said the city has been trying to bring a hotel to town for years and have had some passing interest, but nothing serious despite being a prime location for a hotel with possibly an adjacent shopping center.
“We are the last community interchange before the national park until you get to Three Rivers,” Boyer said. “We’ve had a few developers mention it would be a good location for some shops and restaurants but we still don’t have any hotels.”
The hotel incentive will offer a rebate up to 50% of the TOT collected. In order to qualify for the incentive, the hotel must have at least 80 rooms, be open 24 hours per day and seven days per week, provide housekeeping and room services, offer parking, be able to host banquets and meetings, and meet the three star standard under the rating criteria established by the American Automobile Association (AAA), JD Power and Associates, or comparable hotel rating entity.
If the hotel does not maintain a rating of at least 3 stars, the agreement is terminated.
“In order to attract developers you need to give them incentives, which is usually a reduction in the TOT,” Councilmember Paul Boyer said. “But you can’t give them the incentive where there isn’t a tax.”
Finance director Steven Huntley estimated that a 80-room hotel with an average occupancy rate of 70% would generate about $185,000 in revenue per year. In addition to using the revenue for economic development purposes, the revenue will be used for general purposes including, but not limited to, city services, programs, and capital improvements.
“I’m hoping the voters will pass it because it won’t cost residents a dime,” Boyer said.