The coronavirus shutdowns began March 12 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 percent.
“It really is dark when you look at the numbers,” said San Diego County Treasurer-Tax Collector Dan McAllister. “As we look at everything to date, the numbers are weak compared to what they were.”
The third quarter of the fiscal year covers January through March. In 2019 the county collected $1,491,782.64 of TOT revenue including $42,746.50 from Alpine facilities, $4,210.48 generated in Pine Valley, and $2,408.36 paid by Boulevard lodgers. The countywide total for the those months in 2020 was $947,175.31 including $31,445.65 collected in Alpine, $3,961.30 of Pine Valley payments, and $1,759.85 obtained from Boulevard overnight stays.
“I think that’s directly attributable to Covid-19,” McAllister said.
TOT revenue for the second quarter which covers October through December increased from $1,184,690.39 in 2018 to $1,342,438.23 during 2019.
“Covid-19 took its toll on the industry, and it’s sad because it cost everybody money,” McAllister said. “It kept people away.”
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 the facility ceases operation the payment must be made within 30 days after the operator ceases doing business, and if the facility 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. If the payment is postmarked by the end of the month following the quarter but not received by the end of that month there is no penalty.
“Covid-19 is probably responsible for the biggest decline across the board,” McAllister said.
“They’re not paying the hotels or the places to stay.”
The Transient Occupancy Tax, which was reduced from 9 percent of the lodging unit rate to 8 percent in October 2007, 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. A timeshare unit used by an ownership partner or an owner’s guest is not subject to the TOT, although if it is rented to the general public that unit is subject to the tax for that period. If a campground has a membership program a member or a member’s guest is exempt from TOT payments. Campgrounds at the eight county parks with such facilities are not subject to the TOT, nor are lodging facilities on Indian reservations or other areas where the County of San Diego has no taxing power. Units occupied or rented for more than 30 consecutive days are not subject to the tax.
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.
If the payment is either late or postmarked by the deadline and not processed by the sixth of the following month the revenue is reported for the quarter after the money was collected. McAllister indicated that such late processing usually involves fourth-quarter payments. Significant decreases in revenues can also be attributed to closures, which in some cases involve permanent closures and in other cases involve renovation-related temporary closures. McAllister and his staff did not notice any such activities that could have decreased third-quarter revenue.
“The only significant impact we see that probably cost a number of dollars was Covid-19. It really did hit very hard in a lot of ways,” McAllister said. “I don’t see anything at all other than Covid-19 being the big hurdle.”
Representatives from five rentals notified the office of the Treasurer-Tax Collector that they had ceased business. Two of those were in Borrego Springs, one was on Palomar Mountain, one was in unincorporated Escondido, and one was in unincorporated San Diego. “We saw some rentals close,” McAllister said.
Some facilities are in their first year of providing lodging services and submitting TOT payments. “We did have more rentals filing TOT forms this year,” McAllister said.
An increase in bed and breakfast venues is the likely cause of that. Forms were filed by 246 establishments during the third quarter of Fiscal Year 2018-19 and by 268 venues during the third quarter of Fiscal Year 2019-20.
“We added rental units across the county, but we still have those closures,” McAllister said.
The Welk Resort provides significant revenue generation for unincorporated Escondido. Increased use by timeshare ownership partners decreases available rentals to the general public which are subject to the TOT, so fluctuations in unincorporated Escondido revenue may be due to that factor. Excluding communities not listed in the 2018-19 report Escondido was one of three communities whose third-quarter revenue increased for 2020. The increase for Escondido was from $101,698.21 to $113,238.59. The other two increases were in the East County backcountry; revenue collected in Jamul increased from $4,253.18 to $4,814.11 and Descanso revenue rose slightly from $982.30 to $987.78.
“The rural areas were seen as a more popular destination for people getting out of the urban areas,” McAllister said.
The three weeks affected by the coronavirus shutdown included spring break for many potential visitors, which could explain why the losses were disproportional to the time the shutdown involved. McAllister cannot confirm that spring break was the cause of the loss which exceeded the percentage of the quarter’s time the quarantine was in effect.
“We don’t collect data on why people would be out,” McAllister said.
The payments themselves only account for the quarter and do not specify individual days. Daily revenue information would be obtained only if an establishment is audited.
“We don’t like to speculate. We like to work from our data. And we don’t keep that data, so I don’t know,” McAllister said.
College students who travel for spring break often congregate in beach areas or ski resorts and thus likely would not be staying in unincorporated San Diego County unless they stayed with family members and would not be subject to the Transient Occupancy Tax. High school juniors and seniors along with their families often use spring break to visit college campuses; the universities in the City of San Diego likely wouldn’t bring lodgers to the unincorporated county although San Diego Christian College in Santee and California State University San Marcos are close enough to unincorporated communities that some lodging may occur in unincorporated towns.
McAllister noted that San Diego Christian College and Cal State San Marcos likely attract more local students who would not be staying in San Diego County overnight. “They would probably be day trips, I would think,” he said.
At one time spring break was associated with the week before Easter. Now some school districts and colleges schedule spring break for the midway point of the semester and colleges on the quarter system have the break to split the winter and spring quarters.
“Spring break has taken on a new meaning,” McAllister said. “There’s no telling when spring break is anymore.”
Some community losses are due to a revision in the community definitions rather than to losses for a specific establishment. “We did change how to categorize these areas,” McAllister said.
Mountain Empire was a 2018-19 community and had a third-quarter collection total of $6,594.62 but is not included this year while Mount Laguna is new for 2019-20 and provided $3,815.37 of payments for the third quarter. Last year unincorporated Chula Vista was listed and Bonita was not; the 2019-20 report includes Bonita but not Chula Vista. San Pasqual and Vallecitos both had 2018-19 fourth-quarter revenue and neither community is part of the 2019-20 report under those names. The most recent report adds Jacumba – which had third-quarter collections of $291.12, Lakeside, unincorporated La Mesa, Palomar Mountain, Ranchita, Santa Ysabel, and Valley Center to the list. What was called Pauma in the 2018-19 report is now Pauma Valley.
“The majority are reclassifications,” McAllister said. “We’re trying to specify as clearly as we can where the areas are.”
Portions of some communities have ZIP codes which are different from the community identity, and facility operators may utilize a Post Office Box or private mail box address rather than the address of the physical location. “We categorized the establishment based on the area listed in their address,” McAllister said.
