Transient occupancy taxes (TOT) can provide tens, and even hundreds, of millions in revenue for some cities in the state. While the TOT remains an important source of revenue for local governments and often bolsters economic and community development projects, municipal leaders need to monitor and review this critical local revenue source.
MuniServices, the nation’s leading provider of local government revenue enhancement, understands this concern better than most outside of municipal staff. This year, they signed contracts with the cities of Tulare and West Sacramento to audit their TOT, and search for unreported or underreported payments from local lodging providers.
“Cities like Tulare and West Sacramento are starting another round of reviews of their lodging providers,” said Doug Jensen, senior vice president for MuniServices. “They have thriving economies, and hoteliers see the opportunities to meet the needs of business travelers who are working in the region.”
Last year, Tulare’s TOT generated more than $1.8 million in revenue. During the auditing process, MuniServices found few deficiencies in this compliance review. Minimal findings are usually a good thing. The lodging providers are doing things correctly in many cases. Like any compliance review, you never know until you do the review. But, more importantly, the hands-on training of local lodging operators helps avoid instances of underreporting in the future.
“We really have two goals in these type of contracts: 1) Find underreported and unreported revenue for our clients, and 2) Prevent underreporting in the future,” said Jensen. “Those two goals drive our engagements with municipal staff and lodging operators because they set our clients up for success now and into the future.”
West Sacramento is in a similar situation to Tulare. They are a major hub for farmers, food wholesalers and food buyers, so a good amount of their TOT revenue comes from business travelers. Because of the growth of the industry, their TOT revenue has almost doubled over the past nine years, from $872,000 in 2007 to $1.4 million in 2016. While the growth has been great for the City, it has left uncertainty about the accuracy of future TOT reporting.
“West Sacramento has made a lot of really good investments in developing their economy and community. As in the case of Tulare, MuniServices’ goal is to protect their revenue both now and in the future, so the City can continue to make those investments,” said Jensen. “In the end, it’s about dollars and cents, and every little bit helps when you have good goals and projects that you need to pay for.”
MuniServices is a leading provider of revenue enhancement and recovery for local municipalities. With over 900 cities, counties, special districts, and states as clients, MuniServices is the only firm in California and throughout the United States to offer proprietary revenue recovery, audit and administration services encompassing all general sources of municipal tax revenue. Learn more at muniservices.com.