Farmersville council approves tax rebate for hotels, but voters will have to approve the tax next March
By Reggie Ellis @Reggie_SGN
FARMERSVILLE – The Farmersville City Council is planning to raise taxes on businesses in the city in order to attract new businesses. It doesn’t sound like a solid plan, unless you consider they will be taxing an industry that doesn’t currently exist within the city limits.
At its May 13 meeting, the council 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 a tax rebate, the city must pass a tax. Mayor Greg Gomez said the city is planning to place a Transient Occupancy Tax (TOT) measure on California’s presidential primary on March 3, 2020. Better known as a hotel tax, the TOT is a tax on room bookings less than 30 days. 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.
“This is a big step for us,” Gomez said. “We went out to the developers they told us to come back with more incentives.”
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.
“I think this will attract some interest and get things started,” Gomez said. “And it won’t affect our residents at all. It’s only a tax on those visiting the city.”
The council also approved a sales tax reimbursement program for commercial developers. Under the program, any new development larger than 50,000 square feet in retail space qualifies for reimbursement up to 50% of the annual sales tax generated by the businesses for five years. The amount is capped at how much in city development fees the business paid prior to construction. The developer must generate more than $5 million in taxable sales or $50,000 of new sales tax revenue per year to the city.
The reimbursement will also be available to individual retailers who expect to generate more than $55 million in annual taxable sales or $550,000 in new sales tax revenue to the city. The reimbursement is capped at $350,000 per year, or $1.7 million for five years. The incentive explicitly states that cannabis businesses are not eligible for the reimbursement. The city already offers tax reimbursements for residential development. The city also currently allows residential developers to defer development impact fees, which go toward alleviating the impact of new construction on city services, until homes have been sold and a certificate of occupancy has been issued by the building inspector.