Nevada County’s Airbnbs increase TOT revenue, improve economic bottom line
October 9, 2017
How important is tourism to western Nevada County’s economy? And how do you measure that economic impact?
Nationwide, nearly 40 percent of travel-related spending is for food (16.6 percent) and accommodation (21.5 percent), with 23 percent going to transportation costs. So transient occupancy tax, which reflects the actual revenue being brought in by visitors staying in campgrounds, hotels and short-term rentals, is a good way of estimating any increase in tourism and tourism-related revenue.
Transient Occupancy Tax, or TOT, is defined as the money that local governments levy from visitors who stay for less than 30 days in any structures used for overnight dwelling, lodging or sleeping purposes.
That TOT tax is typically just 8 to 9 percent of the overall budgets for Nevada City, Grass Valley and Nevada County, far below the revenue generated by sales tax and property tax. It’s still a significant chunk, however, accounting for more than $800,000 in revenue for Grass Valley this year.
It’s no surprise that TOT tax from increasingly popular Airbnb rentals has become a revenue source being pursued by local jurisdictions.
Growing market means growing revenue
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Just eight short years ago, short-term rentals and their attendant sites such as VRBO were just a blip on the radar when it came to assessing tourism revenue in Nevada County.
To put the phenomenon in perspective, Airbnb officially launched in late 2008 and boasted just 2,500 listings in March 2009. Currently, Airbnb’s website boasts more than 3 million listings; a quick search for Nevada City this week brought up 217 rentals, with 289 for Grass Valley.
By 2015, local jurisdictions were already noticing the financial impacts of Airbnb rentals, with concerns mounting over the displacement of long-term rental housing — and the need to capture TOT tax from those businesses.
Nevada City was the first in western Nevada County to tackle regulating and allowing hosted short-term rental of up to two units in residential dwellings effective January 2016. As part of that ordinance, Airbnbs were required to make a quarterly payment of transient occupancy tax, as well as pay a $100 registration fee.
According to Nevada City’s interim city manager, Catrina Olson, in FY 2016-17 the city collected an additional $25,000-30,000 in TOT tax from those short-term rentals.
“It definitely was helpful,” she said.
The opening of Inn Town Campground has also been a boon to Nevada City’s bottom line, Olson noted. Nevada City’s TOT revenue jumped 24 percent, from $323,814 in FY 2015-2016 to $401,616 in FY 2016-2017.
In May of this year, the unincorporated county entered into a tax collection agreement with Airbnb.
“They collect the TOT and give us a quarterly payment,” said Nevada County Deputy County Executive Officer Martin Polt. “Before that, it was an honor system.”
Polt estimated that is boosting revenue by about $120,000 a year, a 25-30 percent increase.
Coming soon to a neighborhood near you?
The city of Grass Valley is moving forward with its own ordinance to regulate the short-term rental market.
According to Tim Corkins, the treasurer for the Nevada County Economic Resource Council, Truckee “recognized the revenue source that was sliding by them and went after that Airbnb revenue.” That city’s TOT tax revenue was $2.8 million in FY 2015-16.
The addition of Airbnbs to how some areas collect TOT tax makes it difficult to estimate how much tourism revenue has increased in Nevada County. Over the last eight years, Grass Valley’s TOT revenue has increased 75 percent; Nevada City’s has more than doubled at 122 percent of FY 2009-10 while the unincorporated county saw a much more modest gain of 24 percent.
Increasing the county’s tourism dollars is “a hard nut to crack,” Corkins said.
In 2012, the ERC hired tourism marketing managers, who started “at ground zero,” Corkins said. “They tried to get a bed count (of) the hotels, anyone who rented something, They got ticket counts from venues and the fairgrounds, They tried to get a baseline for what was happening.”
The marketing effort included targeted advertising and organized tours from the Bay Area, he said.
“We saw a bump (in TOT revenue) in 2012-13, it was up almost $50,000, then it dropped, then it jumped again,” Corkins said. “It was hard to gauge the effect of our efforts.”
Since then, Corkins said, the ERC has changed its focus to throw tourism under the same umbrella as economic development, with the idea of luring visitors to “come up to play, then stay and bring your company up here.”