Laguna Beach leaders are looking at potentially asking voters to increase their hotel and business taxes, asking city staff to draw up language for the ballot based on the results of a survey of their residents.
The survey asked residents their major concerns for the city, their satisfaction of how the city government is functioning and how they would feel about various taxes being introduced including an increased sales tax, transient occupancy tax and a business license tax.
The survey was made up of “likely voters” – people whose demographics match those of what is predicted at the general election. 400 people were surveyed, a little under 2% of the city’s population, of which many were over 64, caucasian and 20+ year residents of the city.
According to the US Census Bureau, nearly 80% of the Laguna Beach population is white and 30% is over 64 as of 2025.
The proposed sales tax increase would put the current tax up one percent, from 7.75% to 8.75%, and bring in around $7.8 million annually.
This would put Laguna Beach among only 11 other cities in the county whose sales tax is over 7.75%.
Initially, those surveyed opposed a sales tax by almost 49%, with only 46.5% voting in favor.
However, after conducting what is known as an “informed vote,” meaning that voters are educated on what the funds raised by the tax would be used for, those in favor made up nearly 49%, and those opposed made up 44.5%.
The increased Transient Occupancy Tax would apply to hotels and short-term rentals operating in the city, bumping their tax rate from 12% to 14%, and would bring in an estimated $3 million annually, according to a staff report.
73.5% of voters supported the hotel tax initially, and that number increased to 75% after an informed vote.
This increase would put Laguna at one of the highest hotel tax rates along the coast, with Dana Point, Huntington Beach, San Clemente and Newport Beach at 10%, and Seal Beach at 12%.
The final proposed option is an adjusted Business License Tax, which would remove the annual $1,650 on annual “gross receipts” and impose a graduated tax based on business income.
City staff noted it’s expected to bring in $8.6 million annually, though no exact percentage for the new tax was provided at the meeting. The tax would affect those dining out, which is largely day trippers and tourists.
Nearly 48% opposed a business tax, with about 41% voting in favor, but no informed vote was conducted.
Of all three taxes, 56% were mostly likely to support a hotel tax, 43% supported a sales tax increase and 23% were in favor of a business tax, with over 25% either unsure or not in support of any.
Several public commenters at a study session held on June 9 were unhappy that few of the taxes would affect day trippers and management of the city’s budget.
According to a staff report, eight positions within the city have been cut this year and contracts have been reduced in an attempt to balance the budget.
Right now, the city’s general fund is narrowly imbalanced, with around $673,000 more in spending than income, but city leaders have been able to cover their spending by shifting some other funds around.
“We are not in the mood for increases in additional taxes in our city until you guys start cutting your costs, cutting your spending, cutting the number of employees and cutting out the vanity projects that appear to be on the agenda to pass through,” said public commenter Jennifer Zeiter.
The hotel and business taxes were favorable to the council, with members highlighting that in order for the votes to be successful, community education would have to take place.
“I really agree with what I’ve heard a lot of in the community and what I heard from speakers tonight, that I think our visitors, our day trippers, in particular need to carry a heavier burden of the increased costs providing services to those visitors,” Councilmember Hallie Jones said at the June 9 meeting.
“The best way to do that, I think, logically, and from a policy perspective, the Business License Tax does make sense to me. But I think it’s a really hard thing to explain to the community.”
Council members looked to both the hotel and business taxes as potential avenues for funding, particularly for wildfire prevention, with concerns of the former hurting the hotel business in the city and the latter being poorly understood by the public.
“At the end of the day, public safety and wildfire prevention has to be our top priority, and that’s not a place where we should just be making cuts for the sake of making cuts,” Councilmember Alex Rounaghi said at the meeting.
The council will meet again on July 7 to revisit the drafts and discuss the possibility of putting the tax measures on the ballot.
Michelle King is a Voice of OC Tracy Wood Reporting Fellow. Contact her at mcaitlin254@gmail.com.
