Memo for fiscal year 2019, updated 2018-03-29

[Archived] Question #17: What would the Hotel Tax rate need to be to fully pay for the Trolley?


What would the hotel tax need to be to fully cover the operations of the Trolley?


The current operating cost of King Street Trolley as proposed in the FY 2019 Budget is $958,936. The transient occupancy (hotel) base tax rate is 6.5% of the room charge plus $1 per room per night. Each additional 0.1% increase on the base tax rate would generate approximately $182,400, based on the FY 2019 projected revenue of $11.8 million from the transient occupancy base tax rate. Additionally, each $0.10 on the room tax would generate $114,400. To fully cover the current operating cost of the King Street Trolley, the City would need to increase the base tax rate by 0.53% to 7.03% or increase the room tax by $0.85 to $1.85. 

The transient occupancy tax was last increased in FY 2009 by 1%, from 5.5% to 6.5%, and the $1.6 million in additional annual revenue was used to help fund economic sustainability initiatives such as the launch of the King Street Trolley service, CIP transportation projects, and land use and transportation planning staff resources. As a result, it would be difficult to again raise the City hotel tax indicating that it was to be used to fund the King Street Trolley as that funding the trolley (while not a formal hard-wired dedication) was one statement made by Council Members in FY 2009.

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