Council sends sales tax increase to Nov ballot; rejects hotel tax proposal

The Hermosa Beach City Council voted Tuesday to place a half-cent sales tax measure on the November 3 ballot, but turned away attempts to pair it with an increase to the city's hotel tax, exposing a divide over how aggressively to chase new revenue ahead of a structural deficit projected to open in 2028.

The sales tax measure passed 4-1, with Councilmember Dean Francois the lone dissent. If approved by a simple majority of voters, it would raise the local rate by a half cent, generating an estimated $2 million annually. Three separate motions to put a transient occupancy tax increase on the ballot, either alone or bundled with the sales tax, all failed.

The split was less about whether the city needs money than about how to ask for it. Finance Director Brandon Walker opened the discussion by reminding the council that while the fiscal year 2026-27 budget is balanced, the out-years are not. The gap, he said, is driven mainly by three looming Los Angeles County contracts for beach maintenance, lifeguard, and fire services. Mayor Pro-Tem Michael Keegan later underlined this as he explained that the lifeguard contract alone could run $3 million to $4 million a year, and that the LA County Fire contract renewal originally came in with a 33 percent increase, and remains under negotiation.

Two recent changes may also have impacted the argument for a local measure. Measure ER, a half-cent countywide sales tax, takes effect October 1 and will push Hermosa's rate to 10.25 percent. Separately, the state's AB 1768 raised the local sales tax cap from 2 percent to 3 percent, meaning Measure ER does not count against the city's own ceiling. Without that change, Walker said, a local sales tax measure would not have been possible.

Polling shaped the council's caution. A community survey showed 56 percent initial support for a sales tax, rising to 62 percent once respondents heard supporting information and settling at 55 percent after opposition arguments, still above the 50-percent-plus-one threshold a general sales tax requires.

What followed was a lengthy procedural back-and-forth that produced two failed motions before the council settled on the measure it sent forward. The votes on those failed motions tell a misleading story unless the reasoning behind them is spelled out, because the same two councilmembers backed both, for opposite reasons.

Councilmember Ray Jackson moved a more aggressive tax hike package: a half-cent sales tax that would escalate to a full cent when (and if) Measure ER sunsets in five years, paired with a hotel tax increase to 15 percent and a still-higher rate for short-term rentals. That motion failed 2-3, supported only by Jackson and Francois. A standalone hotel tax measure from Jackson, raising the rate to 15 percent with an additional 3 percent on short-term rentals, also failed 3-2, again with Jackson and Francois the two yes votes.

Their alignment on those tallies was a coincidence of arithmetic, not agreement. Jackson wanted more revenue and wanted it locked in early, arguing the city is roughly $12 million behind where it would have been had earlier measures passed and that "desperate times call for desperate measures." He saw the short-term rental tax in particular as a way to recoup what he described as a significant enforcement and collection burden on the city.

Francois wanted the opposite of more taxation. He said plainly that the city had balanced its budget on existing revenue, that Hermosa is a disciplined city, and that it did not need to raise the sales tax at all. What he supported was putting the choice in front of voters. He disputed the premise that a hotel tax on the ballot would drag down the sales tax measure, calling that the voters' decision to make, and noted the hotel tax falls largely on visitors rather than residents. So when Francois voted for Jackson's motions, he was voting to give the public both questions, not endorsing the tax increases themselves; he ultimately cast the only no vote against the sales tax measure that passed.

Mayor Mike Detoy and Mayor Pro Tem Michael Keegan favored simplicity over breadth. Keegan's clean half-cent motion, seconded by Councilmember Rob Saemann, was the one that survived. Seaman said he believed a single, straightforward measure had the best chance of passing, and that the city had "come a long way toward regaining trust" with voters after sales tax measures failed in prior years under the leadership of former City manager Suja Lowenthal. The council's consultant had warned of a watering-down effect from competing measures, citing Los Angeles, where a hotel tax increase tied to the 2028 Olympics failed at the same time a separate hotel tax measure passed. Saemann later likened the evening's compromises, approvingly, to a dance.

The decision leaves a gap between what the council put on the ballot and what some members say the city actually needs. Jackson, who voted for the half-cent measure in the end, was blunt that he considered it would not be enough.

Whether voters see it that way, and whether a future council returns to the hotel tax this one declined to pursue, will likely define the next phase of the city's fiscal debate. The measure heads to the November 3 general municipal election, where three council seats are also up. Staff will return July 28 with formal ballot language to meet the county's August 7 filing deadline.

Voters rejected a sales tax increase ballot measure in 2022, and again in 2024 by a larger majority. This time around it might just be that City Manager Steve Napolitano has struck a different chord with voters, after a budget process that seemed to offer a more candid assessment of the realities facing the city than in previous cycles.

Time will tell.