COVID not hitting city tax revenue as hard as feared when pandemic began

Revenue from hotels and vacation rentals in the city is so far not on pace to drop as far as predicted when the COVID-19 pandemic began to grip the country.

A projected shortfall in the city budget of tens of millions in tax revenue generated from visitors may not come to fruition, according to the latest available reports.

As the COVID-19 pandemic began to grip the nation last spring, Palm Springs leaders made a plea to the federal government for financial assistance after a revised budget predicted a $26 million drop in revenue from occupancy taxes for the fiscal year ending June 2020 and up to $44 million in losses for the fiscal year ending later this year. The Transient Occupancy Tax (TOT), collected from guests at city hotels and vacation rentals and comprising the largest single source of city revenues, was predicted to plummet 61 percent, to $14.1 million. But data released in February indicates that midway through the current fiscal year those revenues fell only 8.7 percent, and already stand at $13.7 million.

The city had every reason to fear the worst last spring. As the 2020 fiscal year entered its final quarter, hotels, restaurants and shops usually packed with visitors were nearly empty due to statewide stay-at-home orders. Occupancy tax revenues in those final months sunk an average of 63 percent compared with the prior year, including an 88 percent drop in June. The city ended the fiscal year with $10 million less occupancy tax revenue than the year before — a 28 percent year-over-year decline despite earlier being on pace for a 6.6 percent increase.

As lockdowns eased in the summer months, visitors from throughout Southern California flocked to Palm Springs, bolstering city coffers. The city averaged 12 percent more occupancy tax revenue in July, August and September compared with the year prior. But the revenue roller coaster ride wasn’t over. While not as drastic as losses in the spring of 2020, lockdowns that went into place for the holidays resulted in additional steep declines in occupancy tax revenue, including a 55 percent drop in December.

No city revenue data for the first two months of 2021 is publicly available. And none of the occupancy tax figures reflect the health of shops, restaurants and other small businesses that do not collect that tax. But as vaccines roll out and restrictions ease, data that is available shows the city may have been able to avoid a financial calamity. If that comes true, the story in Palm Springs would mirror that in many cities and states across the US. In California, for example, the Urban-Brookings Tax Policy Center found that tax revenues actually increased 1.2 percent between April and December last year, as federal and state aid allowed people to continue spending, even as many lost their jobs.


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BRIEFLY

  • INMATE QUARANTINE MEETING: Business leaders in Palm Springs plan to meet with county staff, Palm Springs Police Chief Bryan Reyes and Councilmember Geoff Kors today at 8:30 AM to address a report from Reyes last week about a county program that transports recently-released prisoners to Palm Springs in order to quarantine from COVID-19 following completion of their sentences in the Banning jail.
  • CODE COMPLIANCE: City Code Compliance staff responded to 144 reports, completed 90 proactive inspections, and issued 14 citations in the week ending Sunday, Feb. 28. Of the reports, 32 came in through the Vacation Rental Hotline, 59 through the city app, and 53 were called in to the code hotline. The proactive inspections include 10 at local cannabis businesses and 80 at other businesses for COVID regulation compliance checks. Of the citations, eight were for vacation rental violations and six were for other code violations. Anybody wishing to report a code violation can visit this online tool.
  • COVID VACCINES: If you qualify for a vaccine you can get one at the Palm Springs Convention Center, 277 N. Avenida Caballeros, from 8 AM-5 PM today, and all week through Friday. Appointments can be reserved online at www.rivcoph.org/COVID-19-Vaccine. Find community providers such as pharmacies here.
  • FUNDRAISER ENDING: Palm Springs High School’s junior class Krispy Kreme fundraiser ends Friday. Purchase a dozen glazed doughnuts for $10 by going here or by sending the funds via Venmo (@pshs2022). After your purchase, a redeemable coupon will be sent to you on March 8.

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