Title
Transient Occupancy Tax (TOT) Priorities Plan
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FileID
File ID: 2026-00850
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Location
Location: Citywide
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Recommendation
Recommendation: Pass a Motion directing the City Manager to: 1) develop a TOT priorities plan for Council consideration and adoption that includes priority categories, evaluation criteria, scoring rubric and funding review process; 2) bring the TOT priorities plan annually to Council for review and adoption along with associated project rankings, and an update on the Community Center Fund performance, current obligations, and bonding capacity; and 3) develop a Community Center Fund reserve policy for Council consideration and adoption.
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Contact
Contact: Megan Van Voorhis, Director, (916) 808-5979, mvanvoorhis@cityofsacramento.org, Department of Convention and Cultural Services
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Presenter
Presenter: Megan Van Voorhis, Director, (916) 808-5979, mvanvoorhis@cityofsacramento.org, Department of Convention and Cultural Services
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Attachments
Attachments:
1-Description/Analysis
2-TOT Priorities Presentation
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Description/Analysis
IssueDetail
Issue Detail: The Transient Occupancy Tax (TOT) is a tax paid by guests staying 30 or fewer consecutive days at hotels, motels, inns, short-term rentals, and similar establishments within the City. Currently the tax is 12% of rent charged by the operator and has two components. The first component, a 2% tax, is a general tax that is placed directly into the City’s General Fund and can be used for any governmental purposes. The second component, a 10% tax, is a special tax which is deposited into the Community Center Fund and, pursuant to City Code chapter 3.28, shall be used exclusively for:
1. Administration of the provisions of City Code 3.28;
2. Economic development projects to create local jobs;
3. Acquisition, construction, completion, operation, repair and maintenance of visitor-serving facilities that promote tourism, economic development, and other activities that bolster the local economy, such as convention halls and centers; theatre and arts venues; public off-street parking facilities and related site improvements; lands, easements, rights-of-way, and other works, property, or structures, necessary or convenient for these facilities;
4. Expense in connection with proposals or proceedings for acquisition of the facilities referred to in subsection 3 of this section;
5. Interest and principal payments on bonds issued to acquire any of the facilities referred to in subsection 3 of this section;
6. Lease payments for lease of any of the facilities referred to in subsection 3 of this section; and
7. Recurring annual payments to fund Visit Sacramento.
Existing TOT obligations include, but are not limited to, annual payments to Visit Sacramento operations, Council-approved bond obligations for the Convention Center Complex Project (SAFE Credit Union Convention Center, SAFE Credit Union Performing Arts Center, and Memorial Auditorium), operation and upkeep of the SAFE Credit Union Convention & Performing Arts District, cultural partner support and related fund obligations.
Since recovery from the COVID-19 pandemic, TOT revenues have returned to a pattern of steady growth. However, future revenue growth is influenced by multiple market factors, including hotel inventory, occupancy, average daily room rate (ADR), convention activity, special events, and broader destination competitiveness.
The presentation is intended to provide City Council with a broader framework for understanding how tourism supporting investments contribute to Sacramento’s visitor economy and how future investments could be evaluated.
The presentation will explore:
• the relationship between tourism activity, destination competitiveness, and TOT generation;
• the distinction between short-term visitation peaks and long-term baseline visitation;
• the role of visitor-serving infrastructure, destination activation, and demand-generating activities in supporting tourism growth;
• and how tourism investments may contribute differently over varying time horizons.
The presentation is also intended to begin discussion regarding the development of a more transparent and consistent framework for evaluating and prioritizing visitor economy investments over time. It will offer a preliminary framework for evaluating future tourism supporting investments using criteria including tourism impact, visitor-serving value, economic return, destination strength, and long-term contribution to the visitor economy.
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PolicyConsiderations
Policy Considerations:
The presentation will introduce potential policy considerations related to:
• development of a formal TOT priorities framework,
• evaluation criteria and review processes for tourism-supporting investments,
• long-term Community Center Fund sustainability,
• reserve and fund balance considerations,
• future bonding capacity,
• and annual review of enterprise fund performance, obligations, and available capacity.
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EconomicImpacts
Economic Impacts:
The presentation will discuss how:
• Visitor activity contributes to TOT generation;
• Different tourism segments contribute differently to the visitor economy; and
• How investments in visitor-serving infrastructure, destination activation, conventions, events, arts and culture, historic assets, and related tourism-supporting. activities may contribute to Sacramento’s long-term economic competitiveness and tourism economy.
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EnvironmentalConsiderations
Environmental Considerations: The report is not a project pursuant to the California Environmental Quality Act (CEQA). This report is an informational item only. No action is being taken in connection with this report. As there is no potential for this oral report to result in a direct physical change in the environment or a reasonably foreseeable indirect physical change, this report does not qualify as a “project” under CEQA. [See CEQA Guidelines Section 15378(a)].
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Sustainability
Sustainability: Not applicable.
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Commission/Committee Action
Commission/Committee Action: Not applicable.
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RationaleforRecommendation
Rationale for Recommendation: The recommended action is intended to support greater community engagement, transparency, consistency, financial stewardship, and long-term alignment in evaluating visitor economy investments.
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FinancialConsiderations
Financial Considerations: No fiscal action is requested as part of this direction. The Community Center Fund is an enterprise-supported fund comprised primarily of: TOT revenues, earned revenue associated with convention and visitor-serving facilities, and related enterprise activity. The fund supports a variety of ongoing obligations including debt service, operation and maintenance of visitor serving facilities, cultural partner support and annual payments to Visit Sacramento.
The presentation will detail how future policy considerations may include reserve and fund balance targets, long-term enterprise stability, future capital and infrastructure needs, and preservation of future bonding capacity when evaluating discretionary allocations or future commitments.
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LocalBusinessEnterprise
Local Business Enterprise (LBE): Not applicable.
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