Nevada City has lost millions in TOT taxes in last decade, study shows (Interactive Graph) |

Nevada City has lost millions in TOT taxes in last decade, study shows (Interactive Graph)

Nevada City's Northern Queen Hotel, located at 400 Railroad Avenue and pictured here, has transformed many of its rooms into apartments for senior citizens.
Teresa Yinmeng Liu/ |

The tourism industry in Nevada City in the last decade has suffered a significant loss in terms of transient occupancy tax revenue, a direct contrast to the gain in Grass Valley and other areas of Nevada County.

Data compiled by private research company Dean Runyan Associates and collected by Lex Matteini, owner of PHS Communications, paints a grim picture of the tourism industry in Nevada City. It attributed the loss to the depletion of new and available hotel rooms in Nevada City, and the continual growth of hotel inventory in nearby Grass Valley.

Transient Occupancy Tax, or TOT, is the money that local government levies from visitors who stay for less than 30 days in any structures used for overnight dwelling, lodging or sleeping purposes. And based on information from Matteini, Nevada City has experienced a dwindling share of Nevada County TOT in the last decade. Its share of the county TOT fell from 23 percent in 2003 to 11 percent in 2014. In the meantime, Grass Valley’s share of TOT increased from 10 percent in 2003 to 22 percent in 2014.

“The data strongly suggests that an increasing number of people who visit Nevada City are spending the night in Grass Valley hotels,” wrote Matteini in a report that analyzed Nevada City TOT from 2003 to 2015. “The cumulative economic impact of this trend is an estimated $3.5 million loss in Nevada City TOT revenue over the past 13 years, and a corresponding $3.45 million gain in Grass Valley’s TOT revenue.”

According to Assistant Nevada City Manager Catrina Olson, TOT currently constitutes about 9 percent of the total city revenue, while property and sales tax, the two largest sources of income for the jurisdiction, combined to make up 60 percent of city revenue.

Nevada City collected $296,688 TOT in the last fiscal year, a 14 percent drop compared to the $346,672 it accrued in FY 2002-2003. Olson projected TOT to climb 20 percent for the upcoming year due to increased collections in FY 2015-2016 and the projected start-up of Inn Town Campground.

Matteini, who is also the press manager of the Chamber of Commerce, said he is not trying to influence people’s opinions on Measure Y, a short-term rental regulation that Nevada City voters are set to vote on June 7. Nevertheless, the report has already succeeded in drawing the ire of both sides of the Measure Y campaign.

Vice Mayor Evans Phelps, who is a supporter of the No on Measure Y campaign, said that as a part of the lodging industry in town, she knows how hard it is for people to get rooms in town. She feels that short-term rentals pop up because there is a need for lodging in Nevada City.

“We lost six B&B’s and we lost 36 rooms at the Northern Queen. And the National has 12 rooms that cannot be rented or are so substandard they are too hard to rent,” she said. “Not only have we lost a lot of TOT tax, for every dollar spent on lodging, it translates to five dollars that is spent in town.”

Kathy Dotson, co-president of Nevada City Hosts, which is leading a campaign against Measure Y, agreed. She said that Measure Y passes, the strict provisions of the ordinance would shut down 10 of the current short-term rentals in the city, including hers. She said that Measure Y would lead to other revenue losses.

“The merchants are missing out as well. They are losing out on sales tax, not only the money in store, but sales tax,” she said.

However, Mayor Jennifer Ray and council member Terri Andersen, who are both listed as supporters of Neighbors of Nevada City, downplayed the impact of TOT on the city.

Ray stressed the decline in TOT does not reflect a financial crisis, because 40 percent of the city’s revenue comes from property tax. She said Measure Y helps maintain the character of the city.

“One of the reasons that Nevada City is such a pleasant place to live is that it has maintained some authenticity and it is not excessively commercial,” she said.

Gary Johnson, a member of Neighbors of Nevada City and supporter of Measure Y, noted that even if the ordinance passes, the city could still get TOT from owners’ occupied Airbnbs.

Matteini said he has already submitted the data to both the city and the chamber. He expects to make a presentation on the report during a city council meeting in July.

“I think an economically informed community could do a lot of great things,” he said.

To contact Staff Writer Teresa Yinmeng Liu, please email, or call 530-477-4236.

TOT Report by PHS for Nevada City 5.20.16

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