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Tourism and the city’s money

larryforojai.com/world/tourism

Can we replace tourist revenue? Short answer: we can’t, but we can and must supplement it.

Tourism and the taxes it generates support a large share of what the city spends. During COVID-19, hotels and restaurants were hit hard, and the city had to draw down its emergency reserves to keep basic services running. That period was a wake-up call about how closely Ojai’s finances are tied to tourism.

Ojai was built as a destination, and over the years our expenses, staffing and services have grown to match the income visitors provide. At the same time, our ability to grow is limited by our location, available land, roads and state tax law. Most importantly, we have chosen to manage development so Ojai doesn’t become a 24/7 tourist destination. That choice protects our quality of life, but it carries financial consequences.

Tourism will remain our economic foundation. But if we can raise income without adding costs for residents and making Ojai less affordable, we should seriously pursue those options while rigorously reviewing our internal spending.

  • 44%

    of General Fund revenue is hotel tax in the proposed 2026-27 budget

  • $3.4M

    in reserves when the pandemic hit

  • $1M

    what those reserves fell to at points while hotels were closed

  • $4.2M

    the revenue the city expected to lose to COVID

The hotel tax share is from the city’s proposed 2026-27 budget. The pandemic figures are from the city’s own 2021-22 budget message. Both are linked below.

Why replacement isn’t realistic

Headwaters Economics, an independent nonprofit research group, calls this the “amenity trap”: a place with natural or cultural attractions that becomes so popular it is “loved to death.” Waves of visitors and new residents strain infrastructure and municipal finances while pushing housing costs out of reach for the workers who sustain the community. Their research shows communities can wait, react with growth limits that carry unintended consequences, or plan ahead. Ojai should plan. Towns like Bend, Big Sky and Vail have adopted measures such as dedicating lodging tax revenue to community needs and incentivizing sales to local residents, and we should study what applies here.

Our municipal commitments have also grown significantly. Permanent supportive housing, the new aquatics program, a full-time motorcycle officer, additional staff and rising legal costs have added spending that wasn’t in the budget years ago. State law strictly limits how the city can raise income, so unless we are prepared to cut Public Works, Parks and Recreation, Planning and Building, and general services beyond public safety, we remain in a symbiotic relationship with our visitors.

Step one: review our own spending

Before any new tax is imposed, a dedicated committee must review all city expenses to determine whether we can reallocate spending in ways that are more cost-effective and deliver better results. This remains the most direct way to build a fiscal supplement without simply raising taxes on residents.

Where the Council is looking

The City Council is currently exploring a second-home tax and a vacancy tax, including on commercial property. These deserve serious study, with careful attention to who ultimately bears the cost. I suspect a higher hotel bed tax will become part of the conversation eventually, because there may be no choice.

Additional options to consider

Paid by visitors and those who profit from them

  • An enhanced Tourism Marketing District, funded entirely by the businesses within it, so the city spends zero general fund dollars marketing Ojai.
  • Short-term rentals: higher fees and stronger enforcement to capture a fair-share contribution.

Paid by development

  • Larger developer contributions toward resident amenities, or a community real estate trust, as a condition of approval, going beyond the current two percent for the arts requirement.

Other revenue options

  • Cannabis tax: the current tax is 3% and can be raised up to 10% by Council vote. This should remain a viable option for evaluation.

Check it yourself

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This is one of 10 positions Larry has written out, in his own words. Where a number appears, the document it came from is linked under it, and nothing here is edited after it is published except to fix a typo or add a document. Read the rest.

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