How much money does Menlo Park make from short-term rental taxes?

This November, Menlo Park voters will face the question of whether or not to increase taxes on hotels, motels and short-term rentals in the city. Ahead of that ballot measure, the Menlo Park City Council reviewed how much money the city makes from short-term rentals on August 13. In the 2023-24 fiscal year, the city collected $510,438 in revenue from the transient occupancy tax on short-term rentals.

People staying in hotels, motels and short-term accommodations such as Airbnbs for 30 days or less must pay transient occupancy taxes. These taxes are paid by the guests, not by Menlo Park residents.

To identify active short-term rentals in the city, Menlo Park has contracted with HdL Companies, a consulting firm specializing in revenue management services and tax recovery for public entities.

According to a Menlo Park staff report, the city began working with HdL in the summer of 2021 when it began rolling out services to detect, monitor and comply with short-term rentals within the city. Short-term rental detection is done by monitoring various rental sites such as Airbnb, Tripadvisor and Vrbo, according to the report.

Information about each short-term rental is then entered into a short-term rental directory, which includes the owner’s name, address of the unit for rent, number of nights rented, average occupancy rate, room rates and usage trends.

In the first year of short-term rental monitoring, the 2021-22 fiscal year, Menlo Park collected $230,279 in transient occupancy tax revenue from 68 registered short-term rental properties, according to a city government information update. In the 2022-23 fiscal year, the city collected $363,857 in revenue from the short-term rental monitoring program.

According to the staff report, as of June 30, 2024, there are 101 short-term rental properties in Menlo Park, of which 92 had confirmed stays in the 2023-24 fiscal year.

Revenue from short-term rentals represents only a small portion of the city’s total transient occupancy tax revenue. In fiscal year 2023-24, the city collected a total of $10.5 million in transient occupancy taxes, including $10 million from hotels and motels. Short-term rentals represented just under 5% of transient occupancy tax revenue in 2023-24.

Temporary occupancy tax measure

The transient occupancy tax measure, which will be on Menlo Park voters’ ballot on Nov. 5, proposes a 3.5% increase in the transient occupancy tax within city limits, from 12% to 15.5% over two years. The Menlo Park City Council voted to put the measure on the ballot to address the city’s ongoing funding problems.

Menlo Park’s approved budget for 2024–25 included a deficit of approximately $820,000 that had to be covered with money from the city’s general fund reserve.

“The city is facing the elimination or elimination of revenue sources it has relied on for decades – one of which is the UUT (Utility-User Tax), which the city no longer collects,” said Vice Mayor Drew Combs during discussion of the measure at the July 9 council meeting.

The ballot text for the measure states that the proposed tax is estimated to generate an additional $3.6 million per year for the city.

According to a staff report on the tax, the higher taxes on short-term renters would be used to maintain city services such as road and pothole repairs, police and emergency services, emergency preparedness programs, parks and open space programs, storm sewer maintenance and other general government purposes.

The approval of a simple majority of voters is required for this measure to be passed.