Report on projected impact of possible vacancy tax in South Lake Tahoe called flawed, rushed, and full of assumptions

SOUTH LAKE TAHOE, Calif. - The company HdL hired by the City of South Lake Tahoe to create a Section 9212 report, analyzing the financial and other impacts of the vacancy tax should it pass. The report shows the financial impact could be $27 million in annual local business spending, a number that is being called out by many in the community. They also state the City could gain an additional 1,543 residents.

During the June 16 City Council meeting, the HdL report was discussed, with Mayor Cody Bass saying, "Too much of the report is assumptions."

Steve Teshara, co-chair of "Stop the South Tahoe Vacancy Tax" and Tahoe Chamber spokesperson said the proponents of the tax are relying on a rushed and flawed report.

"All parties at the June 16 City Meeting – vacancy tax opponents, the Mayor and City Council, city staff, and even vacancy tax supporters – agreed had errors and relied on wild and unsupported assumptions."

The report assumes there are 7,714 potentially vacant properties in the City limits, and says 30 to 60 percent of these potentially vacant properties would be subject to the tax and 60 percent would comply by paying the tax.

Under this scenario, HdL laid out hypothetical revenue outcomes to show the impact of the new tax:

First-Year Revenue Estimates range from $4.16 million to $8.33 million.

They also estimate the City will spend almost $1M in the first year on administrative costs, many of those expenses coming one year before any tax would be collected.

The tax could modestly increase Sales Tax revenue if vacancies are transitioned to permanent residency or long-term leases The current Sales Tax Revenue Impact ranges from $235,000 to $670,000 annually. HdL constructed its estimates with three assumptions:
- Permanent residency would increase by approximately 540 to 1,543 residencies, with one to two residents per property.
- Estimated household income will be approximately $67,686 per property based on 2022 US Census data.
- Retail sales per property will be approximately $17,386 based on 2022 US Census data.

As residents know, not all of the money they spend on groceries and items subject to sales taxes are spent in the City limits, another assumption opponents are taking issue with. Those with second homes spend money in the community when at their homes, including goods and services, something the report didn't touch.

“The proponents of the Vacancy Tax are telling whoppers again, this time somehow trying to tell us that a $34 million tax increase on housing will help small businesses! Nothing could be further from the truth,” said Teshara.

The tax, if passed, could be used on the following per the verbiage of the ballot measure: Repayment of bonds or other debt for the specified
purposes; for housing purposes including constructing, purchasing, and operating housing properties and housing assistance, subsidy, and incentive programs; for roadworks and related infrastructure programs including construction, repair, maintenance, and replacement of roads, bicycle and multi-use paths, and stormwater infrastructure; for transit and related infrastructure purposes including bus and rail infrastructure within the
City and operational and capital equipment costs of public transit services to serve areas within and outside the City; and for City costs of administering the tax and any legal defense of the Initiative.

"Property owners are upset, mystified, and this is a black mark on the community that will stay around for a long time," said Teshara.

"While the City used very conservative assumptions in its revenue and cost estimates, this impartial analysis dives deep into the details of how the City will implement the Tahoe Vacancy Tax," said Nick Speal of Locals for Affordable Housing, the initiators of the vacancy tax proposal. "It enables the voters to make an informed decision when they vote in November, knowing that we have the opportunity to raise tens of millions of dollars for housing, roads, and transit, boost the local economy, and help the City meet its Regional Housing Needs Assessment goals."

“The vacancy tax is a major win for local businesses, providing both more workers and more year-round customers, and we’re glad to see that reflected in the City’s impartial analysis,” said Amelia Richmond, co-founder of Locals for Affordable Housing. “When 44 percent of all housing units sit vacant most of the year, our businesses take the hit. By incentivizing more use of the housing we already have, there are more year-round customers to eat, drink and shop at local shops and restaurants on a daily basis. Not to mention, more housing for local employees.”