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Archer hotel rises above downtown Napa

The 183-room Archer hotel, under construction on First Street, will become the latest Napa lodging to contribute to bed tax revenues that now make up more than a quarter of the city’s income for its general fund.

Napa’s hotel industry continues to expand, and so does its importance to the city’s checkbook.

Guests at local lodgings now account for more than a quarter of Napa’s general fund revenue and should reach 28 percent in two years, according to the 2017-19 budget passed by the City Council on Tuesday. That figure would be double the contribution from lodging taxes in 2009-10.

As the downtown, five-story Archer hotel nears completion and other builders apply to add as many as 1,200 more rooms, revenue from the city’s 12.5 percent transient occupancy tax (TOT) on overnight stays is forecast to jump 19 percent to $22.9 million in 2018, and a further 16 percent to $26.6 million in 2019, contributing to the city’s estimated intake of $187.3 million over the two-year cycle.

Spending from the general fund, the portion used for routine city expenses, was set at $184.4 million.

The room surcharge, expected to garner $19.2 million in the fiscal year that ends June 30, is now Napa’s No. 2 revenue source in the general fund, behind only property taxes.

During budget talks that began in May, however, advocates for low-cost housing described such hotel growth as a mixed blessing – a source of more jobs but not of wages high enough to cover rents or down payments in a city with booming rents and a vacancy rate less than 2 percent.

While cities collect fees from developers to stock funds to support subsidized housing, the deepening rental-home shortage has rendered such reserves nearly impotent, argued Eve Kahn, a real estate broker and chairwoman for the group Get a Grip on Growth.

“The imbalance is that with a 19 percent increase in TOT (next year), I don’t see an equivalent increase in low-income housing – and hotels are the largest generator of low-income jobs,” she told the council.

With the city’s prospect of building its way out the housing shortage improbable, Kahn urged Napa leaders to digest previous growth rather than foster more – by providing more financial assistance to home buyers, for example, and investing in its roads and other facilities. “Don’t let the hotel growth get ahead of the infrastructure or the housing,” she said.

Council members nonetheless allowed the budget to go through – but not without pondering what more Napa could do to get hotel builders to pay for a larger share of housing for their future workers.

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“We have hotels coming in, saying they’ll just pay the in-lieu fees (into Napa’s affordable housing fund),” said Councilwoman Juliana Inman, suggesting she and her peers schedule talks about city funding tools for housing. “This is not adequate; we need to set a high bar and expectations for hotel development. If Yountville built housing for their hotel employees, we can too.”

Napa officials also forecast continued growth – if not at the same clip as hotel-based revenue – in the city’s other financial mainstays of property taxes ($63.4 million over the next two years) and sales tax ($34.8 million, the No. 3 revenue source).

Just over half the new budget’s general fund spending is set aside for public safety services, assigning 32.1 percent to Napa Police and 18.9 percent to Napa Fire. The Public Works and Parks and Recreation departments each will receive shares slightly more than 11 percent.

Capital improvement programs for city-owned buildings, roads and other facilities are allotted $53.6 million through 2019, with the largest shares devoted to solid waste and recycling (23 percent), street maintenance (31 percent) and municipal water (14 percent). Those expenditures are drawn partly from non-general fund revenue.

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City of Napa/Town of Yountville Reporter

Howard Yune covers the city of Napa and the town of Yountville. He has been a reporter and photographer for the Register since 2011, and previously wrote for the Marysville Appeal-Democrat, Anaheim Bulletin and Coos Bay (Oregon) World.