CULVER CITY — The City Council voted 4-1 Monday night to direct staff to bring back the necessary items for the city to place a measure on the Nov. 2 ballot to increase its Transient Occupancy Tax rate from 12 percent to 14 percent.

But the action was met by much disapproval from representatives of four local hotels and Councilman Micheal O’Leary, the lone dissenting vote.

“We truly believe that the increase in the [tax] by two percent during these difficult economic times for all will result in a net loss of revenue,” said Antonio Reis, director at the Courtyard by Marriott, 6333 Bristol Parkway. “We survive on the transit business, travelers, modest groups and tour businesses which can not afford other cities that are pricier.

“By increasing the [tax], we will be less attractive to those market segments and actually lose occupancies and demand which will in turn reduce the city’s tax revenues instead of the increase that is hoped," Reis added. "We are just starting to see a faint glimmer from the economy’s recession, so do not stop this by raising the TOT, it will hurt all of us.”

Bill Reider, general manager at the Radisson Hotel Los Angeles Westside, 6161 Centinela Ave., said his franchise lost 15 occupancy points last year and has yet to hit rock bottom. The figure may not seem huge, he said, but the hotel has long been competing to get occupants who are already swayed by tourist destination cities, such as Beverly Hills, Hollywood, Santa Monica and Los Angeles that provide a higher volume of activities.

According to Reider, roughly 70 percent of the Radisson’s business is through contracted groups and local negotiated rate business. They use their two point advantage over the LAX corridor hotels to gain business.

“It is a selling point that we have been using for years,” he said, “and when we lose that I’m afraid that we are going to lose a considerable amount of group business in the city and possibly a considerable amount of corporate business from our local negotiated rates.”

Reider suggested that if approved, the city should use the money generated to bring in businesses and activities that will draw in customers. In addition, he requested that the tax be delayed for at least two years to see if the economy recovers.

Melissa Williams, director of sales and marketing at the Four Points by Sheraton Los Angeles Westside, 5990 Green Valley Circle, also added that her hotel has had to give “deep discounts” and “lower rates overall,” she said. And because the hotel, like the others, have to give a percentage of the transient occupancy tax to the city, the hotel is fighting to make ends meet. An increase, Williams said, would take away a negotiating tool and selling advantage.

Douglas Newton, a representative of the Culver Hotel, 9400 Culver Blvd., said his hotel is “the little guy in the city as far as hotels,” because it is centered in downtown Culver City, away from the airport and not relatively close to popular destination cities.

“We are fighting every day trying to get people to come to the hotel,” said Newton, who also stated the hotel has lowered its rates considerably. “We are not saying not to do it, just not right now.”

The hotel representatives had a supporter in O’Leary, who said he “could not support this in any way, shape or form.

“This is the wrong time for this move," he added. "It’s outrageous that any business would raise their rates at a time like this. This is not a tourist destination yet. We can’t slap [these hotels] with another burden. We could end up losing money on this deal. I really caution my colleagues.”

California Revenue and Taxation Code authorizes the city to levy a tax on persons who occupy a room, hotel room or other lodging for a period of 30 days or less.

Also known as a hotel tax, Culver City’s transient occupancy tax was originally adopted at four percent as a general tax in 1964. Over the years, however, it has gradually increased. In 1989, it went from 10 percent to 12 percent, where it currently stands.

Once voted on by the council, current state law makes it mandatory that all new taxes and tax increases be approved by voters.

If approved by voters, the tax will only be charged to persons — mainly visitors and tourists — occupying hotel and motel rooms in the city. The tax will then be transmitted to the city by those who collect room charges.

It will not apply to other facilities and services offered by the hotels, such as catering, food, spa and banquet, said the staff report.

There will be no impact to residents or businesses, unless of course they utilize hotel accommodations.

The estimated increase in revenue is expected to be $237,000 during the 2010-11 fiscal year, because the tax would only be in effect for six months. In future years, an annual increase is estimated at $475,000.

The council suggested Monday night that it would phase in the increase, raising the rate by one percent over the next two years. The new tax rate increase could be effective as early as Jan. 1, 2011.

Revenue received from the tax may be used to support city operations and services, including public safety and street and infrastructure improvement.

Currently Beverly Hills, Los Angeles and Santa Monica have a transient occupancy tax of 14 percent. West Hollywood’s tax is 12.5 percent, but after a 1.5 percent tax rate that goes directly to that city’s Visitors Bureau, the rate also comes to 14 percent.

Raising Culver City’s tax rate would put the city in line with other cities, and generate “a revenue stream” to help not only close the city’s now projected $2 million shortfall but provide revenue in the future, said interim City Manager Lamont Ewell.

According to Ewell, there has been no evidence showing that increases in the transient occupancy tax have a negative impact on hotel bookings. If anything, he said, hotel room rates are what transients base their decision on.

He and staff came to this conclusion after calling several hotels in surrounding cities to get their room and occupancy tax rates. They then inquired as to whether the tax rates made a difference in whether a customer stayed or not. They then spoke with multiple travel agents and other travel experts.

The increase originally gave Councilman Jeffrey Cooper pause. During budget sessions in May Cooper said he feared the increase could turn away visitors, tourists and businesses looking to get the lowest rate available. But after conducting his own research Cooper said he also found that customers are more inclined to make their decisions based on room rates.

“And with that in mind,” Cooper said, “I would support staff’s recommendation regarding placing this on the ballot. I would be happy to make that motion.”

Councilmen Andrew Weissman and Scott Malsin wrestled with the decision but in the end conceded. Weissman felt more comfortable with knowing that the increase could be phased in over time, while Malsin was more inclined to support the rate increase because the revenue would address necessary street and infrastructure improvements.

Mayor Christopher Armenta sympathized with the hotel representatives but could not fathom the thought of placing the burden on city employees, he said. If the tax rate is not increased, there is a possibility that the city would have to consider further position and service reductions to close the current $2 million structural gap.

The transient occupancy tax will be categorized as a general tax, and requires voter approval. If the tax proceeds were to be dedicated for a specific purpose, such as only public safety or only street improvement, it would be considered a special tax and would require a two-thirds vote.

The council also approved hiring a consultant — at a budget not to exceed $25,000 — who will facilitate a public education program on the tax measure. All information will be impartial, as required by state law. Printing and mailing costs for all materials will run approximately $15,000.

Funding for the educational campaign and the use of a consultant — a total of $40,000 — were included in the fiscal year 09-10 budget and will be re-appropriated in fiscal year 2010-11.

However, the council can choose at a later date not to hire a consultant, at which point the city’s staff would be responsible for printing and mailing the materials to residents. It was also suggested that there may be community meetings to further inform citizens and gain their input.

Staff must devise the language for the measure, paying close attention to details, and must gather data and input from supporters, as well as opponents. The four hotel representatives will have their comments stated at the council meeting taken for the record and inserted into the materials.

All items are expected to come back to the council no later than July 26. The council must take formal action to place the measure on the ballot and consolidate the election with the county by that date. The information must then be submitted to the county by the first week of August.

Consolidating the election with the county could cost the city roughly $80,000, said Jeff Muir, director of finance.