With revenues falling fast, the City of Palo Alto hopes a few adjustments to its hotel ordinance could add some cash to city coffers.

Specifically, city officials want to make sure that when visitors check into a local hotel, the city gets its fair share of the revenue. The Planning and Transportation Commission discussed possible changes at its meeting Wednesday.

In Palo Alto, guests pay a 12 percent "transient-occupancy tax" (TOT) when they stay at local hotels. The tax brings in about $8 million in annual revenues.

In exchange for supplying the city with revenues, hotels are allowed to have greater square footage (technically known as the floor-area ratio) than the zoning typically allows. The more units, the more hotel taxes, the thinking goes.

But the TOT comes with a major limitation: The tax can only be charged for room stays of 30 days or less, due to state law. Longer sojourns go untaxed.

That's where the ordinance changes come in. To encourage more transit-occupancy taxes, the planning commission agreed Wednesday to limit the number of rooms a hotel could designate for stays exceeding 30 days.

Staff proposed that local hotels would only be allowed to dedicate 25 percent of their rooms for extended stays and would be required to sign a development agreement if they want to exceed that limit. The commission, however, proposed a modification requiring all hotels wishing to dedicate rooms to extended stays -- and wishing to build with higher density than normal zoning allows -- to sign a development agreement.

The agreement would arrange for compensation to the city for the lost TOT.

The commission did not formally vote to recommend approval of this change, however, because members wanted to give an attorney a chance to look over the proposed language. It will likely endorse the proposed changes when it meets in two weeks. The proposal would then go to the City Council for final approval.

While the exact language has yet to be determined, the revised ordinance should clearly reflect the city's intent of receiving more transient-occupied taxes, Commissioner Arthur Keller said. City attorneys had warned, however, that the ordinance could not specifically impose new taxes or fees.

Commissioners generally endorsed a staff suggestion to require the development agreement from hotels wishing to dedicate more than a quarter of their rooms to extended stays.

"I think this new zoning-ordinance update provision would go a long way to ensuring the original reason to increase (the floor area ratio) and allow flexibility to both current needs and future needs to have extended-stay hotels under the right circumstances," Vice Chair Samir Tuma said.