Palo Alto's hotel tax rate will go up for the second time in four years, giving the city the highest rate in the state, thanks to the voters' decision on Tuesday to support Measure E.
Shortly after midnight, with 93 percent of the vote counted, the measure was cruising to victory with the support of 67.85 percent of the votes (a total of 9,594), while 32.15 percent (or 4,545) went against the measure.
The measure increases Palo Alto's transient-occupancy rate will from 14 percent to 15.5 percent. The proceeds from the hotel-tax increase will go to the city's general fund, which means the city will have the latitude to spend them on any city services or project.
That said, City Council members had indicated that they plan to devote the proceeds to funding the council's 2014 infrastructure plan, which includes a new police building, two new garages, two rebuilt fire stations, a bike bridge over U.S. Highway 101, streetscape renovations along the Charleston-Arastradero corridor and various other bike and open-space projects.
The tax increase is expected to increase the city's proceeds from hotel taxes by about $2.55 million annually, according to a city analysis. The city currently makes about $25 million a year from hotel taxes, which accounts for about 11 percent of general fund revenues.
The city had last increased its hotel taxes in 2014, when the rate was raised from 12 percent to 14 percent.
Councilman Greg Scharff and Vice Mayor Eric Filseth were among the council members who heavily favored the tax increase, which Filseth said would add an equivalent to the cost of a cup of coffee to a hotel bill.
At the same time, owners and executives from several Palo Alto hotels came out swinging against the measure, which they said would encourage large corporate clients to book hotels in nearby cities with lower rates.
With the increase, Palo Alto's rate will surpass that of Anaheim, which has a rate of 15 percent. Mountain View has a rate of 12 percent, while Menlo Park's rate is 10 percent.