A REPORT ON NEVADA CITY TOT, 2003-2015P

Prepared for travel & tourism stakeholders

and a more economically aware community

By Lex Matteini PHS Communications

May 20, 2016

TABLE OF CONTENTS

Background

Page 1

Summary

Page 1

Key Findings

Pages 2-5

Conclusions & Implications

Pages 5-6

Appendix Tables
1.
2.
3.
4.

Nevada City and Grass Valley Share of County Transient Occupancy Tax (TOT) 2003-2014, 2013-2015p
Nevada City Actual TOT Comparison to 2003 (22.8%) TOT Share Equivalent 2003-2014, 2003-2015p
Grass Valley Actual TOT Comparison to 2003 (10.4%) TOT Share Equivalent 2003-2014, 2003-2015p
Nevada City and Grass Valley Estimate of Cumulative TOT Loss/Gain 2003-2015p

A REPORT ON NEVADA CITY TOT, 2003-2015P

Based on Dean Runyon Associates California Travel Impacts by County (2015, 2016)
Background, Summary, Key Findings, and Conclusions & Implications

I. Background
The Nevada City Chamber of Commerce has monitored visits to www.nevadacitychamber.com
since 2008, as an indicator of visitor interest in Nevada City. Other indicators have been added
for recent years, such as the number of Facebook likes, Twitter followers, and e-newsletter
subscribers associated with the promotion of local events and activities in social and electronic
media. These metrics have been presented in an ongoing series of Nevada City Marketing
Dashboard analyses submitted to the Chamber by PHS Communications, with PHS working as a
pro bono marketing advisor and subsequently as a publicity contractor for events such as
Summer Nights and Victorian Christmas. Without exception, all web, social and electronic
media statistics, as reported in the Dashboards, have shown continuous month-to-month and
large year-to-year increases in the number of people accessing and engaging in visitor-related
information about Nevada City.
Under separate contract in 2015, PHS consulted the state travel and tourism bureau, Visit
California, on the procurement of data collection and analysis describing the direct
economic impacts of travel to and through California and each of its 58 counties and multiple
Transient Occupancy Tax (TOT) jurisdictions. These data and analyses were compiled by Visit
Californias selected research contractor, Dean Runyan Associates (DRA), and published in
California Travel Impacts 1992-2014p (April 2015) and the recently-released California Travel
Impacts By County 1992-2015p (April 2016). The DRA reports have been examined by PHS as
part of the PHS scope of work for Visit California. In the process of this examination, PHS
observed that Nevada City experienced a significant TOT decline over the past decade, and that
Nevada Citys decline is in contrast to modest TOT growth in Nevada County and California
overall, and in very stark contrast to the booming TOT growth recorded in Grass Valley.
This PHS report has been prepared voluntarily for the Nevada City community at large, and in
particular for the benefit of economic stakeholders in the community who may be interested in
informed discussion of local travel and tourism trends and impacts. A primary objective of this
report is to understand why Nevada City TOT revenue has plummeted, despite indications that
visitor interest in Nevada City has been increasing.

II. Summary
Between 2003 and 2015, the relationship between Nevada City and Grass Valley TOT revenues
has demonstrated a consistent 1:1 ratio of Nevada City losses to Grass Valley gains. The data
strongly suggest that an increasing number of people who visit Nevada City are spending the
night in Grass Valley hotels. The cumulative economic impact of this trend is an estimated $3.5
million loss in Nevada City TOT revenue over the past 13 years, and a corresponding $3.45
million gain in Grass Valleys TOT revenue.

III. Key Findings

Nevada Citys share of Nevada County TOT revenue was 23% in 2003, and dwindled steadily to
11% in 2014. In its California Travel Impacts By County 1992-2015p, issued in April of this year,
research company Dean Runyan Associates shows that Nevada City TOT revenue fell further still
in 2015, dropping to $287,600 a decrease of $53,200 (-16%). As a result, Nevada Citys share
of Nevada County TOT fell to 8%, its second lowest share on record.
Stated differently, Nevada City used to account for almost a quarter of Nevada County TOT
revenue; now it accounts for less than one-tenth.
TOT performance in Grass Valley has been a mirror image of Nevada Citys. Grass Valleys share
of Nevada County TOT was 10% in 2003 and steadily increased to 22% in 2014, going from less
than half of Nevada Citys share to more than double (and almost triple). Projected Grass Valley
TOT revenue rose to $818,100 in 2015, a gain of $107,900 (+15%) from 2014. As a result, Grass
Valleys share of Nevada County TOT increased yet again in 2015, to 23%.
Exhibit 1 illustrates Nevada Citys long term erosion in annual share of TOT, compared to Grass
Valleys general pattern of year-to-year increases.
Exhibit 1
Nevada City vs. Grass Valley % Share of Nevada County TOT, 2003-2015p
30
25
20
15
10
5
0
2003

2005

2007

2009

Nevada City

2011

2013

2015p

Grass Valley

In 2003, Nevada Citys TOT revenue was at an historic peak, amounting to $428,500. In the
immediate post-recessionary year of 2010, TOT fell to a low of $180,300. Since then, TOT has
rebounded to $287,600 in 2015, but is still far less than thirteen years ago.
By comparison, Grass Valleys TOT revenue amounted to $196,400 in 2003 and, despite the
recession, soared to $482,100 in 2010. Grass Valley has since continued its upward run,
reaching $816,300 in TOT revenue in 2015 a fourfold increase since 2003 and now almost
three times higher than Nevada City on an annual basis.
Page 2

Exhibits 2 and 3 show general TOT dollar revenue declines for Nevada City (Exhibit 2) and
increases for Grass Valley (Exhibit 3).
Exhibit 2
Nevada City Annual TOT Revenue, 2003-2015p
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2003

2005

2007

2009

2011

2013

2015p

Exhibit 3
Grass Valley Annual TOT Revenue, 2003-2015p
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
2003

2005

2007

2009

2011

2013

2015p

These TOT data suggest that Nevada Citys economy has recently suffered the impacts of both
recession and competition, and has benefitted less than Grass Valley from the relatively stable
economic impact of visitor spending. According to various travel industry reports, travel and
tourism is the most recession-proof of Californias three major industries the other two being
construction and technology.
To determine the TOT dollar losses associated with Nevada Citys dwindling share of Nevada
County TOT, PHS has estimated what Nevada City TOT revenue would have been if Nevada City
had maintained a steady 23% share of Nevada County TOT from 2003 to 2015. Those
hypothetical figures are then compared to actual TOT revenue as Nevada City share fell to 8%.
As shown in Exhibit 4, Nevada City would have collected $3.5 million more in TOT revenue if it
had managed to sustain its high (23%) share of TOT from 2003 onward. Similarly, as shown in
Page 3

Exhibit 5, Grass Valley would have collected $3.45 million less if it had sustained its low (10%)
share over the same time period. These exhibits indicate that what Nevada City loses in TOT
share and revenue is directly recovered in the form of Grass Valley gains, and that over the
course of many years of share declines, Nevada City has lost millions in TOT revenue and,
therefore, an estimated tens of millions (if not more) in unrealized visitor spending.

Exhibit 4
Nevada City Actual Annual TOT Revenue vs. 2003 (23%) Share of Nevada County Equivalent
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
2003

2005

Actual TOT

2007

2009

2011

2013

2015p

2003 (23%) Share Equivalent TOT

Exhibit 5
Grass Valley Actual Annual TOT Revenue vs. 2003 (10%) Share of Nevada County Equivalent

$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
2003

2005

Actual TOT

2007

2009

2011

2013

2015p

2003 (10%) Share Equivalent TOT

During the 2003-2015 analysis period, Grass Valley added significantly to its hotel room
inventory with new properties, such as the 80-room Holiday Inn Express Hotel & Suites Gold
Miners Inn. Simultaneously, Nevada Citys hotel room inventory has diminished in size and,

Page 4

reputedly in some cases, relative condition although it should be noted that this observation is
not based on any formal analysis of local lodging inventory and actual or perceived quality.
According to Dean Runyan Associates, the California statewide travel industry expanded for the
sixth consecutive year in 2015 following the 2007-2009 recession, and reached a record high of
$22.5 billion in total direct travel spending. Travel-generated employment also increased in
California in 2015, up +3.7% over 2014 and accounting for 1,064,000 jobs. Room demand
increased by +3.3% in 2015. All figures for 2015 are preliminary.
Overall California TOT increased from $1.03 billion in 2003 to $2.23 billion in 2015. Within
Nevada County, TOT revenue increased from $1.88 million to $3.59 million over the same
period. These increases represent an approximate doubling of TOT revenue at both the state
and county level.
Grass Valley, as discussed, contributed significantly to Nevada County TOT growth, as did
Truckee, whose TOT revenue increased from just under $1 million in 2003 to $2.1 million in
2015. In unincorporated Nevada County, TOT revenue also increased from $266,500 in 2003
to $363,200. Nevada City is therefore the only jurisdiction in Nevada County whose TOT
revenue actually decreased over the past 13 years.

IV. Conclusions & Implications

For every dollar that Nevada City has lost in TOT revenue in recent years, Grass Valley has
gained a dollar. This 1:1 relationship between Nevada City losses and Grass Valley gains does
not seem to be the result of fewer daytime visits to Nevada City, but of fewer overnight visits (or
room nights). Grass Valleys hotel inventory is newer and larger than Nevada Citys, resulting
in a situation in which Nevada City is not benefitting from the travel industrys significant,
positive economic benefits benefits that are being enjoyed in Grass Valley, as well as in
Truckee, unincorporated Nevada County, and across California. This should be of particular
concern to Nevada City, especially if other vital sectors of the California economy, such as
construction and technology, are also not flourishing here.
The amount of lost TOT revenue is substantial in Nevada City, and signals the loss of much
greater amounts of visitor spending not only on hotels, but in related areas such as meals and
entertainment. In the future, visitor spending and TOT revenue are likely to increase somewhat
in Nevada City as a result of additional campground space as of this summer, and a likely
increase in room nights from online, short-term rentals. However, PHS believes that these two
growth opportunities have limited potential to recoup all that has been lost since 2003.
Accordingly, PHS believes that the cause and effect of Nevada Citys TOT losses raise two
fundamental and urgent questions
First, realistically, can Nevada City not only stop the shrinkage of its overnight visitor economy,
but also regain a significant portion of its lost market share in the years ahead? The community
should formally assess this question and, through its leadership, establish explicit, measurable
Page 5

goals and accountability, using TOT data at a minimum to revisit progress on an annual
basis.
The second and related question is what other segment(s) of the local economy could help
compensate for Nevada Citys diminished competitiveness in overnight accommodations in
terms of generating local sales and revenue, tax revenue, and employment? This second
question appears more complex, yet its answer needs to be presented in a simple, vivid
economic analysis that the community can understand. Ideally, such an analysis would include
forecasts of regional factors and issues that could present significant challenges and
opportunities for Nevada City, specifically.
In relation to both questions, the call to action in this study is for a more economically aware
and engaged community, with good quality data playing a stronger role in prompting informed
discussion, goal-setting, and accountability. A more economically aware and engaged
community can lift all boats from public health, safety, and education, to employment,
philanthropy, and other determinants of social well-being in Nevada City.

----LM/PHS
5/20/16

Appendix Table 1
Nevada City and Grass Valley
Share of County Transient Occupancy Tax (TOT)
2003-2014, 2013-2015p

Nevada City

Grass Valley

2003

22.8%

10.4%

2004

16.9%

13.0%

2005

18.0%

21.6%

2006

15.1%

21.6%

2007

14.1%

21.5%

2008

11.1%

23.9%

2009

09.0%

24.0%

2010

07.6%

20.3%

2011

07.6%

23.7%

2012

10.7%

26.2%

2013

09.7%

18.6%

2014

10.9%

22.2%

2003-2014 Diff.

-11.9% pts.

+11.8% pts.

2015

08.0%

22.8%

2003-2015p Diff.

-14.8% pts.

+12.4% pts.

Source: Dean Runyon Associates California Travel Impacts 1992-2015P, PHS estimates

Appendix Table 2
Nevada City
Actual TOT Comparison to 2003 (22.8%) TOT Share Equivalent
2003-2014, 2003-2015p

Nevada City TOT

22.8% TOT Equivalent

Difference

2003

$428,500

$428,500

$0

2004

$311,700

$419,500

($107,800)

2005

$353,400

$448,500

($95,100)

2006

$333,700

$502,300

($168,600)

2007

$344,400

$556,500

($212,100)

2008

$294,200

$603,500

($309,300)

2009

$203,400

$517,100

($313,700)

2010

$180,300

$540,800

($360,500)

2011

$186,900

$561,600

($374,700)

2012

$267,700

$571,800

($304,100)

2013

$270,400

$634,100

($363,700)

2014

$340,800

$710,200

($369,400)

2003-2014 Total

$3,515,400

$6,494,400

($2,979,000)

2015p

$287,600

$818,100

($530,500)

2003-2015p Total

$3,803,000

$7,312,500

($3,509,500)

Source: Dean Runyan Associates California Travel Impacts by County 1992-2015, PHS estimates

Appendix Table 3
Grass Valley
Actual TOT Comparison to 2003 (10.4%) TOT Share Equivalent
2003-2014, 2003-2015p

Grass Valley TOT

10.4% TOT Equivalent

Difference

2003

$196,400

$196,400

$0

2004

$238,900

$191,400

$47,500

2005

$425,400

$204,600

$220,800

2006

$475,700

$229,100

$246,600

2007

$525,400

$253,900

$271,500

2008

$633,100

$275,300

$357,800

2009

$545,300

$235,900

$309,400

2010

$482,100

$246,700

$235,400

2011

$582,700

$256,200

$326,500

2012

$657,300

$260,800

$396,500

2013

$516,000

$289,200

$226,800

2014

$691,800

$324,000

$367,800

2003-2014 Total

$5,970,100

$2,963,500

$3,006,600

2015p

$816,300

$373,200

$443,100

2003-2015p Total

$6,786,400

$3,336,700

$3,449,700

Source: Dean Runyan Associates California Travel Impacts by County 1992-2015, PHS estimates

Appendix Table 4
Nevada City and Grass Valley
Estimate of Cumulative TOT Loss/Gain
2003-2015p

Grass Valley Gain:

Nevada City Loss:
Difference:

$3,449,700
$3,509,500
$59,800 (= approx. 2%)

Conclusions


For every $1.00 in TOT that Nevada City loses, Grass Valley gains $1.00 (+/- 2%)


If Nevada City had maintained its share of Nevada County TOT at the same high
level as in 2003, it would not have lost the equivalent of approximately $3.51
million in 2003-2015 TOT revenues


If Grass Valley had maintained its share of Nevada County TOT at the same low
level as in 2003, it would not have gained the equivalent of approximately $3.45
million in 2003-2015 TOT revenues