Approval of Professional Services Agreement with FM3 Research for Transient Occupancy Tax (TOT) Rate Increase Research and Strategic Consulting.
 

Staff recommends that the City Council approve an Agreement with FM3 Research in an amount not-to-exceed $34,900; and authorize the City Manager to execute the agreement and any minor, non-substantive amendments consistent with the approved scope of work; and encumber the funds from account 100-1601-000-0-0-40514.

BACKGROUND
The City of Hawthorne levies a Transient Occupancy Tax (TOT) on short-term lodging stays within the City. TOT revenues provide an important source of General Fund support for essential municipal services, including public safety, street maintenance, and other community priorities.

Like many municipalities in Los Angeles County, Hawthorne continues to face increasing costs associated with service delivery, infrastructure needs, and inflationary pressures.  As a result, the City is exploring options to enhance and stabilize revenue sources, including a potential adjustment to the TOT rate.

A TOT increase—particularly one that may require voter approval—benefits from a clear understanding of community sentiment, stakeholder perspectives, and the likelihood of electoral success.

DISCUSSION
Staff recommends engaging FM3 Research to conduct public opinion research and provide strategic consulting services related to a potential TOT rate increase.
FM3 Research is a nationally recognized firm with extensive experience supporting local governments on revenue measures and community engagement efforts. The proposed scope of work includes:

•Scientific Public Opinion Surveying: Assess voter awareness, priorities, and support levels for a potential TOT increase.
•Stakeholder Insight: Evaluate perspectives of residents, local businesses, and the hospitality sector.
•Message Development and Testing: Identify clear, effective, and legally compliant ways to communicate the purpose and benefits of a TOT adjustment.
•Feasibility Analysis: Estimate the likelihood of voter approval under various scenarios, including different rate structures.
•Strategic Recommendations: Provide guidance on timing, outreach, and positioning should the City choose to move forward.

Given Hawthorne’s proximity to major regional destinations and transportation corridors, including Los Angeles International Airport, the TOT is largely paid by visitors rather than residents. This dynamic makes TOT a potentially viable revenue option; however, careful evaluation is necessary to ensure competitiveness with neighboring jurisdictions and minimize unintended economic impacts.

Engaging a qualified research firm will allow the City to make informed, data-driven decisions and reduce the risks associated with advancing a revenue measure without sufficient public support.

If approved, the project will include structured community engagement efforts to ensure that Hawthorne residents and stakeholders have opportunities to provide input and receive clear, factual information.

Approval of the agreement with FM3 Research will provide the City of Hawthorne with reliable data and strategic guidance necessary to evaluate a potential Transient Occupancy Tax rate increase. This approach promotes informed policymaking and helps reduce financial and electoral risk.
 

This initiative supports the City of Hawthorne’s goals to:
•Maintain long-term fiscal sustainability
•Preserve and enhance essential City services
•Promote transparent and data-driven decision-making
 

Should a TOT rate increase be approved in the future, the City could realize additional annual revenues estimated at $1-$3 M, depending on the rate structure, hotel occupancy levels, and broader economic conditions.

72 Hours posted notice pursuant to the Ralph M. Brown Act.