Feb. 27 2013 09:38 AM

Ideally, we vote again on a TOT hike for promotion and civic services

Bob Filner
Photo by David Rolland

Some folks are steaming mad at San Diego Mayor Bob Filner for refusing to authorize the release of money that's supposed to pay for marketing the city to tourists. Let's step back and take a broader view of the issue and see if we can figure out what's what:

We'll start in March 2004, when San Diegans went to the polls and voted on Prop. C, which proposed to raise the transient-occupancy tax (TOT, the tax you pay on a hotel room) from 10.5 percent to 13 percent and use the money generated to help pay for public safety, infrastructure and tourism marketing. Voters favored Prop. C by a count of 61.8 percent to 38.2 percent, but it failed because it needed 66.7 percent of voters to say yes for passage. (Thanks, anti-tax crusaders!) 

Proponents of raising the tax tried again in November 2004 with Prop. J, this time choosing not to earmark the revenue for any specific purpose, but it failed, too; 58.4 percent of voters said yes, and 41.6 percent no. San Diego's lodging industry backed Prop. C because it proposed spending some of the money on marketing, but it opposed Prop. J because it didn't.

Industry leaders had been meeting since 2003 to figure out how to raise money for tourism marketing, and in the wake of Prop. C's failure, they came up with the Tourism Marketing District (TMD): They would run around the huge hurdle of having to get two-thirds of the electorate to agree to raise the TOT and ask only owners of hotels with 70 or more rooms to do it. It passed for an initial period of five years, ending in December 2012.

Last year, the hoteliers voted to renew the tax, under a weighted vote that's too complicated to explain here. Of the 1,379 ballots that went out, 345 were returned with eligible votes (25-percent turnout), and only 127 of those ballots were marked yes (36.8 percent). But because of the way they were weighted, the measure passed—the 127 "yes" votes had a weighted value of 94.3 percent, while the 218 "no" votes had a value of 5.7 percent. Clearly, a few hotels are way more hotel-y than many others.

So, for the entire voting public to raise the hotel tax for general civic purposes, you need 66.7 of the votes to be "yes," but for hotel owners to raise the tax to market San Diego, and their own private businesses, to tourists, you need only 36.8 percent— and probably far less than that, actually. As a result, people who stay in hotels with 30 or more rooms are paying a 12.5-percent tax; those who stay in places with 29 or fewer rooms are paying a smidge more than 11 percent. The extra tax raises roughly $30 million a year for tourism promotion. The renewal is good for nearly 40 years. We repeat: 40 years!

Mayor Filner believes the added tax is illegal, and given our layman's understanding of the law, we think he's right. Prop. 26, passed by California voters in 2010, raised the bar for passing taxes disguised as fees without a public vote. The tourism industry says the tax is really a fee paid by the hotels. To us, that's ridiculous; it's a tax paid by hotel guests. San Diego City Attorney Jan Goldsmith says he doesn't know who's right; he says it's a gray area that the courts will have to sort out. Two lawsuits have been filed against the TMD.

But Filner's also hedging. He wants the hoteliers to agree to a new deal, under which some of the money would go to city services, the hotels owners would pay their workers a living wage, the renewal would be good for only one or two years and the city would be indemnified if the TOT-funded TMD is ruled to be illegal. The TMD has sued to force Filner to release the money.

San Diego's social-justice advocates have rallied behind Filner, praising him for standing up to the politically powerful lodging industry, which managed to engineer a coup for public money to pay for their promotional efforts while continuing to pay relatively low wages to their workers. Tourism advocates counter that the loss of the TOT money would mean the loss of jobs—whatever the quality—decreased sales-tax revenue and a huge blow to the local economy amid competition from other cities.

On Monday, the tourism side packed the City Council chambers with people who implied that the loss of public money for marketing would mean no marketing at all. But is that true? Would the big hotels not get together and fund the TMD with their own money? And how much money is enough? Does effectively marketing San Diego require $30 million a year on top of the marketing that's already done (the zoo, SeaWorld, etc.), when San Diego is still struggling to pay for basic citizen services, when the police department is down 300 officers from where it would like to be?

City Council President Todd Gloria on Monday offered veiled criticism of Filner's tactics by saying it's inappropriate to subvert the will of the council, which approved the TMD renewal late last year. True, it did go though a legit legislative process. But Filner campaigned in part on a promise to hold the money and push for a change in how it's spent, and he got elected. He could release the money and let the legal battle play out, but he wants to make sure the city's not on the hook for that money if it's spent and later determined to be ill-gotten.

If we're right that the TMD is illegally funded, we'd urge for a public TOT vote that would fund civic services along with some tourism marketing. In any case, this is an important fight to be having.

What do you think? Write to editor@sdcitybeat.com.


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