The Hoteliers' New Kitty
Thursday, Dec. 6, 2007 | Seven months ago, I asked Mayor Jerry Sanders about the proposed tourism marketing district that hoteliers had been pushing for several years.
The concept was simple: San Diego’s tourism poobahs wanted to pretend that the city’s large hotels were a sort of virtual neighborhood. Any neighborhood, or "district," in town can set up its own maintenance district. In the district, the stakeholders and residents can vote to levy an extra tax on top of what the city, county and state already take. This is how they get the uniformed litter patrol in Little Italy, for example.
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But the big hotels in town don't want to levy any fee on themselves to pay for trash pickup on their premises. They want to generate funds to pay to market their rooms to the world. They want to pay as many people as possible to work in New York and other places and get groups like the Association of Gophers Who Sculpt Ice to have their annual conferences in San Diego and stay at a city hotel.
Visitors to San Diego who stay in hotels pay a daily room tax, and the hoteliers have always been a bit bitter about a historical evolution of what that tax funds.
The money should, rightly, be used to pay for things like police and fire. After all, tourists need those services as much as we do. But the hoteliers always push to have it pay to market San Diego and therefore generate more visitors and therefore generate more tax revenues from their hotel room stays.
Now, San Diego has tried twice in the last few years to raise this hotel-room tax. Both times, the increase failed.
The first of those attempts would have set aside millions for the marketing of tourism in San Diego and it would have doled out millions more to interest groups all around town. The second of those attempts would have merely sent the money to the city's general fund, allowing public officials to spend it however they pleased. Hoteliers bitterly opposed the latter version.
So they came up with this new plan and they've been working on it ever since.
In addition to the 10.5 percent tax visitors pay on their hotel room bill for every night they stay in San Diego, the hoteliers wanted to tack on 2 percent and use the money exclusively for their own marketing efforts.
Now, San Diego already foots the bill to pay for marketing efforts. The city pays the San Diego Convention and Visitor's Bureau millions every year to cover most of that group's costs as it tries to book conventions and "sell" San Diego.
In May, I asked the mayor what he thought about all this.
Would you be willing to cut all of the funding for ConVis and other promotional efforts out of the city's budget if the hoteliers gain approval for their self-levy plan?
He said no. "We've got to be spending a certain amount in addition to what the TMD (tourism marketing district) will spend to market ourselves more effectively."
Turns out the City Council approved the tourism maintenance district Monday but did the right thing and ensured that the city would not spend a dime on ConVis or other marketing efforts any longer. And the mayor agreed. Now that the hoteliers have all this money for marketing, they can pay for ConVis.
So what was the mayor thinking, I wondered, when he said the city should still keep supplementing tourist promotion?
Fred Sainz, his spokesman, said he asked the mayor and Sanders said that he must have misunderstood my question.
Someday, the guy is just going to have to be comfortable admitting that he changed his mind -- because that was a good thing to change your mind about.
The city of San Diego will be able to shed about $10 million from its budget.
What's funny about this, of course, is that we could have cut that before. Sanders and the City Council could have cut ConVis and the other so-called promotional efforts from the budget years ago.
But the hoteliers will be able to raise an estimated $30 million from the boost and they've only accepted $10 million of the city's obligations.
So we have to ask if this is OK.
It's kind of weird. In Little Italy, for example, businesses and residents have to pay into their maintenance district. The businesses can ostensibly raise their prices a bit to pay the fee, but their competitors don't have to. This is not the case with the hoteliers. They don't have to just pay a fee into the new marketing district. It doesn't come out of their revenues. They get to charge visitors a fee for it. And this doesn't hurt them competitively because every other major hotel will be doing the same thing.
In fact, they all could have combined funds in some kind of promotional entity before. But they wouldn't have done it because there would have been no way legally for them to uniformly, across-the-board, raise their prices to pay for it. That would be price-fixing.
This formation of the tourism marketing district essentially allows that to occur.
And it's not such a bad thing if the city takes advantage of it. For years, dozens of organizations have applied for and received tens of millions of dollars from the city. The money comes from the hotel-room tax. Money paid out to things like the opera and the museums is always justified by saying that the money comes from hotel room taxes and since these entities attract visitors, they justifiably deserve it.
But now that the hoteliers have set up their own quasi-government slush fund with the mission to promote San Diego, perhaps they should receive the applications for funds from places like the La Jolla Festival of the Arts and Food Faire, which received $21,000 this year from the city of San Diego. Or maybe the La Jolla Playhouse could ask the hoteliers for money next year, instead of the city which handed out $382,303 to the organization.
As it stands, the hoteliers plan only to pay for a select group of entities that the city has been funding for years. Groups like the San Diego International Sports Council and the Holiday Bowl Committee will receive funds from the new tourism maintenance district.
The City Council, in its infinite wisdom, didn't demand that the hoteliers and their guests take on some of these other groups.
But they could, of course, cut these groups off and give them the hoteliers' address when they come pleading for funds.
After all, the hoteliers are going to have $20 million to spend. The city has been convinced for years that these organizations had to be supported in order to attract visitors. Why wouldn't the hoteliers follow suit if they're trying to attract visitors?
Please contact Scott Lewis (scott.lewis@voiceofsandiego.org) directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.
Reader Feedback
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Comments so far on this story: 1. Steve K wrote on December 5, 2007 9:21 PM: "I like the way you're thinking, Scott. Too bad, you're not on the city council." 2. ME-E wrote on December 6, 2007 12:44 AM: "Bravo!" 3. Torrey Pines wrote on December 6, 2007 8:24 AM: "Just another way to squeeze the public coffers for corporate enrichment. Yes, we all know that some of this comes back to the general fund in the form of the TOT. Big deal. The city has a multi billion dollar deficit. The council majority and Jerry Claus just gave a X-mas present to the People's Republic of Hotels and Hospitality. I'd be curious to find out what Steve Francis and the candidates running for council have to say about this topic. Any elected officials in this town care to start paying down some obligations? This house is headed for foreclosure and our parents are out giving gifts to all the wealthy neighbors. Wrap a big bow around this terrific present." 4. Sombrero wrote on December 6, 2007 8:43 AM: "This is a biased, one sided, and seemingly ill-informed article. The original room tax money has been diverted for all sorts of unrelated expenses. The City Council spends all the money it can get and MORE and then cries that it needs more, more money. This disgraceful attempt by the Hotel industry came about only as a last resort by them to assure they have funds for marketing. Money that the City Council can't divert for other pet projects." 5. Xander wrote on December 6, 2007 8:51 AM: "The hotel industry could spend some of their new slush fund on the bird-flu contingency plan that Mike McDowell, executive vice president and chief executive officer of the San Diego Lodging Industry Association, asked for in the editorial, Don’t Let Birds Kill SD Tourism. link" 6. Larry wrote on December 6, 2007 9:18 AM: "Sanders isn't worth the time to discuss. It's clear that he's a lame excuse for a mayor. The real story is the fact that the city can now use that money for more important things that improve residents' lives. Tourism is surely important, but so are safe streets and clean water. Let's hope that the city council continues to cut back on the donations." 7. Christopher Hall wrote on December 6, 2007 9:35 AM: "Pat Flannery has a great article on this subject also, together these two pieces are complimentary. Pat refers to the 'privatization of the TOT' and that is really another example of the corporations taking over the government, which is fascism. Socialism is the opposite, where government takes over the corporations. Fascism in San Diego has its roots in the good old boys establishment, and the hoteliers are siblings and cousins of the developers (Manchester is both.) Fascism is the ruling class giving orders to its young, impressionable freshmen-like little local politicians, particularly the city council members. Sanders may not be young, but he is impressionable, and when the big time rollers run their businesses, they give the local politicians and their staff orders to follow. Multi-millionaires call, the phone gets picked up and the 'boss' tells them what to do, hence the TOT vote." 8. Joe wrote on December 6, 2007 9:38 AM: "I find this 'tourism' district gross. San Diego's TOT is way below competitive markets. As mentioned, the voters have turned down raising the TOT twice (why??, because the hotels (Manchester) have effectively brainwashed the locals that an increase will impact their competitive position, please!). Now the hotel industry has effectively taken the TOT increase for themselves. They will make the TOT competitive and once easy source of new revenue is now gone. The TOT should be used to supplement the general fund. Tourists do impact the city... They use the roads, ambulances and fire trucks make frequent trips to the hotels, the litter, etc. Now this 'district' is taking tax monies away from the general fund so hotels with historically high occupancy rates can 'market themselves' I can't wait for the car rental folks to do it next..." 9. Billy Bob Henry wrote on December 6, 2007 9:40 AM: "It's an illegal tax, and I am going to file suit and blow it out of the water/taxpayers pocket. You can all it anything you want, but if it look like a duck, walks like a duck and quacks like a duck-it's a duck." 10. Sparky wrote on December 6, 2007 9:58 AM: "Great Job Scott... The owners of hotels and motels in San Diego put this together to sidestep any future attempts at a TOT by the City. They can now point to their "self assessment" as a reason to oppose any new TOT for public safety or the arts. Papa Doug was opposed to this self assessment as well as his opposition to the last attempt at a TOT. Sanders is well aware of this and he opposed any cuts to ConViz so as not to ruffle an feathers. The moneys the new "self assessment" will generate is far and above as you said what the City was giving. The loss is to public safety and the citizens. City keeps $10 million and they spend $30 million on themselves. Sounds fair to me..." 11. Realist wrote on December 6, 2007 10:57 AM: "Apparently everyone has forgotten how badly the ConVis budget was slashed before all this began. Other cities spend hundreds of millions of dollars promoting themselves and we are worried about how to fund $10 million? Don't forget, tourism is a huge industry that keeps a ton of us employed. The city council won't give the $10M back to us, so who cares if they get to "save" it. They will just spend it on some other special interest. Now, however, it just got more expensive for visitors to stay in San Diego. Brilliant!!" 12. Sal D'Anna wrote on December 6, 2007 1:37 PM: "This illegal tax assessment violates CALIFORNIA CONSTITUTION ARTICLE 11 LOCAL GOVERNMENT SEC. 11. (a) The Legislature may not delegate to a private person or body power to make, control, appropriate, supervise, or interfere with county or municipal corporation improvements, money, or property, or to levy taxes or assessments, or perform municipal functions." 13. Sombrero wrote on December 6, 2007 2:10 PM: "What a bunch of Socialistic, ill informed comments. The Hotel/Tourism business brings money and jobs to San Diego. You guys seem to think that Big Business is bad. It is businesses and capitalists that get things done, produce goods and services, creates jobs. The only alternative is Big Government that builds BIG bureaucracies, take our money and get little done." 14. Sal D'Anna wrote on December 6, 2007 3:17 PM: "Sombrero, I think you are the one that is misinformed. The enactment of this TMD is Socialism at its best. The definition of socialism is an economic system in which the production and distribution of goods are controlled substantially by the government rather than by private enterprise. The Hotel/Tourism industry can and should promote and pay for their own advertising. Associations are created for this exact purpose. The City should spend TOT funds on infrastructure and our beaches while the Hotels should spend their own money to get tourists to stay at their hotels." 15. Steve K wrote on December 6, 2007 3:57 PM: "Wasn't it a ConVis party for convention promoters, pitured in the U/T, that featured sushi--served on the belly of a bikini clad model? The idea that we need to spend tax dollars to promote San Diego is ridiculous. There are already too many people here for our infrastructure and government services to support. I'm a 55 year old San Diego native. How have I benefited from tax dollars spent on the tourist industry or any government promotion of San Diego?" 16. Billy Bob Henry wrote on December 6, 2007 4:19 PM: "13. Sombrero wrote on December 6, 2007 3:10 PM: "What a bunch of Socialistic, ill informed comments. The Hotel/Tourism business brings money and jobs to San Diego. ...... Hey listen you little corporate welfare queen, if BIG BUSINESS want to bring in money and jobs-GREAT, but they can pay for it themselves, I am NOT their private bank, nor are the hard woriking taxpayers, got it. THEY make plenty of money on THEIR own, if THEY want to make more they can invest in THEIR business with THEIR money-not taxpayers. Man, you and your propaganda sound like one of these little government workers who always complain about not having enough money. I swear, everyone in this county is trying to put their greedy little grubby hands into my pcket and steal my hard earned money." 17. D wrote on December 6, 2007 5:59 PM: "Holy Mother of G....I'm on BillyBob's side on something...oh help me Lord...If Baron Hilton wants more people in his dang hotel, then he can fork over some of his own bucks to buy an ad in an out of town paper. It is a TAX! It is 2 percent on top of the room rate, added to 10.5 percent of the rest of the TAXES already on top of the room rate. And the citizens get NONE of it." 18. Dave L wrote on December 6, 2007 10:15 PM: "The government should get out of this marketing business. San Diego can market itself - especially if the City spends their money and time on the draws we already have. Like keeping sewage out of our oceans and keeping our parks beautiful." 19. jjinsd wrote on December 7, 2007 11:29 AM: "Mike Aguirre, is this legal?"
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