Score one for transparency.
Thursday afternoon, San Diego City Attorney Jan Goldsmith released records that allow us to illuminate the amount of control major hotel corporations have over the Convention Center expansion tax increase.
And the records bring some openness and transparency to a process where there was little before. The data isn’t exactly what we’ve been pushing for, but it’s good enough for us to end our month-long fight with Goldsmith over the voting records.
Let’s recall what this fight was all about.
San Diego hotel owners are voting in a special election to increase hotel-room taxes to finance the Convention Center expansion. Normally, tax increase votes go before the public. But in this case, expansion backers were worried the public wouldn’t pass it. So instead, they developed a plan that allows the hotel industry to decide if it will tax its guests to pay for the expansion.
And this election isn’t decided by one vote per hotel. The election formula depends on a hotel’s room revenues and proximity to the Convention Center. The more money a hotel makes and the closer it is to the center, the more votes it has. There are almost 27 million votes at stake and two-thirds of them have to be “yes” for the tax hike to pass.
We became intensely interested in the vote allocation once it became clear that the hotel industry was using the threat of not passing the tax as leverage to get things unrelated to the expansion.
Two weeks before ballots went out, hoteliers made a major play. Backed by Mayor Jerry Sanders, hotel owners pushed for more control over existing Convention Center operations. After a flurry of last-second meetings, the City Council gave the hoteliers what they wanted.
The hotel industry will get this control even if hoteliers don’t now pass the tax or the expansion doesn’t happen.
The council vote caused fallout. Three top Convention Center officials, including its nationally recognized CEO, have taken steps to leave.
On the eve of the council vote, we asked Goldsmith’s office for the votes controlled by Host Hotels & Resorts, the city’s largest hotelier in the Convention Center expansion election. The Maryland-based corporation owns two giant hotels next to the Convention Center: the Manchester Grand Hyatt and the Marriott Marquis & Marina. The company also owns a 1,000-room Sheraton on Harbor Island and a smaller Marriott in Mission Valley.
Since the tax hike needs a two-thirds vote to win, we wanted to know if Host could block its passage by itself, giving it leverage to determine the tax’s fate.
Goldsmith denied our request for Host’s vote total. He argued releasing it would disclose private taxpayer and corporate proprietary information about Host’s room revenues. In the ensuing jousting between us and Goldsmith, the city attorney declared he wanted the information public, but the law tied his hands.
On Thursday, Goldsmith provided the percentage of the vote total each hotel property in the city will receive within a 2-percent range. The data, emailed to us by Goldsmith’s spokesman, appears on a list littered with limited liability corporations and other weird names that appear on hotel deeds. (My favorites: “Bear Stearns Commercial Mortgage Securities Inc 2006” and “Souldriver LP”.) We had to connect the dots to understand what corporations actually own what hotel properties.
“As we have said, this is a legitimate matter of public interest,” Goldsmith’s office said in a memo accompanying the release. “However, we cannot produce documentation as to the actual votes of each owner because of laws that safeguard confidential taxpayer information.”
This disclosure isn’t perfect. It doesn’t allow us to pinpoint how much control each hotelier has in the election. But it does accomplish one of our goals: bringing a level of openness and transparency to an election that had little.
Our other goal was to know how much control Host has over the election.
By itself the information Goldsmith released doesn’t make that clear. But combining Goldsmith’s data with property and other records shows Host has between 16 percent and 24 percent of the vote. The figure fits well with our earlier estimate of Host’s power. It’s a lot of votes, but not enough for Host to block the election on its own.
The information also allows us to better understand the control wielded by a few major companies over the election. Power, the data reveals, is concentrated at the top. It’s likely that Host along with one or two other large hotel owners could block the tax hike by themselves.
Sunstone, an Orange County-based company, owns three hotels in San Diego including the Hilton San Diego Bayfront. That hotel also is next to the Convention Center.
In one sense, it’s understandable that Host and Sunstone have large sways over the vote. After all, guests at their hotels will pay much more in taxes than other hoteliers because of their hotels’ size and location.
But the risk to the companies, according to a report from a Unified Port of San Diego consultant, is minimal. The Hilton and the two Convention Center hotels owned by Host stand to make $273 million in new revenues in the first six years after the expansion opened, the report added. The tax hike, the report said, won’t affect those hotels’ business.
A third hotel company, Maryland-based Lasalle, owns four San Diego hotels, including the Hilton Gaslamp downtown. If you add Lasalle’s votes to the mix, it’s probably enough to block the tax hike.
All of this leads to a pretty startling conclusion.
Three major companies, including two based in Maryland, likely have the power to decide the fate of a $1 billion tax increase on San Diego visitors and with it the expansion of the Convention Center. And they’re doing so in a quasi-secret election that the hotel industry used to wring unrelated concessions out of city leaders.
The hoteliers’ votes are due back April 23. We’ll know their tally soon after.
It wouldn’t be fair to leave this topic without a word to Jan Goldsmith, his deputy Brant Will and spokesman Jonathan Heller. We want to give them a tip of the hat for continuing to engage with us especially when tensions ran high. We also want to commend them for releasing the data they did on Thursday.
They could have told us to pound sand and see them in court. This was a good compromise.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?
Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.
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