Big Hotels Continue to Throw Their Weight Around - Voice of San Diego

Economy

Big Hotels Continue to Throw Their Weight Around

Faced with a legal dilemma about renewing a visitors’ fee, hoteliers decided to make the little guys pay.

 

Big hotels have a lot of power in San Diego.

In the spring, just three giant hotel companies, including two based in Maryland, likely controlled the fate of the Convention Center expansion vote even though guests staying at every hotel in the city will pay higher taxes to finance it. The plan will raise about $35 million a year.

Now the 183 hotels with 70 rooms or more are planning to force visitors staying at the 600-700 other visitor properties in San Diego, down to one-room vacation rentals, to pay higher fees. The larger hotels also have the ability to outvote the smaller properties when choosing a board that will control the $26 million annually generated by the fees.

And just like the Convention Center expansion, the hotels are going to try to implement the new fee through a secret election. All together, the proposals would send more than $2 billion toward convention and marketing efforts over the next four decades. The money, supporters say, will fuel San Diego tourism, which benefits the city’s bottom line generally.

Avoiding a Public Vote

The entire process springs from the city’s attempt to figure out a way to raise taxes and fees on visitors without a vote of the people.

In 2004, San Diegans twice rejected plans to raise the city’s hotel-room tax. So hoteliers have decided to do it themselves. They did so with the Convention Center expansion tax, which hoteliers approved in April and now is in court with its legality in question.

For more than a year, backers of what’s known as the Tourism Marketing District have been trying to figure out what to do when it expires at the end of the year. The district, which began in 2008 after a hotelier vote, charges an extra 2 percent on guests’ bills for those staying at large hotels. The money from this fee goes toward marketing the city and helping finance tourist-targeted events, such as college football bowl games and the Rock ‘n’ Roll Marathon. Supporters want to renew it for another 40 years.

The deal faces a higher hurdle after California voters passed Proposition 26 in 2010, which was designed to make it harder for local governments to increase fees without a public vote. Prop. 26 forced backers of the district to handle its renewal in a new way, they said.

The New Plan

Currently, the district charges guests that stay at hotels with 70 rooms or more. Under the new proposal, anyone staying at any visitor property in San Diego will have to pay something. Guests staying at hotels with 30 rooms or more will pay the full 2 percent over the regular hotel-room tax rate. At properties with 29 rooms or less, including vacation rentals, guests will pay 0.55 percent more than the normal rate.

In order to make it comply with Prop. 26, supporters say, anyone who might get a customer through the district’s marketing efforts has to help pay for it. That would make it an assessment, not a tax.

“This was not by our choosing,” said John Lambeth, the district’s lawyer, in an interview. “This was us complying with the new rules put into place by the voters of the state of California.”

The decision will add 600 to 700 properties to the district’s assessment rolls, dwarfing the 183 that now are part of the district.

All these new properties don’t have much of a say about their inclusion. The election rules don’t give them much power.

It’s not one vote per hotel. Instead, properties will receive votes based on how much their guests would pay to the district. So votes controlled by the large hotels dwarf the smaller ones.

Once they’re in the district, the small properties likely won’t have much of a say over how the district spends its money. Elections for the district’s board of directors allocate votes the same way, so large hotels will have more say in choosing board members who will make funding decisions.

Another Secret Vote

As far as the renewal election goes, the district will be very different than typical ones that increase taxes or assessments.

The vote allocation is planned to be private, Lambeth said.

Revealing how many votes each hotel company has could indirectly disclose hotel revenue information. This argument is the same as the one used to keep the Convention Center tax vote secret. (Some information eventually became public after we pushed City Attorney Jan Goldsmith’s office for a month.)

The secret vote isn’t final yet. The City Council hasn’t formally authorized an election. Backers of the district unveiled their plan last week to a council committee, which voted unanimously to forward the proposal to the full council in the fall.

Goldsmith’s office said it was relying on council action and various city departments to develop a proposal, one that would include an electoral process.

“Once those departments have formulated a plan, it will be reviewed by the City Attorney’s Office as to legality,” Goldsmith’s spokesman said in a statement.

So it could be on Mayor Jerry Sanders and the council to decide if the votes are secret. Sanders’ office didn’t immediately respond to a request for comment Wednesday and we’ll update the post if it does.

The two mayoral candidates vying to replace Sanders have pledged not to authorize any secret votes, like this one, while in office.

Congressman Bob Filner said in an interview that he was opposed to the secret vote and the whole concept of the district.

“This is disgraceful,” Filner said. “This would never happen if I’m mayor. One, you don’t have a secret vote. But two, you have to go to the vote of the people on a tax.”

Carl DeMaio, Filner’s opponent and a councilman who sits on the committee that moved the plan last week, strongly supports the district as proposed. Still, he said in an interview that the vote allocation should be made public.

But DeMaio did not commit to voting against the district if the election remains secret. Instead, he said he’d push for a transparent vote.

“I will be continuing our discussions with the industry and letting them know that that’s the outcome I desire,” DeMaio said.

If the district renewal vote remains secret, the public will have no way of knowing how much power individual hotel companies have in deciding whether tourists will pay an estimated $1 billion to stay in San Diego over the next four decades. And even with all these legal machinations, lawsuits against the district’s renewal, notably from the hotel-workers union, are expected.

Clarification: Shortly after publishing this story, we added the “likely” into the following sentence: “In the spring, just three giant hotel companies, including two based in Maryland, likely controlled the fate of the Convention Center expansion vote even though guests staying at every hotel in the city will pay higher taxes to finance it.” The control can not be determined absolutely.

Liam Dillon is a news reporter for Voice of San Diego. 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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