How Jan Goldsmith Picked Hotels Over the Public - Voice of San Diego

Government UNVEILING THE UNSEEN

How Jan Goldsmith Picked Hotels Over the Public

The city attorney’s legal opinion protects the privacy of hotel profits over an open and transparent election.

 

Backers of expanding San Diego’s Convention Center have tied themselves in knots to explain why hoteliers, and not the public, should vote on a $1 billion hotel-room tax increase to finance the project.

They say the tax is on hotels so it should be their decision. Never mind that everyone admits hotel guests will be the ones paying the tax.

They say the tax is based on established precedent. Never mind that City Attorney Jan Goldsmith has essentially thrown up his hands and punted the scheme’s legality to the courts. Then there’s the most candid answer. They say a public vote might fail. So instead of trying for one, the city will try to ram the project through without it.

In the 11 months since the tax scheme became public, the city has led itself down a path of untested and untried legal theories to justify its actions. The path has led here.

Normally, we know how much power each voter has in an election. In this case, we don’t.

We wanted to know how much power the city’s largest hotel company had over this tax increase. But Goldsmith said we were asking for confidential information because it could reveal how much the company makes.

Goldsmith’s official legal position, then, amounts to this: Protecting the privacy of hotel profits takes precedent over an open and transparent election.

Last Thursday, in a five-page legal memorandum, Goldsmith officially denied a public records request we made March 16 for the number of votes the company, Host Hotels & Resorts, has in the election. Goldsmith said state law required him to keep this information secret because it was proprietary and confidential.

For most elections, we wouldn’t need to ask anyone to figure out the votes an individual or group has. But in this case, Host’s votes aren’t as simple as one ballot for each of the four hotels the company owns. Instead, the election formula, which was developed by expansion booster Mayor Jerry Sanders, 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 Convention Center, the more votes it has. There are 26,993,118.92 votes in the entire election.

Host, a multi-billion-dollar out-of-state corporation, has a lot of those votes. The company owns the two largest hotels in the city: the Manchester Grand Hyatt and the Marriott Marquis & Marina. They’re both next to the Convention Center. Host also owns the 1,000-room Sheraton on Harbor Island and a Marriott in Mission Valley.

We just wanted to know how much power the company has to decide by itself if the Convention Center is expanded. The tax hike needs a two-thirds vote to pass. If the company had enough votes it alone could block the expansion.

This matters because Host and other hoteliers have used their secret electoral power as leverage, cudgeling the mayor and City Council to do things they don’t normally do. In the space of five days last month, the city forced through a major change in Convention Center operations to give hoteliers more control over the center. The change came on an emergency council agenda. There was no review by a council committee, no recommendation from its budget analyst and no business case for why a private tourism promotion organization controlled by hoteliers would do a better job marketing the Convention Center than the public agency that’s done it for the last eight years. The council approved the switch 7-1 with Councilman David Alvarez opposed. The change will happen whether or not the Convention Center actually is expanded.

Before the council’s vote, a vice president at the Manchester Grand Hyatt said he didn’t know if his parent company would vote in favor of the Convention Center tax increase without a switch to the center’s booking. Without knowing how many votes Host controls, the public had no idea how much leverage the company really had.

Goldsmith’s opinion is that revealing Host’s votes would be the same thing as revealing Host’s room revenues. The city keeps the room tax receipts of individual hotels secret because it encourages the hotels to report their revenues accurately. The state’s public records law allows local governments to keep this kind of taxpayer information and corporate proprietary information private. Our request violates this rule, he said.

“In effect, the vote allocation is the aggregation of 12 months of [hotel-room tax] returns,” said the opinion from Goldsmith’s office, authored by Deputy City Attorney Brant Will.

His opinion makes explicit a central theme in the Convention Center expansion’s financing. At numerous turns, the city has used the law to give hotel owners power at the public’s expense.

When asked to release the voting information, the city says it can’t because that information is the same thing as hotel-room taxes. It must be kept secret.

But in other contexts, city officials argue this tax is very different from a hotel-room tax. If it were the same thing, the California Constitution would require the public to vote on it, not hotel owners.

Felix Tinkov, a partner at Lounsbery Ferguson Altona & Peak who frequently deals with public records issues, said Goldsmith’s argument to have a secret ballot process was safe because it falls within the bounds of the law. But Tinkov believed the city would be required to release the information we requested if the city attorney’s decision was challenged in a courtroom.

The most likely reason the city would lose? Host is a public company and required to report its financial information to the Securities and Exchange Commission. The city could be seen as restricting information that’s already public, which is counter to the California Legislature’s intent with its open records law.

But more broadly, Tinkov said the failure to release the voting information strikes him as wrong. A $1 billion tax increase to expand the Convention Center will affect both San Diegans and tourists since it affects the police, fire, street and other regular services the city provides. It’s not just about hoteliers.

“Insofar as it’s a cabal of hotel owners and they’re voting in secret, that’s unjustifiable,” Tinkov said.

We wanted to talk with Goldsmith about his legal opinion, but his office refused an interview request in person or over the telephone. Instead, Goldsmith’s office said the city attorney would only answer our questions in writing. We refused because we don’t believe a constructive conversation on this topic would happen over email.

Time remains of the essence here. The city sent out ballots to hoteliers last week. They’re due back April 23. When that happens, we’ll know if the hoteliers said yes or no. Since the city gave them more control over the Convention Center last month, all indications are that the hotels will say yes. But that answer won’t be a true indication of how much power each hotel had.

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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