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Mayor Demands Cash for City in Special Hotel Tax Standoff

If the hoteliers just wanted to promote San Diego using their own money, they wouldn’t need Filner at all. The fact that they do illustrates perfectly what’s so weird about this special tax they passed for themselves.

 

As some of you who have followed this might imagine, I’m enjoying the standoff between Mayor Bob Filner and local hotel owners.

The hoteliers are upset because Filner won’t “execute a contract” which would send tens of millions of dollars to the budget of the Tourism Marketing District, half of which goes to the Tourism Authority (you might remember this group as ConVis). The Tourism Authority is trying to recast its wine-and-dine image of the past to something that really demonstrates a return on investment for its advertising efforts.

The funding comes from a 2 percent tax on top of the city’s existing (10.5 percent) hotel room tax. This 2 percent surcharge expired last year.  

The City Council approved an extension of it. Here’s our explainer on the whole thing. Now, Filner simply refuses to release the money. He says it’s illegal because it was a tax hike without a vote of the people.

The hold up is causing some consternation. Advertising campaigns touting San Diego as the place to come are delayed. City Councilman Kevin Faulconer said in a memo to the City Council president Thursday that we were in trouble:

“This inaction puts San Diego jobs at risk and will worsen the City’s projected $40 million budget deficit,” Faulconer wrote as he demanded a hearing on the matter.

Faulconer’s arguing that the advertising helps bring people to San Diego. That in turn fills hotel rooms with visitors, who pay not only for tourism jobs. They also pay that tax on their hotel room, one of the three main sources of money for city government. All this may be true. (It’d be a monster fact check. The recession hurt hotel room nights. But boosters claim that, without all this advertising made possible by the hotel tax hike, things would have been worse.)

But the bigger issue is becoming clear: State law requires the city to ask voters to approve tax hikes. The strange maneuvering that allowed the hoteliers to do this without a vote still requires it to go through the city and now the mayor doesn’t want to play the game.

He wants some cash for other city services. Check out this exchange I had with him when reporter Lisa Halverstadt staked out a recent speech of his and he ended up visiting our office.

I asked him about the hold up and why he wouldn’t release the tax hike bounty to the hoteliers. (Note his point about the Convention Center expansion, which is relying on a different scheme to raise taxes without a vote.)

FILNER: They were trying to rush this through and they forgot one thing: I gotta sign.

LEWIS: Yeah, but if you think this is illegal then you have to think the same thing about the Convention Center.

FILNER: Well I do. It’s even more illegal. But there’s going to be a validation. But there’s not going to be one for the other one.

LEWIS: Nobody challenging it?

FILNER: Except me. [Note: This isn’t true, there are two lawsuits against it.]
The poor hotel guys, they came to see me. Here’s the questions I get. First thing they say is: “We need you to approve this.” I said: “You guys are all small-government people, ‘government can’t do anything well.’ Why do you need me for this? Do it yourself!”

LEWIS: That was the fundamental problem with it. If it’s a self-assessment, then …

FILNER: Self assess! That’s what I said to them. And they said, well, you know some people won’t contribute. I said, well, that’s your problem not mine. Then they said. But you’re going to get $60 million out of this! … I said, $60 million? That means you get $600 million. Make me a better deal. Why don’t you give me 100. Why don’t you give me 200?

So there you go. Filner’s troubled about the legality of this deal but a couple hundred million dollars could make that go away.

That’s probably not right. If it’s illegal, no amount of money should make that OK.

But Filner’s right to be troubled so let’s pretend that’s all he said for a second. Remember, this all goes back to 2004, when the city tried twice to increase this tax. Voters rejected it both times.

Hotel owners formed a sort of virtual business district and treated it like a business improvement district similar to the dozens that work to promote our neighborhoods around town. Now, this district includes all hotels, including vacation rentals. And like a business district, each hotel has to pay a fee.

As Filner noted, the hoteliers could avoid the mayor and his whims. They could raise money to promote San Diego. They can all volunteer to contribute to a fund to do this. They don’t need the government.

But they are worried that not all of their counterparts would participate, giving freeloaders a competitive advantage on cost.

The hotel owners want to raise their prices to consumers to pay for all this marketing. The mechanism to do this is through taxation and through the city.

And Filner may be wrong that he has any choice but to execute on the deal. He may just be trying to get something for the city. And this may blow up in his face.

But he’s right about that one thing at least: If the hoteliers just wanted to promote San Diego using their own money, they wouldn’t need Filner at all.

The fact that they do illustrates perfectly what’s so weird about this special tax they passed for themselves.

Update: The headline of this piece was changed to better reflect its content. A sentence was also changed to clarify Filner wants the money for other city services.

I’m Scott Lewis, the CEO of Voice of San Diego. Please contact me if you’d like at scott.lewis@voiceofsandiego.org or 619.325.0527 and follow me on Twitter (it’s a blast!):

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