Photo by Sam Hodgson
Statement: “If you look at it over 40 years, that’s over $1 billion of tax money we’re giving over to marketing,” San Diego City Councilman David Alvarez, referring to a potential long-term renewal of a 2 percent charge on hotel guests, in a July 31 voiceofsandiego.org story.
Analysis: Visitors who stay in large San Diego hotels pay multiple city taxes. There’s the regular 10.5 percent hotel-room tax. Plus, there’s an additional 2 percent charge that goes to marketing San Diego as a tourist destination.
That charge, which began in 2008, is set to expire at the end of 2012. Hoteliers want to extend it for 40 more years.
“If you look at it over 40 years, that’s over $1 billion of tax money we’re giving over to marketing,” Councilman David Alvarez told me for a story about the extension.
Alvarez’s figures are correct. The hotelier-run organization that spends the tax money, the Tourism Marketing District, expects to collect $26.1 million this year. Assuming no growth in tourism revenues over the next 40 years, the 2 percent charge would generate more than $1 billion in revenue during its lifespan. If you assume a modest 3 percent annual growth rate, the tax would generate almost $1.4 billion in the next four decades.
Because Alvarez accurately described the tax revenue likely generated by the district over the next four decades, we’re calling his statement True.
The larger issue here is about opportunity cost.
Alvarez said he feared that by renewing the district, the city won’t be able to increase its hotel-room taxes to pay directly for general city services, such as police and fire. City leaders twice tried to get voters to increase the tax for those services, but failed.
The hoteliers succeeded, eventually, in getting the charge on visitors’ bills but they didn’t have to go to voters. The City Council and hotel owners agreed to a 2 percent increase, provided the funding went to tourism marketing.
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Alvarez’s fear is especially germane if the proposed Convention Center expansion moves forward. The expansion’s financing plan is counting on even further increased hotel-room taxes. If all the plans go forward, San Diego will no longer have low visitor taxes compared to other big cities particularly at its downtown hotels.
Backers of the district and the Convention Center expansion argue that spending money to generate tourism benefits the bottom lines of both hoteliers and the city. And they say the district has relieved the city’s day-to-day operating budget of $10.5 million in tourism promotion expenses.
The council spoke highly of the district’s benefits on Monday and voted 7-1 to take the first step to renew it. Alvarez voted no. Hoteliers affected by the charge still have to approve it and council will see the plan at least one more time.
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Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall and big buildings.
Please contact him directly at email@example.com or 619.550.5663.
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