Fact Check: The $1 Billion Tourist Tax

Fact Check: The $1 Billion Tourist Tax

Photo by Sam Hodgson

David Alvarez

 

Image: TRUEStatement: “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.

Determination: True

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.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

You can also e-mail new Fact Check suggestions to factcheck@voiceofsandiego.org. What claim should we explore next?

Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall and big buildings.

Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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Liam Dillon

Liam Dillon

Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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14 comments
Robert Castaneda
Robert Castaneda subscriber

Our city's forefathers knew this with significant investments in our parks, Mission Bay and the zoo; we should carry on that tradition with SMART investment that enhances what San Diego is and has to offer both its residents and visitors.

Castaneda
Castaneda

Our city's forefathers knew this with significant investments in our parks, Mission Bay and the zoo; we should carry on that tradition with SMART investment that enhances what San Diego is and has to offer both its residents and visitors.

HC Jay Powell
HC Jay Powell subscribermember

Now that some people have decided that rental housing units dedicated to low income families for 50 years is costing too much, how do we get the cost down and get the miniscule percentage of TOT back into the Housing Trust Fund so that the people who do the frontline work in our tourist industry and earn less than a "iiving wage" can have a shot at decent housing?

taliesin
taliesin

Now that some people have decided that rental housing units dedicated to low income families for 50 years is costing too much, how do we get the cost down and get the miniscule percentage of TOT back into the Housing Trust Fund so that the people who do the frontline work in our tourist industry and earn less than a "iiving wage" can have a shot at decent housing?

Dennis Rosche
Dennis Rosche subscriber

One of the reasons that the previous attempts to increase the tax was that the majority of the revenue was going to go to the hotels rather than police/fire/general fund. If an increase went soley to fund city services I think it would pass since residents would not have to pay the tax in most cases. Of course that would not get support from the movers & shakers.

SDResident
SDResident

One of the reasons that the previous attempts to increase the tax was that the majority of the revenue was going to go to the hotels rather than police/fire/general fund. If an increase went soley to fund city services I think it would pass since residents would not have to pay the tax in most cases. Of course that would not get support from the movers & shakers.

Carrie Schneider
Carrie Schneider subscribermember

And, can a new tax come with conditions, such as no lavish meals reimbursement, and a cap on salaries? 'cause this appears to be creating a lovely gravy train otherwise.

Carries
Carries

And, can a new tax come with conditions, such as no lavish meals reimbursement, and a cap on salaries? 'cause this appears to be creating a lovely gravy train otherwise.

Barry Pollard
Barry Pollard subscriber

Keep up the good job.............

Don Wood
Don Wood subscriber

Amazing. The mayor and city council can't raise taxes to fix streets and keep critical services funding, but they bent over backward to help the big hotel owners raise the TOT tax, then handed control of over a billion dollars in new tax funds over to a private outfit set up by the hotel owners, giving up control over more than a billion in new tax revenues. Typical San Diego politicians.

Don Wood
Don Wood

Amazing. The mayor and city council can't raise taxes to fix streets and keep critical services funding, but they bent over backward to help the big hotel owners raise the TOT tax, then handed control of over a billion dollars in new tax funds over to a private outfit set up by the hotel owners, giving up control over more than a billion in new tax revenues. Typical San Diego politicians.