How Jan Goldsmith Picked Hotels Over the Public

How Jan Goldsmith Picked Hotels Over the Public

File photo by Sam Hodgson

City Attorney Jan Goldsmith

 

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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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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41 comments
Geoff Page
Geoff Page subscribermember

The increased "amenities" you refer to is really one amenity, if that is the correct way to refer to an expansion of the convention center. Tourists don't come to San Diego to attend conventions. Conventioneers do come and, as I said, they can usually write off their expenses. So, the result, while beneficial to the hotels for the increased business convention traffic, is actually harmful to tourism.

GeoffPage
GeoffPage

The increased "amenities" you refer to is really one amenity, if that is the correct way to refer to an expansion of the convention center. Tourists don't come to San Diego to attend conventions. Conventioneers do come and, as I said, they can usually write off their expenses. So, the result, while beneficial to the hotels for the increased business convention traffic, is actually harmful to tourism.

Bill Sheffler
Bill Sheffler subscribermember

In a free market increasing the cost of goods or services will in most cases reduce the number of units sold. Agree?. In order for the merchant to be unaffected he would need to sell the same number of units at the higher price. This isn't a monopoly or oligopoly, and tourists have choices about where they stay. Higher room charges in San Diego will drive tourists (at the margin) to stay outside the hotel tax district. Hoteliers are "betting" that the increased amenities financed by their self-assessment (ie the hotel tax) will be attractive enough to offset their loss of price-competitiveness.

WmJSheffler
WmJSheffler

In a free market increasing the cost of goods or services will in most cases reduce the number of units sold. Agree?. In order for the merchant to be unaffected he would need to sell the same number of units at the higher price. This isn't a monopoly or oligopoly, and tourists have choices about where they stay. Higher room charges in San Diego will drive tourists (at the margin) to stay outside the hotel tax district. Hoteliers are "betting" that the increased amenities financed by their self-assessment (ie the hotel tax) will be attractive enough to offset their loss of price-competitiveness.

Geoff Page
Geoff Page subscribermember

Help me out here WmJSheffler. How does an increase in the pass through tax on on a room reduce the hotel owners revenue? That's like saying an increase in the sales tax reduces the revenues of the merchants. I don't get it.

GeoffPage
GeoffPage

Help me out here WmJSheffler. How does an increase in the pass through tax on on a room reduce the hotel owners revenue? That's like saying an increase in the sales tax reduces the revenues of the merchants. I don't get it.

Bill Sheffler
Bill Sheffler subscribermember

I dispute that statement. Who are these people, and what qualifies them to make that assertion? In my opinion, a microeconomic analysis indicates that the sellers (hotel owners) are paying the tax, since the tax reduces their revenue.

WmJSheffler
WmJSheffler

I dispute that statement. Who are these people, and what qualifies them to make that assertion? In my opinion, a microeconomic analysis indicates that the sellers (hotel owners) are paying the tax, since the tax reduces their revenue.

David Cohen
David Cohen subscriber

As long as the hotel owners accept liens against their properties as collateral for their ability to pay the required amounts toward Convention Center expansion, IMO they can finance it any way they want. It would be cool for the City to take ownershiop of a few hotels "in proximity to the Convention Center" if the hoteliers can't deliver. The City Council should insist upon such liens, however, as a show of good faith and a backstopping of the payments.

fryefan
fryefan

As long as the hotel owners accept liens against their properties as collateral for their ability to pay the required amounts toward Convention Center expansion, IMO they can finance it any way they want. It would be cool for the City to take ownershiop of a few hotels "in proximity to the Convention Center" if the hoteliers can't deliver. The City Council should insist upon such liens, however, as a show of good faith and a backstopping of the payments.

Felix Tinkov
Felix Tinkov subscribermember

JB619: Thoughtful response. I believe your argument regarding the special tax being a burden on a special class is the one the city is likely to use in its validation action. I guess we willl have to see what the judge thinks.

Felix Tinkov
Felix Tinkov

JB619: Thoughtful response. I believe your argument regarding the special tax being a burden on a special class is the one the city is likely to use in its validation action. I guess we willl have to see what the judge thinks.

Jeff Brazel
Jeff Brazel subscribermember

As far as your observation about the TOT being a "fundamental and vital resource" I agree, but the nature and substance of the vote by the hotels has nothing to do with that. The hotels are asked to vote to accept the taxation on their special class, that vote does not provide them any power to unilaterally tax themselves to the potential detriment of the "fundamental and vital resource". The City Council, through a number of actions, is taxing the hotels.

JB619
JB619

As far as your observation about the TOT being a "fundamental and vital resource" I agree, but the nature and substance of the vote by the hotels has nothing to do with that. The hotels are asked to vote to accept the taxation on their special class, that vote does not provide them any power to unilaterally tax themselves to the potential detriment of the "fundamental and vital resource". The City Council, through a number of actions, is taxing the hotels.

Felix Tinkov
Felix Tinkov subscribermember

If I am mistaken in any of the above, I would hope some one could enlighten me further.

Felix Tinkov
Felix Tinkov

If I am mistaken in any of the above, I would hope some one could enlighten me further.

michael-leonard
michael-leonard subscriber

JB619: The difference is one of who taxes whom. A BID votes a tax upon themselves; this tax is voted upon others who have no say regarding the tax. That's why I continue to submit that TOTs are fundamentally un-American - they are the soul of taxation without representation.

mlcred
mlcred

JB619: The difference is one of who taxes whom. A BID votes a tax upon themselves; this tax is voted upon others who have no say regarding the tax. That's why I continue to submit that TOTs are fundamentally un-American - they are the soul of taxation without representation.

5c7817c2-7da5-11e1-9a2e-5745d6b919af
5c7817c2-7da5-11e1-9a2e-5745d6b919af

Some people complained that Mike Aguirre was too involved, made too many decisions, strayed into areas he should not have, so they voted him out. What they voted in was a man who refuses to get involved, to make any decisions, and stays out of areas he should be in. Mr. Goldsmith takes great pains not to step in and be the impartial arbiter he said he was going to be. For my money, I'd rather have someone like Mike who made decisions, right or wrong, but at least got involved. This is what happens when people are driven by blind dislike, even hatred. They stupidly decide that anyone would be better than what they have; the only driving purpose is to get rid of the person they don't like. Mike had engendered such animosity among some people that anyone could have won the election against him. And, an anybody did.

Joseph Hartman
Joseph Hartman subscriber

Goldsmith makes me long for Mike Aguirre.

john kaleto
john kaleto subscriber

See, this is what happens when the public allows developers to control decision makers. And some of you still favor adding 4 developer-appointed trustees to the SDUSD board? That's just nuts!

kaleto
kaleto

See, this is what happens when the public allows developers to control decision makers. And some of you still favor adding 4 developer-appointed trustees to the SDUSD board? That's just nuts!

Michael Aguirre
Michael Aguirre subscriber

Mr. Goldsmith said law above politics. This is another example of his putting politics above law. The City Attorney is supposed to be an impartial referee of the Public Records Act. Mr. Goldsmith, a life long politician has subverted the law in favor of his political backers. Action must be taken at great expense to the taxpayers to correct this transgression of the law.

MichaelAguirre
MichaelAguirre

Mr. Goldsmith said law above politics. This is another example of his putting politics above law. The City Attorney is supposed to be an impartial referee of the Public Records Act. Mr. Goldsmith, a life long politician has subverted the law in favor of his political backers. Action must be taken at great expense to the taxpayers to correct this transgression of the law.

Jeff Brazel
Jeff Brazel subscribermember

Now if there is a question about the public's obligation to back-stop the debt service to the extent the tax does not cover it, that is a different question not specific to the vote that is before the hotels. Take that question up when the city council votes to implement the increase in the room tax.

JB619
JB619

Now if there is a question about the public's obligation to back-stop the debt service to the extent the tax does not cover it, that is a different question not specific to the vote that is before the hotels. Take that question up when the city council votes to implement the increase in the room tax.

Don Wood
Don Wood subscriber

The fix is in. Crooked San Diego backroom politics at their finest.

Don Wood
Don Wood

The fix is in. Crooked San Diego backroom politics at their finest.

michael-leonard
michael-leonard subscriber

BTW, all you who voted for Goldsmith over Aguirre - how do you feel about it now?

mlcred
mlcred

BTW, all you who voted for Goldsmith over Aguirre - how do you feel about it now?

Vlad Kogan
Vlad Kogan subscriber

This is especially troubling given the city's history of improperly manipulating voting weights in these types of weighted elections. The Golden Hill MAD is a case in point. The court ruled that the city improperly overweighed open space in order to stack the deck in favor of getting the MAD adopted.

vkogan
vkogan

This is especially troubling given the city's history of improperly manipulating voting weights in these types of weighted elections. The Golden Hill MAD is a case in point. The court ruled that the city improperly overweighed open space in order to stack the deck in favor of getting the MAD adopted.

Eva Vargas
Eva Vargas subscriber

It NEVER surprises me when whoever it is in the city machine declines to do what's GOOD for the city--we, the people. AND by good, I mean transperancy. There's the law, Mr. Goldsmith, and there's no law broken here when it comes to seeing the names of those hotels. What's the big deal, we already know who the big hotels in this city are and their influence. I can do my own investigating, but I'll leave it The VOSD. Who and why are you protecting them? It's not that we don't trust the city, oh wait, I don't.

evavrgs
evavrgs

It NEVER surprises me when whoever it is in the city machine declines to do what's GOOD for the city--we, the people. AND by good, I mean transperancy. There's the law, Mr. Goldsmith, and there's no law broken here when it comes to seeing the names of those hotels. What's the big deal, we already know who the big hotels in this city are and their influence. I can do my own investigating, but I'll leave it The VOSD. Who and why are you protecting them? It's not that we don't trust the city, oh wait, I don't.

Lucas OConnor
Lucas OConnor subscriber

So in Goldsmith's premise, there isn't even a pretense that there will be any sort of election monitoring or public accountability? Any results at all could be reported and nobody would ever know if the vote was conducted and tabulated correctly?

lucasoconnor
lucasoconnor

So in Goldsmith's premise, there isn't even a pretense that there will be any sort of election monitoring or public accountability? Any results at all could be reported and nobody would ever know if the vote was conducted and tabulated correctly?

Jake Resch
Jake Resch subscriber

And yet people still trust this man when it comes down to the legality of the Pension Reform.

Dawg53
Dawg53

And yet people still trust this man when it comes down to the legality of the Pension Reform.

Chris Brewster
Chris Brewster subscribermember

This is enormously disappointing and another indication of the disproportionate control businesses exert over the electorate in San Diego.

B Chris Brewster
B Chris Brewster

This is enormously disappointing and another indication of the disproportionate control businesses exert over the electorate in San Diego.