Photo by Sam Hodgson
Hotels on San Diego's downtown waterfront
Let San Diego never be accused of being short on innovation: In order to build the things we want, we may have just figured out a way to raise taxes without a vote of the people, despite long-standing laws to the contrary.
A judge tentatively ruled Monday that the city could increase taxes on hotel-room stays to fund the Convention Center expansion. It was a blow to activists suing the city and to the Chargers, who hoped to be able to pick up where this tax failed and try to build a stadium that might satisfy the need.
But the judge might have opened a window for the Chargers — one that would forever flip our understanding of taxes and government on its head. Business groups of all kinds could now conceivably impose their own sales taxes on consumers and use the money to build whatever they want.
All they need, apparently, is the go-ahead from the City Council.
Let me explain.
Unlike the much-discussed Tourism Marketing District, which has caused a fight between the mayor and the hotel industry, nobody disputes that the Convention Center tax hike is an actual tax hike.
“To be clear, this IS a tax,” City Attorney Jan Goldsmith wrote in a Feb. 1, 2012, statement.
The state’s requirement that taxes be approved by voters therefore came into play. This is where the city’s innovation comes in: Who exactly are the voters needed to approve this tax?
The city attorney and city decided the voters were hotel owners. You see, this was an increase to their property taxes. That those hotel owners were going to pass it along directly, as a line-item, to the bills of their customers, just like the city’s hotel room tax, didn’t matter. It also didn’t matter that unlike any other property taxes, this would be levied not on the value of the property, but on how much revenue these hotels got.
Nor did it matter that many of the hotel owners didn’t actually own the property on which they operated.
We were the first city to try this. San Jose did something similar but different in key ways. And now the judge has said that he doesn’t see a problem. This is not an increase to the city’s hotel room tax, he wrote, because it’s not an increase to the city’s hotel room tax.
OK, here was the judge’s actual point (via KPBS) about why this was not the same as the city’s Transient Occupancy Tax, the 10.5 percent tax it charges visitors on hotel room stays, the increase of which voters twice rejected in 2004:
With respect to Shapiro’s contention that the special tax is a transient occupancy tax (“TOT”), the Court notes that the special tax differs from a TOT in several respects. More specifically, unlike a TOT, it is a tax and creates a lien (Gov. Code §53321(d)) against real property and makes real property subject to foreclosure.
The tax has been structured as though all hotels in the city were actually in a neighborhood together and were deciding to raise their taxes to build themselves a rec center their children could play in. Like the taxing program known as Mello Roos.
And that’s where this gets interesting: What other businesses could seize on this idea and impose a tax on their customers to build something they want?
What’s most interesting about this is not even a majority of hotels had to impose the tax on their customers. Only a majority of the money did. As we discovered last year, one company — one company — represented between 16 percent and 24 percent of the vote in the Convention Center tax hike.
Imagine if one of your neighbors could raise the property tax for your whole block.
We don’t know how each hotels voted because, even though this is a tax imposed on hotel room bills, it’s apparently a big secret. We are not allowed to know who supported it.
A minority of hotel owners was able to impose the tax on the majority for the Tourism Marketing District precisely because it made more money.
So what other roads could we take this down?
What if all the biggest restaurant chains decided to impose a tax on restaurant bills in San Diego — a tax that would fund a meat distribution plant for all of the biggest restaurants?
What if the biggest-revenue bike shops got together, voted to raise sales taxes on bikes and used the money to build a new bike path that connected people to all the biggest bike stores?
The Chargers may be bummed that their plan to try to save Convention Center dreams with a football stadium looks like it’s dead.
But maybe they could rally big beer retailers to impose a tax on all retail beer sales to support a new stadium. Lots of drinking goes on during NFL Sundays.
“If this holds up, it really would open up the floodgates for special assessments that benefit the public at large,” Chargers special counsel Mark Fabiani told NBC 7. “Very interesting stuff.”
Very interesting, indeed. Maybe this is good. The people who patronize these establishments can pay for the things these establishments need. Those who don’t drink beer wouldn’t have to pay for a stadium.
But make no mistake, this is a big precedent. It’s privatization of taxing authority. The power to tax is being removed from the people and handed to big business colluding to raise costs for an industry goal.
Maybe we’ll see an explosion of these tax hikes — ironically, a result of the unique restrictions on tax hikes this state has. After all, when Texas built a new football stadium for its beloved Cowboys, it only needed 50 percent of the vote to raise taxes.
Here, that would take 66.7 percent of the vote.
Or maybe it doesn’t need any votes of the public at all.
Maybe it just needs a few closely aligned businesses. This is what the city decided. And the court has tentatively agreed.
I’m Scott Lewis, the CEO of Voice of San Diego. Please contact me if you’d like at email@example.com or 619.325.0527 and follow me on Twitter (it’s a blast!):
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