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Twice after the Cedar fires, San Diegans have been misled about the capacity of the tourism industry to absorb a higher Transient Occupancy Tax (TOT). The two ballot measures to make hotels pay for funding city services in 2004 were described as job-killers that would drive tourists away:
“The travel-industry client is being taxed to death,” said Eklund of Joni’s Journeys. “They’re paying taxes on hotel rooms, taxes on airfare and taxes on renting a car. It’s the cumulative taxes that obviously have a stifling effect on travel.” (Union-Tribune, 10/17/2004)
“They really could be strangling the goose that laid the golden egg here,” Winston said. (Union-Tribune, 10/17/2004)
This despite the fact that our TOT at 10.5 percent of the room rate is lower than competing markets in California such as Los Angeles (14 percent), Anaheim (15 percent) and San Francisco (14 percent).
At the time, we were told by the Union-Tribune editors that raising TOT was a bad idea, precisely because it put too much money into tourism promotion and not enough into fighting fires:
Even worse, the March ballot measure, known as Proposition C, would have imposed illogical priorities on the uses of the hotel levy. For example, in the aftermath of last October’s devastating wildfires, it would have set aside permanently more than three times as much of the revenues for tourism promotion as for the Fire Department.
Such earmarking of general fund levies would bind the City Council’s hands, placing huge chunks of tax resources off limits, regardless of such unforeseen calamities as earthquakes or wildfires or pension fund crises. (Union-Tribune Editorial, 07/16/2004)
Now, we face a proposal to create a tourism Business Improvement District (BID), which arguably raises the same issues as the tax proposals — with one significant difference. Tax revenue generated locally is spent on San Diegans by our elected officials, whereas BID revenue will be spent on whatever the top nine hoteliers in town want to spend it on.
The tourism industry gets to keep its cake and eat it too. They can bill tourists the BID fee as if it were a tax on the base hotel room rates. And they get to tell San Diegans that it’s not their money.
Other businesses don’t control the money raised from taxes. We pay 7.75 percent sales tax on everything we buy, and the retailers don’t get to keep half the tax money to promote their products. Our cable companies pay franchise fees, and they do not expect half the revenue to go towards promoting television viewing. A lot of our small businesses pay BID fees and they do not tack that as a private tax on our dinner bills or sales receipts. So why should tourism be an exception?
Do we really need more tourists? We have some of the highest occupancy rates for hotels in the nation, and our convention center is turning away conventions because we do not have the capacity. Additional tourism promotion does not make sense given San Diego’s current carrying capacity — unless the thirst for tourists is to satisfy an appetite for new hotel development. According to the chief executive of the San Diego Lodging Industry Association:
The fundamental objective of the TMD is to significantly increase the number of visitors into San Diego in order to compensate for the anticipated growth in the number of new hotel rooms in the region. (Mike McDowell, Union-Tribune op-ed, 12/11/2007)
So we have approved 10,000 hotel rooms in the city of San Diego since 2000, and are now going to spend $30 million every year to fill those rooms. And we are going to fill those rooms regardless of whether San Diegans benefit from them, or we have adequate police or fire protection or infrastructure to serve these new developments. Speculative investment by hoteliers increases land costs that makes housing unaffordable for San Diegans. In most instances, the city does not evaluate the economic and community impacts of these huge tourism projects. In Manchester’s Pacific Gateway project on prime public land near the bay, the city failed to even negotiate a TOT guarantee to protect its revenues and refused to report its fiscal impact.
Whilst the Mayor wants to use taxpayer dollars to subsidize the tourism industry, other cities make hoteliers pay for the impacts of their development on essential services. For example, compare the Business License Fees for a hypothetical hotel with $50 million in revenues and 600 employees for the competing tourism markets in California. This is what the typical hotel would pay every year in business license tax, http://www.onlinecpi.org/downloads/THE%20BOTTOM%20LINE.pdf“target=”_blank”>according to a CPI report:
Los Angeles: $74,000
San Francisco: $80,192
San Diego: $3,065
Now, as we are evaluating our firefighting resources, San Diegans know where to look. As Senator Feinstein put it: the third time, the charm might work.
— MURTAZA BAXAMUSA
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