If major San Diego hoteliers get their way, it won’t be as cheap to visit the city anymore. That’s fine by Mike McDowell, one of the hotel industry’s top lobbyists.
“We’re not out there saying come to San Diego because it’s one of the lowest,” McDowell said. “We’re saying come to San Diego because it’s one of the most desirable places in the country. And it’s worth every penny.”
McDowell is the general in the long, slow revolution to make San Diego tourists pay more to visit the city. Central to that plan is a proposed $550 million Convention Center expansion, financed primarily by a 1 percent to 3 percent hike in visitor taxes. More immediate is the extension by four decades of a 2 percent charge on visitors staying at large hotels. The plan begins winding its way through City Council on Monday.
Taken all together, San Diego’s comparatively low tourist taxes will no longer be comparatively low, potentially jumping from 10.5 percent to 15.5 percent in certain areas.
In the past, hiking tourism taxes have been an anathema to hotel owners who argued it would kill their business. But these charges are OK, McDowell said, because the extra money will go back into promoting tourism, which benefits the city and hoteliers.
In 2004, voters twice rejected tourist tax hikes that would have paid for increased promotions, fire protection or general city services.
But three years later, McDowell cobbled together a plan for hoteliers effectively to increase the tax rate and give themselves more control over spending the extra money. The City Council and hotel owners approved the 2 percent charge for five years.
Last year the Tourism Marketing District collected $26 million, which a nine-member board of hoteliers allocated to the city’s Convention & Visitors Bureau and other organizations to promote the city and events.
Now, with that plan set to expire, the plans are more ambitious both in lifespan and scope.
McDowell is lobbying for a new 40-year term to allow for long-range planning and to pair it with bonds needed for the Convention Center expansion.
To attract visitors to fill an expanded center, he said, hoteliers need a guaranteed revenue source for promotion. Right now, hotels that have more than 70 rooms charge the fee. He wants to lower that, likely to around 30.
“The premise is that those that a receive benefit pay an assessment,” McDowell said.
The district’s increased role concerns City Councilman David Alvarez.
Locking in an extra 2 percent charge on visitors for promotion likely keeps the city from raising the tax rate to pay for general services or other priorities such as affordable housing, he said. Besides, the Convention Center expansion is far from a done deal.
“If you look at it over 40 years, that’s over $1 billion of tax money we’re giving over to marketing,” Alvarez said. “I’m not sure that is a good policy from the city’s standpoint.”
The district does have strong support from the council’s Republicans, who are generally opposed to increased taxes.
Councilmen Carl DeMaio and Kevin Faulconer spoke glowingly at a recent budget committee hearing. The district relieves the city’s day-to-day operating budget of about $10.5 million in annual promotional costs and the last audited figures show an 18 to 1 return on investment.
Councilwoman Lorie Zapf said she was inclined to support the district’s 40-year renewal, even though she recently advocated that all business fees sunset after three years unless explicitly reauthorized. Zapf preferred hoteliers allocate the money instead of directing it to the city’s day-to-day operating budget.
“I want it earmarked for something that’s going to help the city,” Zapf said.
The district’s 2 percent additional fee can get lost amid its overall charges to tourists. Last week, a business trade group said San Diego had one of the lowest visitor tax burdens in the country. But the group’s study left out the 2 percent district charge.
“That should be included,” said Joe Bates, director of research at the Global Business Travel Association, which produced the study. The group later amended the study and the additional charge dropped San Diego’s rating.
Monday’s council vote begins a multi-stop journey to approval.
Individual hotels still have to sign off, and the council has to vote at least once more. This week, the council also will be voting to approve a $70,000 contract with outside lawyers to develop the Convention Center expansion financing plan.
If approved, paying back those bonds will cost visitors an additional 1 percent to 3 percent on their hotel bills depending on where they’re staying. The extra charge likely would last the 30 years needed to pay back the bonds.
Supporters hope the expansion won’t have to face voters, either.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall and big buildings. What should he write about next?
Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.