Sounds like it was quite a scene Wednesday when Mayor Bob Filner crashed City Attorney Jan Goldsmith’s press conference.
Goldsmith had wanted to put Filner’s demands in his standoff with hotel owners into perspective. Filner had told me and then elaborated to U-T San Diego what he was trying get from the hotel owners in exchange for signing off on the deal that allows them to add a 2 percent tax to hotel-room bills for the next four decades.
The city attorney also released a memo that helps boil down the entire disagreement I’ve been trying to explain for several years now.
In the memo, Goldsmith explains as succinctly as ever why he believes this 2 percent tax hike on hotel rooms, in addition to the 10.5 percent visitors already pay, is legal to impose without a vote.
Under California’s Constitution, taxes can only be imposed if approved by voters. Fees can be imposed without a vote. The TMD’s lawyers attempted to structure the assessment to be a fee. The standard for being a fee is very stringent under Proposition 26, approved by voters in 2010. Generally, Prop. 26 states that it is a fee only if the activities to be funded by the assessment are limited to benefits or services provided directly to the charged businesses and not to others who are not charged.
This is a very difficult standard to meet. Comparing to water ratepayers, you pay for the water you use. That is a fee. Here, the payors are the hotels. In order to try and meet that standard, the TMD and its lawyers structured its budget to spend money only on those activities benefiting the payors. There are pending lawsuits as to whether the standard has been met. (emphasis added)
Note that line. “Here, the payors are the hotels.”
The very basic truth is that if your mom stays in a hotel room in San Diego and this stands, she will get a hotel bill that has all the taxes added on, including this 2 percent charge. The city attorney and hotels can tell her that she’s not actually paying it all they want. But she is.
Do the hotel owners also make the case that they, and not their customers, pay the existing 10.5 percent tax? Does Banana Republic pay the sales tax when I buy a shirt? Is Exxon paying your gas taxes? No.
The people staying in hotels who pay this fee are not getting any direct benefit under this “difficult standard.” And nobody is arguing as much.
For legal reasons, they have to argue that people who pay hotel-room bills aren’t actually paying the fee that’s on them.
And this basic contention is at the heart of the entire debate. Years ago, hotel industry representatives admitted that increasing this “fee” was effectively an increase to the hotel-room tax already in place and they discussed its potential effects on the market.
They decided consumers wouldn’t mind paying the tax.
And then they decided to claim that consumers actually weren’t the ones paying it.
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