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As much as $6.6 million in refunds may flow to more than a million San Diego International Airport rental car customers under settlements reached to resolve disputes over the legality of a Port of San Diego fee.
Beginning in May 2018, the Port of San Diego required rental car companies at and near the airport to collect $3.50 from customers with the goal of ultimately raising $40 million. The money would be used to pay back loans taken out to build a 1,600-space parking garage in Chula Vista. That was a crucial piece of infrastructure for the planned $1.13 billion Chula Vista bayfront convention center, hotel, retail and park complex.
Rental car companies are tenants of the Port of San Diego, a government agency that acts as landlord for businesses spanning five cities along San Diego Bay.
At issue was whether the charge was a lawful fee or an illegal tax requiring two-thirds voter approval. Governments can raise fees, but they must prove that the fees are being used for the specific benefit of the people who pay them. If the fee is used for general or separate government needs, then the fee is actually a tax and must be subject to a vote of the public.
The Port admits no wrongdoing in the settlements, and the lawsuit brought by rental car companies Enterprise Rent-A-Car Co. and Hertz Corporation “will be dismissed with no final order on validity of the fee,” said Port of San Diego spokeswoman Brianne Page.
“The Port has always considered the fee to be a legal fee, not a tax requiring voter approval. The settlement preserves the Port’s right to seek to put such a fee in place in the future if it should choose to,” Page wrote in an email, though, “reinstitution of the fee is not currently being contemplated.”
Port officials have maintained the charge is permitted under the Port Act. It was last levied from 1999 to 2006 to fund a $29 million public parking structure near the San Diego Convention Center and Petco Park.
Port records provided to Voice of San Diego show this time around, more than $8.25 million was collected from June 2018 to August of this year. The charge stopped in July and there are currently no plans for how to replace the lost revenue, which plummeted from about $333,000 in February to $14,000 in May amid stay-at-home orders aimed at preventing the spread of the coronavirus.
Several rental car companies sued the Port of San Diego in 2018, arguing their customers did not benefit from the future Chula Vista parking garage the fee would eventually pay for. At one point the airport itself questioned the legality of the fee and moved to join the litigation, but later backed away from the challenge.
“Given that the parking structure has not been built, none of the customers being assessed the Charge can ‘use’ the parking structure,” the rental car lawsuit said. Even when it is built, the companies argued “only a miniscule percentage” of their customers would use it 10 miles away.
A judge in that case found the arguments compelling and said in a tentative ruling earlier this year the charge violated the California Constitution.
A rental car customer from New Mexico, Jeffrey Garvin, then sued the rental car companies in 2020 seeking class action status to obtain restitution and stop the fee.
The settlements will resolve both cases, but customers must file a claim by Oct. 20 to receive a refund or opt out. Attorneys for Garvin told VOSD a two-week claim extension may be granted soon. After that, customers who do not file a refund claim or opt out will be barred from taking legal action. A judge is expected to provide final approval of the deals in November.
Customers who were charged for several rentals can be refunded for each rental. Garvin’s attorneys estimate refunds will be sent out early next year and said past customers have been notified of the settlement by email or mail or both. More information about obtaining a refund can be found at RentalCarFeeSettlement.com.
Sarah Poralla, who lives in Cologne, Germany, traveled to San Diego in October 2018 and September 2019 for work and leisure and said she has filed two refund claims.
“As a foreigner I was not aware of the fee at all (to be honest all kinds of fees are miraculously added each time one hires a car in the USA)”, Poralla wrote VOSD in an email. “But I am glad that someone took the time to look into this. It is important to push back when something is not done correctly.”
As agreed, the Port of San Diego will first pay Enterprise and Hertz attorneys’ fees totaling about $1.5 million; then customer refunds followed by administrative costs of the claims process; attorneys’ fees for Garvin totaling about $1.2 million. Any remaining funds then go to SANDAG to fund access improvements to the Rental Car Center, said Page.
If the Port resurrects a new version of the fee in the future, the car companies must receive a 30-day notice “and all parties reserve their right to challenge the fee,” Page wrote in an email.
As for the Chula Vista Bayfront project, Page said the coronavirus has not delayed anything.
The Sweetwater Bicycle and Pedestrian Path is expected to open by the end of the year. The RV resort with RV stalls and furnished vacation rentals is expected to open in early 2021. The Gaylord Pacific resort hotel and convention center are targeted for opening in 2024, port officials said.