San Diego tourism marketing...like advertising birthday cake

Initiative would steer hotelier-controlled revenue to general fund

Not many people have to be convinced to come get a slice of San Diego.
  • Not many people have to be convinced to come get a slice of San Diego.

If San Diego's largest hoteliers didn't like attorney Cory Briggs before, they are bound to have issues with him now.

The attorney for San Diegans for Open Government (an open government advocacy group) announced today, August 19, that he is spearheading a petition drive to place an initiative on the June 2016 ballot called the "Public’s Right to Vote on Hotel Taxes Ordinance." If approved, the initiative would dissolve the Tourism Marketing District and at the same time raise the Transient Occupancy Tax from 10.5 percent to 15.5 percent citywide. The revenues would be directed to the city's general fund for fixing roads, repairing potholes, building fire stations and libraries, as well as other public services.

Under the current setup, hotel guests pay a 2 percent surcharge, in addition to the 10.5 percent Transient Occupancy Tax, on hotel rooms. The 2 percent surcharge is used by the Tourism Marketing District and its board, comprised of several local hotel owners, to promote and market San Diego as a destination for visitors and to boost tourism.

Established by local hoteliers in 2007, the Tourism Marketing District was renewed in a vote by hoteliers in 2012 for a 39.5 year term. During that time, the district is expected to generate $1 billion in revenue. Since its inception in 2008, approximately $100 million was generated through the 2 percent surcharge and spent on promoting San Diego as well as for overhead for district staff.

The marketing campaigns, say proponents, help bring new visitors to San Diego and increase sales-tax revenues for the city. Opponents say the district is essentially a tax dressed in a surcharge's clothes.

Several other big California cities have established similar taxes. If approved, increasing the Transient Occupancy Tax from 10.5 percent to 15.5 percent will level the playing field and bring San Diego more in line with other large California cities and tourist destinations.

Currently, San Diego has one of the lowest hotel-fee rates throughout the state. Anaheim tacks on a 17 percent surcharge on each hotel room, a combination of transient occupancy taxes and tourism marketing district charges; Los Angeles and San Francisco both have a 14.5 percent tax.

But the plan from Briggs would make San Diego unique in that the city would get to keep the revenue and could use it to repair the current infrastructure backlog.

As reported here, Briggs and area hotel owners have grappled before. In 2012, the attorney and the nonprofit he represents, San Diegans for Open Government, filed a lawsuit against the city and Tourism Marketing District for enacting a tax without voter approval.

As required by the state constitution, taxes must be approved by a public vote. But the Tourism Marketing District works around that. Hotel owners and city officials say the surcharge is legal because it is considered a "self-assessment." In addition, only hotel owners are allowed to vote on whether to impose the fee.

But there are complaints over the vote as well. The vote is weighted according to the number of rooms and size of the hotel. In 2012, as reported by the *Reader*, before the city council's decision to renew the district, out of the 1379 ballots sent out, only 355 were returned. Of those 355, 127 of the largest hotels approved the surcharge while 218 voted against it. And, because of the weight, despite the numbers, the 2 percent surcharge was approved.

Asserting that it is a bad deal for taxpayers, Briggs decided to take matters into his own hands. He is donating $250,000 to start a petition drive in hopes of getting the item on the ballot.

"I love this city and its people, but I hate that they are ignored by their elected representatives who give far too much away to special interests and wealthy political donors," said Briggs in a statement to the Reader.

"The city's first spending priority should be fixing our neighborhoods' infrastructure backlog, but our representatives prefer to focus on subsidies for billionaire sports franchises and for mega hoteliers. But real San Diegans, the people out in the neighborhoods, want their communities fixed up first. Over the years I have been very successful against the city in court, and the taxpayers have had to shoulder the legal fees the politicians ran up trying to defend the indefensible in order to cover up their own wrongdoing or trying to fleece the public through giveaways to rich campaign donors."

Added Briggs, "The real question is this: Why should the hotels control money that tourists could be paying into the city's general fund for all sorts of public services and, just as importantly, to help pay the tourists' fair share of impacts on the city's infrastructure? An extra $75 million per year to the general fund could yield about $2 billion if properly bonded, and that could eliminate the $1.7 billion infrastructure deficit and provide the $280 million that councilmembers such as Marti Emerald thinks is needed for firefighters — all without raising taxes on locals. That's a good deal."

Briggs says he will continue representing San Diegans for Open Government in their lawsuit; however, having the public dissolve the Tourism Marketing District and raising the transient occupancy tax would do more for the taxpayer and get it done much quicker.

"The lawsuit has dragged on for nearly three years with no end in sight. Meanwhile, the city continues to let tourist taxes be controlled by hoteliers. If I can get the issue in front of the voters faster than I can get the lawsuit finalized, then it is worth the effort."

Executive director of San Diego's Tourism Marketing District, Lorin Stewart, says the benefits of the surcharge are widespread. "The [district] is responsible for improving hotel room night consumption within the City of San Diego. We accomplish this through funding strategic marketing efforts targeting national and international tourists.

“The [district] is confident that the last seven years of experience running the program is one of the key reasons that the region’s advertising and marketing programs are so successful. Since its establishment in 2008, assessed properties in the City of San Diego have experienced more than 20.1 million incremental room nights. Through its programs, the [Tourism Marketing District] helps generate more Transient Occupancy Tax revenues for the City of San Diego."

But not all agree. Former city councilmember, lifeguard sergeant, and lifeguard union spokesperson Ed Harris, questions the need to promote San Diego and believes the money could be used to better the general public as well as visitors.

"Sure, tourism is a huge revenue generator for the city," said Harris during a August 19 interview. "But the taxpayer needs to be aware of where this tourism tax money goes. As a city, we need to address what is a billion-dollar backlog on infrastructure projects. In addition, we need lifeguards, police officers, fire stations, libraries. The city is good when it comes to cutting services; let’s see if they are as willing to add and enhance services instead.

"I’m not opposed to promoting San Diego, I’m just not sure how much promotion we really need, especially when there is so much more this money can do, for everyone, residents and tourists alike.

"We are trying to resurface roads but what about the pipes underneath the roads? We used to have a trolley line to the beaches and other attractions, so visitors in downtown could experience San Diego. Wouldn’t it make sense to enhance the visitor experience by reintroducing a trolley to Pacific Beach or just investing those tourism dollars back in the city as opposed to letting wealthy hotel owners use it at their discretion?"

Briggs hopes to begin collecting signatures by Thanksgiving, after the city attorney prepares the ballot language for the petition drive.

See the proposed initiative here.

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Comments

Meanwhile, SD Tourism Authority CEO Joe Terzi pulls down an outrageous salary of $435,000 (although he claims that includes performance bonuses). Has Terzi ever explained exactly what he does to earn that kind of money, especially since city councilmembers only earn about $75,000.

I wonder what Mr. Briggs thinks about microbreweries and the Cities failure to follow the Municipal Code when authorizing their use in commercial and residential zones. Microbreweries are permitted by right in industrial zones but need a conditional use permit to be legally placed in North Park commercial zones. San Diego Development Services does not want to take the risk of notifying the public and having the microbrewery rejected by area residents when San Diego officials yearn to be known as the "Microbrewery Capitol of the World"; so they pretend that microbreweries are permitted where the municipal code clearly states that they are prohibited. This is not only ridiculous it is criminal. It strips citizens of their Constitutional right to the due process of law, when their civil right to notification, hearing and appeal are denied, and strips them of their property rights when they are forced to accept a non conforming use in their neighborhoods without the due process of law. San Diego under the auspices of our current officials is run more like a criminal enterprise then a city dedicated to the welfare of it's citizens.

Great story and great comments! This is enough to make a person feel hopeful! No wonder the minions of SDSU's inewsource/KPBS were trying to destroy Cory Briggs earlier this year with their intimations and allegations: Briggs is a hero who threatens San Diego's establishment special interests with courage, intelligence and lawyerly skills.

Let's do have a vote on our tourism tax and let's do put the proceeds in the general fund for crumbling infrastructure that has been neglected for so long by our GOP "strong mayors" and supine City Council.

Can someone name another industry where you get government to approve a "fee" on their clients/customers and then gets to keep the fee to promote its own business and enhance their profits. And, we're not talking about trivial amounts of money, no, these are substantial dollars.

While it's true...more guest staying at hotels generates taxes for the city... I go back to the original question, name another industry that has this benefit? T.O.T. is there to offset the costs of having these tens of thousands of guests in our city. It is not suppose to offset the cost to run a private for profit business.

I applaud Mr. Briggs' efforts in this area. Our council's first priority should be its fiduciary duty to all of the citizens who live here, not just a few millionaire hotel owners.

"Can someone name another industry where you get government to approve a "fee" on their clients/customers and then gets to keep the fee to promote its own business and enhance their profits."

Yes, agriculture.

Great news. Hopefully the ballot language will include the full gross receipts including Online Travel Agency (OTA) fees subject to the TOT.

See Page 3 for 2012 Effective TOT Hotel Taxes State and Nation-wide, which includes the Base (TOT) Plus Other Taxes including TMD and Special Taxes.

http://tinyurl.com/20120619

In 2012, both Los Angeles and San Francisco documented 15.5% Effective TOT Rates, consisting of 14.0% Base TOT pus 1.5% TMD.

http://tinyurl.com/20140531a

In 2014 the State of California Superior Court ruled that San Diego’s TOT ordinance created in 1973 is Calculated based upon the Amount Received by Hotel Operators, Not the Amount Received by Online Travel Agencies (OTA) The OTA are not hotel operators, therefore the markups and service fees charged to purchase Hotel rooms online are not subject to the TOT.

The only solution to receive the full existing 10.5% gross receipt TOT, or a new 15.5% rate, is a public vote to specifically change the TOT Ordinance to include Online Travel Agents (OTA) and reselling of hotel rooms as Taxable under the TOT.

Also annually, the City Council can lower the existing 2% TMD rate to zero.

When the City of San Diego collects money as taxes and turns it over to private individuals and companies to spend, all of the citizens of San Diego have a problem. The city's ability to hold these groups accountable for the money does not present a strong track record. A mechanism to hold the city and the recipient accountable does not exist today.

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