Hotel-motel industry rips tax-hike effort

By Don Bauder
Copyright 2001 San Diego Union-Tribune
Article date: October 5, 2001
 

The San Diego Hotel-Motel Association has a war chest that is $200,000 and mushrooming to fight the suggested increase in the transient occupancy tax -- a proposal that Mayor Dick Murphy now opposes, according to his chief of staff.

If the TOT, or hotel tax, goes up any amount, don't be surprised to see the association drop its backing for the downtown ballpark project: Officials aren't talking openly about it, but prominent members are talking about it privately.

The ballpark ballot issue promised no new taxes, and the Hotel-Motel Association took that to mean no increase in the TOT. From the outset, the association challenged the project's financing: Its support has never been unanimous, and one reason was a fear that the TOT would be raised when it was clear that the financing would not work. Jerry Morrison, La Jolla-based hotel guru, not speaking for the association, thinks that politicians may want a TOT increase because of ballpark financing woes. The Padres have already admitted that they do not have the funding for almost all the proposed buildings that were supposed to provide tax revenue -- particularly TOT -- for the ballpark project.

Firefighters Local 145 recently suggested that the TOT be raised from 10.5 percent to about 13.5 percent, citing the need to pay for improved fire equipment. The suggestion was sent to the City Council's Rules Committee before the hotel industry knew anything about it.

John Kern, the mayor's chief of staff, was a political consultant for the firefighters union for 10 years, ended last year. However, he says he had no role in prompting the proposal.

Eyebrows have been raised because the City Attorney's Office drafted the proposal submitted by the union.

"The firefighters sent the proposal in July, it raised legal issues, and it was sent to the city attorney, and then got sent to us," says Kern, claiming it did not start in the mayor's office. When the issue was brought before the Rules Committee in late September, Murphy did not take a position.

The Hotel-Motel Association has a Political Action Committee with $200,000 for handling specific matters, and it will go to fight this proposed boost, says Rick Mansur, senior vice president for J.C. Resorts and chairman of the Hotel-Motel Association. "We haven't even started fund-raising," he says.

The proposal "will cripple the hotel industry," says Mansur. The proponents compare San Diego with cities such as Los Angeles and San Francisco, which have a 14 percent rate, and Seattle, which has 16 percent.

"The competing cities they have listed are fraudulent," says Mansur. Particularly for many conventions and other business travel, "We are competing against Orlando at 11 percent, Las Vegas at 9 percent and Phoenix at 11.5 percent," he says.

"It is more expensive for group attendees to get to San Diego. We don't have an airline hub," says Mansur.

He says that San Diego's low rate is the major reason that "San Diego has had the fastest-growing (hotel) tax base" of major cities. An increase in the tax would decrease the tax base, he says. Some say the TOT will begin declining in any case.

Morrison points out that convention planners carefully compare expenses of competing cities, and the hotel tax plays a big role in site selection. It plays a smaller but still significant role in family tourism.

"Can you pick a worse time to raise taxes? The San Diego hotel industry is really hurting," says Morrison.

Reint Reinders, president of the Convention and Visitors Bureau, says the proposal "came out of nowhere. There was no dialogue" with the industry.

The city has painted itself in a corner. It went ahead with the Convention Center expansion without having hotels to support it. That was done because the public, in November 1998, was voting on the ballpark, which was to be financed by hotels that would be constructed to serve the expanded center.

Even before the terrorist attacks of Sept. 11, hotel financing evaporated as part of the nation's economic downturn. Yet real estate values in East Village have escalated, so any hotel would have to be a high-priced one -- say, $200 a night. This expense, in turn, limits the kind of conventions that would come here, and puts us in competition with the most expensive markets, such as San Francisco, at a time when convention center space has been expanded tremendously in the West.

The fact that we are now competing with the most expensive cities "is even more of an argument that the tax should be at a reasonable level," says Reinders.

In Wednesday's Wall Street Journal, the Port of San Diego took out a one-third-page ad seeking developers to build the Campbell shipyards hotel, which has been on and off the table for some time, but was part of the original ballpark financing package. The ad mentions that the ballpark will be nearby.

Don Bauder's e-mail address is don.bauder@uniontrib.com. His phone number is (619) 293-1523.
 

In the News