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Tourist money spigot wide open

Hoteliers have so far paid $2.1M for legal defense against taxpayer group

Cory Briggs
Cory Briggs

Since January 2013, San Diego's hoteliers have paid outside attorneys $2.1 million in hotel-tax revenues, according to numbers released by San Diego's Tourism Marketing District pursuant to a public records request.

That number will increase, as the Tourism Marketing District's attorneys are now in court defending the legality of the transit occupancy tax as challenged in a lawsuit from San Diegans for Open Government.

A Tourism Marketing District Is Born

In 2007, a group of San Diego's largest hoteliers created the Tourism Marketing District. Currently, there are 78 such districts throughout the state. Creation of the district allows hotel owners to add a 2 percent surcharge on hotel-room bills. A nonprofit, run by volunteer hotel owners, then spends the revenue — upward of $30 million per year — on ad campaigns promoting San Diego. The promotions are said to strengthen the hotel industry, create new hotel jobs, and entice people to visit the city, thus generating sales-tax revenues.

In 2012, after the first five-year contract lapsed, city councilmembers renewed the district for 39.5 years.

“Tax” or “Assessment”?

In December 2012, Cory Briggs, representing San Diegans for Open Government, sued the city and San Diego's Tourism Marketing District for violating the state constitution by imposing a tax on hotel guests without a public vote.

The district and the city argue that the 2 percent charge is an assessment, one paid by visitors and not San Diego residents. The distinction allows hoteliers to skirt state constitutional requirements. The marketing district and the city have defended the lawsuit ever since.

For the Tourism Marketing District, that means, so far, shelling out $2.1 million on lawyers.

Tourism Marketing District on Trial

The trial over the hotel tax began on November 9. In arguing their side of the case, attorneys hired by the district have attempted to turn the tables on San Diegans for Open Government. They argue that the group does not have proper standing to sue the district because none of its members are hotel owners.

Michael Colantuono
Jennifer Pancake

Attorneys from Sacramento-based Colantuono, Highsmith & Whatley assert that San Diegans for Open Government is nothing more than an alter ego of attorney Cory Briggs, a vehicle that enables him to file lawsuits and receive attorney's fees.

Since the trial began, Tourism Marketing District attorney Jennifer Pancake and her colleague Michael Colantuono have gone to lengths to show that the group has no real members and is guilty of doctoring membership forms in order to proceed with the case.

In court, Pancake said Briggs has used the nonprofit to protect himself against judgments.

Now moving into the second week of trial, the Tourism Marketing District and the city will soon rest their case. On November 17, Briggs is expected to call his first witnesses.

San Diego Superior Court judge Joel Wohlfeil will then decide whether San Diegans for Open Government has proper standing to sue. If so, that means the merits of the lawsuit — whether the 2 percent fee is a tax or an assessment — will be litigated. If not, hoteliers will continue to collect the revenues and promote San Diego (after paying what's sure to be thousands more in legal expenses).

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Cory Briggs
Cory Briggs

Since January 2013, San Diego's hoteliers have paid outside attorneys $2.1 million in hotel-tax revenues, according to numbers released by San Diego's Tourism Marketing District pursuant to a public records request.

That number will increase, as the Tourism Marketing District's attorneys are now in court defending the legality of the transit occupancy tax as challenged in a lawsuit from San Diegans for Open Government.

A Tourism Marketing District Is Born

In 2007, a group of San Diego's largest hoteliers created the Tourism Marketing District. Currently, there are 78 such districts throughout the state. Creation of the district allows hotel owners to add a 2 percent surcharge on hotel-room bills. A nonprofit, run by volunteer hotel owners, then spends the revenue — upward of $30 million per year — on ad campaigns promoting San Diego. The promotions are said to strengthen the hotel industry, create new hotel jobs, and entice people to visit the city, thus generating sales-tax revenues.

In 2012, after the first five-year contract lapsed, city councilmembers renewed the district for 39.5 years.

“Tax” or “Assessment”?

In December 2012, Cory Briggs, representing San Diegans for Open Government, sued the city and San Diego's Tourism Marketing District for violating the state constitution by imposing a tax on hotel guests without a public vote.

The district and the city argue that the 2 percent charge is an assessment, one paid by visitors and not San Diego residents. The distinction allows hoteliers to skirt state constitutional requirements. The marketing district and the city have defended the lawsuit ever since.

For the Tourism Marketing District, that means, so far, shelling out $2.1 million on lawyers.

Tourism Marketing District on Trial

The trial over the hotel tax began on November 9. In arguing their side of the case, attorneys hired by the district have attempted to turn the tables on San Diegans for Open Government. They argue that the group does not have proper standing to sue the district because none of its members are hotel owners.

Michael Colantuono
Jennifer Pancake

Attorneys from Sacramento-based Colantuono, Highsmith & Whatley assert that San Diegans for Open Government is nothing more than an alter ego of attorney Cory Briggs, a vehicle that enables him to file lawsuits and receive attorney's fees.

Since the trial began, Tourism Marketing District attorney Jennifer Pancake and her colleague Michael Colantuono have gone to lengths to show that the group has no real members and is guilty of doctoring membership forms in order to proceed with the case.

In court, Pancake said Briggs has used the nonprofit to protect himself against judgments.

Now moving into the second week of trial, the Tourism Marketing District and the city will soon rest their case. On November 17, Briggs is expected to call his first witnesses.

San Diego Superior Court judge Joel Wohlfeil will then decide whether San Diegans for Open Government has proper standing to sue. If so, that means the merits of the lawsuit — whether the 2 percent fee is a tax or an assessment — will be litigated. If not, hoteliers will continue to collect the revenues and promote San Diego (after paying what's sure to be thousands more in legal expenses).

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Comments
5

The city will have to win on a technicality - their position has no merit in the real case. The city's current preference is to call everything new a fee or an assessment, nothing a tax. Avoiding State law is an adroit pastime at City Hall (well, the City Attorney's office) when designing new ways to extract money by force from unsuspecting assesses..

Nov. 17, 2015

The banks and airlines are raking in $billions from fees, so governing bodies jumped on that bandwagon.

Nov. 17, 2015

I appreciate Briggs challenging this "Was not it always so? Why not just keep gouging and we know what best to do with the money" way of thinking that the current system hands over to the chosen few.

However, I think the room tax, given to the city to distribute back to the hotel folks is stupid. I think the tourism folks should foot the bill for their own advertising and other projects. Adding a "room tax" or any other named "tax" is deceptive, Figuring other cities charge a lot, so we should, too, is not an argument at all.

Briggs also proposes that proceeds from this tax on tourists and other visitors should fund city infrastructure projects. That just encourages the folks in power to continue the bait and switch that they have been doing for years.

Nov. 17, 2015

Do to others as you like to be done on to you. Tax others, and they will tax you.

Nov. 17, 2015

I think it is also true that if you can't fight back, you will be taxed.

Nov. 18, 2015

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4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
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