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$1 billion dollars over the next 40 years, that's the amount that would be raised if city councilmembers decide to renew the contract for San Diego's Tourism Marketing District.

The district, established in 2008, generates revenue from a 2 percent charge on hotel rooms, which is in addition to the current transit occupancy tax. The revenue from the assessment goes to promoting hotels and tourism.

Mike McDowell, head of the San Diego Lodging Industry Association presented some changes to the district to the City's Budget and Finance Committee on Wednesday.

The proposed contract is an upgrade from the one currently in place. If approved, the new contract will generate approximately $30 million a year and will include all hotels with 30 rooms or more-- not the 70-room plus requirement in the current contract. And, instead of four years the contract will expire in 40 years.

"Why are we not the home to a Dr. Seuss theme park? We should be. Why are we not an equity partner in ComicCon?" Asked McDowell. His answer; because San Diego needs more promotion and during the next 40 years the Tourism Marketing District can do just that.

"Our proposal for a 40-year term to the [Tourism Marketing District] will provide economic stability and financial resources...to energize the economic engine of tourism."

But critics, such as the local hotel workers union, say the assessment is just a tax and violates Prop 26, which requires that any hidden tax have approval from two-thirds of the electorate. Proponents claim that participating hotels benefit directly from the charge through additional room-nights. The incremental rooms exempts the district from Prop 26.

"We should be investing this $1 billion dollars in the City of San Diego not a select group of hotels in town," stated Graham Forbes, research analyst for local hotel-employee union, Unite Here.

The district and hoteliers will finish drafting the proposal and will present the new contract to the council at a later meeting.

Comments
14

The union rep's point doesn't make sense to me. As I understand it, the hotels themselves have to vote in favor of the TMD for it to be passed. Without a supporting vote of the hotels, this money would not and could not otherwise be collected. This money, without the hotels' votes, would not otherwise be available for any other purpose. So, how exactly is it that the union is charecterizing this as the City choosing between investing in the City vs the hotel industry?

There is nothing stopping the City and the voters from taxing these hotels and using the money for whatever purposes they want. That is true with or without the TMD. The past two attempts to do so (via increase to the TOT tax) were shot down by the voters.

This is an instance where the hotels are deciding to assess themselves and use the assessments to benefit their industry. Which, incidentally, also causes a boost in our entire city's economy. How could the union have a problem with that?

Seems like the unions are just taking an opportunity to screw management and if successful will likely screw our entire city in the meantime.

Oct. 19, 2011

tedbohannon, You say, "As I understand it, the hotels themselves have to vote in favor of the TMD for it to be passed."

By law, to go to a ballot and vote on this assessment district "requires submittal of petitions from lodging business owners representing more than 50% of the total annual assessment followed by a City Council hearing and a ballot procedure."

So, you can see, that, from the outset, if the few largest or biggest revenue-generating hotel owners want this (say, just barely comprising >50% of the total proposed assessment), it will go to a ballot and will pass. Collection of the assessment will be imposed on all of the other hotel owners (comprising up to 49% of assessments), even if the actual number of small, "no"-voting hoteliers actually far outnumbers the number of big hoteliers.

Assessment ballots are inherently undemocratic. A few powerful entities can force the many smaller entities to pay into the pot.

And there is one more aspect: it is not obligatory to pass on the 2% assessment cost to the customer: "The amount of assessment, if passed on to a transient [customer], shall be separately stated from the amount of rent charged and any other applicable taxes, and each transient shall receive a receipt for payment from the business."

The big guys can afford to offer some customers a deal,and not charge the 2%, when they want to, but the collective money pot for advertising their hotels will still be there. The little guys will not likely be able to afford anything similar, always needing to pass on the 2% charge to the customers. It's unfair.

Oct. 19, 2011

I won't debate whether assessment voting is democratic or not, but it was introduced into our State's constitution by an act of the citizens.

My only point was that the union's argument doesn't make sense to me and your response has gone off that topic.

Oct. 19, 2011

The topic isn't Unions. It's the TMD, and that's not temporomandibular disorder, unless you are a small hotel owner grinding your teeth over this.

Oct. 19, 2011

Allow me to recap our exchange:

I commented that the union's argument presents a false dichotomy. You replied TO MY COMMENT with an off topic response. I pointed out that you haven't addressed my comment with your reply. You replied to THAT with a time-wasting attempt at humor.

Your inability to follow a very simple topic and your awkward attempts to force the conversation in an unrelated direction are making this a ponderous discussion.

If you want to make arguments that are completely unrelated to the point I made, then don't bother replying to my comment.

Oct. 19, 2011

OK. Sorry to have bothered your head.

Oct. 19, 2011

Here's the draft proposal: http://docs.sandiego.gov/councilcomm_agendas_attach/2011/Budget_111019_1a.pdf

I think this is on shaky legal grounds, considering the California State Constitution. For example, the Assessment District plan says, as required by Article XIIID of the State Constitution,

"State law requires that assessment funds be expended on a specific benefit conferred directly to the payees that is not provided to those not charged, and which does not exceed the reasonable cost to the City of conferring the benefit."

The 2% assessment is the "reasonable cost to the City" to provide PR? How to calculate? The Plan says "Processes to identify and verify specific benefits to assessed businesses will be modeled on practices in use,..."

Further: "The specific benefit the district will provide to assessed lodging businesses, and will not provide to those not charged, is incremental room night sales."

Now it's "the district," not the City, providing/conferring the PR benefit. I guess district/City are legally interchangeable, but it is odd.

Then, "The programs and services provided with the district funds will be designed specifically to drive room night sales at assessed lodging businesses. Only assessed lodging businesses will be featured in marketing materials, receive sales leads generated from district-funded activities, be featured in advertising campaigns, and benefit from other district-funded services. Those not assessed will not receive these and any other district-funded services."

So, if you have 29 rooms or less, you will be delegated to a promotional black hole. Nothing the City ever does to promote tourism can refer to your hotel.

Oct. 19, 2011

These districts are black holes for money $$$$$ -> ????

The use of the funds is whatever the city approves. The voters are whoever the city designates. And who exactly is the District? These organizations are people. At high salaries. How many people and how many brochuers do you get?

Seen it before.

Oct. 19, 2011

What you are bringing up is the actual black hole: the "administration" aka the "SDTMD Corporation."

That would be the group of TMD hotleliers who make all of the decisions about use of the assessment money collected (who would be the members of this group, and how are they chosen?).

The Plan says, "The SDTMD Corporation (“Corporation”) acts as the owners’ association...The Corporation’s Board of Directors is comprised exclusively of owners or owner’s representatives from lodging businesses within the District. Each year the Corporation receives and reviews numerous vendor applications for TMD funding."

Which means that the Corporation decides who to whom to give the assessment money, such as "Holiday Bowl, Crew Classic, Wine & Food Festival, and Rock & Roll Marathon." To an assessed hotleier operating a 30-room motel near the Tijuana border, this may not be all that beneficial.

So how does the Corporation Board spend the assessments collected? Examples: 1. Audits "The SDTMD Corporation will contract with an independent third-party to audit" 2. Administration: "3% to 5% including City Administration Costs" 3. City Administration Costs: "TBD – intended to recover actual costs only" ["TBD" is a scary and open-ended number in Paradise Plundered] 4. Contingency/Renewal: "3% to 5%" 5. "Administration shall be increased by $100,000, $150,000, $200,000 and $250,000 annually to be used to develop the ten-year Milestone Reports."

It's worse than this. Read the whole Draft Plan.

Oct. 19, 2011

This sounds just like any other Assessment District. You could build a Dr. Seuss theme park for a Billion Dollars. It will all go to $100,000+ salaries.

Oct. 19, 2011

At the mayoral debate: he's not even my candidate, but: "Fletcher calls [[TMD] fee revenue "Backdoor tax increase."

Oct. 19, 2011

Sometimes the photos that accompany these blogs just don't fit. If I'm not mistaken, this is all about a City of San Diego levy and marketing program. Yet the photo is of the Hotel del Coronado, which is definitely NOT in SD. (Oh, it may benefit from the efforts that it does not pay for, as may properties in Del Mar, Carlsbad, Poway, El Cajon, etc.) Would not a photo of the Westgate or US Grant or a Manchester waterfront hotel be more appropriately used?

Oct. 20, 2011

Not the best picture choice, for sure. But Coronado's Tourism Improvement District, in place for a year or so, contracts with the San Diego Convention and Visitors Bureau as their primary marketing partner.

ConVis has been allocated 50% of the San Diego TMD funds since the TMD began operation in 2007/8. You can see a budget analysis for past TMD ops here (note that the new TMD plan is to assess every hotel w/30 or more rooms; it has been an assessment only on 70 or more rooms): http://docs.sandiego.gov/councilcomm_agendas_attach/2011/Budget_110420_1ppt.pdf

Oct. 20, 2011

These audits of city contracts! The contractor picks and pays for the auditor. The city accepts the audit and has no further responsibility. The auditors constitute a sub-scam population. Where will this billion dollars go? We'll never know from an audit.

Oct. 20, 2011

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