COMMENTARY | COLUMNISTS | CARL DEMAIO

Watch for stealth tax being imposed in San Diego

They're at it again! The politicians and lobbyists at San Diego City Hall have concocted yet another plan to impose a stealth tax in San Diego. The net increase of the tax is estimated to be $9.6 million -- all of which will go to the same City Hall that already cannot account for two years' worth of revenue it has spent. What's worse, this scheme they plan to impose is a tax that has been voted on and decisively rejected by San Diego voters not once, but twice in the past two years.

Here's the plan: Every hotel owner within the city of San Diego is set to gather and cast a vote on whether or not to impose an extra fee on their customers for their hotel stay. If passed, the 2 percent "fee" would, in theory, be spent by the hoteliers to promote San Diego's tourism industry.

The "fee" would be placed on top of the existing Transient Occupancy Tax (TOT), which currently adds 10.5 percent to the price of each hotel room in San Diego. Although the original intent of TOT was to promote tourism in the city, over the years nearly all of it has been redirected to the bottomless hole that is the city's General Fund. Now, to make up for the city's theft of TOT funds, the hoteliers are self-imposing a "fee."

Whereas in the past the hotel industry strongly opposed measures to increase TOT, fearing our spending-addicted politicians would continue to take the extra revenue for further city spending, they are on board with this measure as they believe it to be the only way to make certain dollars are put toward the marketing of San Diego as a destination city.

Have hoteliers forgotten who they are dealing with? These are the same politicians whose obsession with spending has driven the city to the brink of bankruptcy. The same politicians that have twice gone to the people asking for more money and been turned down. And yes, the same politicians who have increased TOT over the years only to divert these funds to other purposes. Now the politicians are going behind the backs of the voters to cut a deal with the hotel industry.

Though according to Proposition 218 all tax increases are subject to voter approval, this one may not be because it would be self-imposed by an entire industry. When hotel owners vote on the tax, they are also voting to create a business improvement district whose boundaries are marked by the city of San Diego. The hotels within the district are then able to tax themselves and spend the extra revenue as they wish. The politicians and lobbyists have essentially found a loophole allowing them to skip asking the voters for approval, and there is a chance the tax will not even show up on hotel room bills. A conflict-of-interest issue has also been raised by the city attorney, because hoteliers would be privately governing how the dollars would be spent.

The hotel industry is by no means wrong in its desire to have more dollars to spend on marketing San Diego as a destination city. Tourism is a vital part of our local economy, with San Diego consistently ranked among the top 5 destination cities in the United States. We by no means want to kill the goose that laid the golden egg by underfunding tourism promotion. Maintaining and increasing our tourist base is without a doubt in the best interest of San Diego.

Yet the city of San Diego faces the most significant crisis in its history because of complete financial mismanagement -- a multibillion-dollar pension debt, a city budget habitually in deficit, a suspended credit rating and the lack of financial audits for two fiscal years. Giving more money to this city right now is like giving alcohol to an alcoholic. City Hall cannot be trusted not to attempt to get its hands on this 2 percent increase. The politicians have done it before by diverting the existing TOT revenue. What reason do we have to believe they won't do it again? For example, the city intends to charge a "nominal fee to collect the fee" being self-imposed by hoteliers.

Got that straight? The city is collecting a fee, on a fee, on a tax.

We implore San Diego hoteliers to reject outright the idea of any tax increase and instead join our call for the City Council to put TOT revenue toward tourism promotion as it has promised but failed to do over the past two decades. For the sake of our city and to earn back the trust of the people, this City Council should focus on putting its financial house back in order and demonstrate to the people that all current taxes and fees are going to their intended purposes. Until then, giving this city another dollar would merely be throwing good money after bad.


DeMaio is president of the Performance Institute, which has spent the last 18 months examining the city's finances and authored the "Citizens' Budget Plan" (www.sandiegobudget.org/sandiego/) to address the city's financial crisis. Send comments to editor@sddt.com. All letters are forwarded to the author and may be published as Letters to the Editor.

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