A Fine Mess - The Hotel Tax

I find myself partially agreeing with Mayor Filner on the subject of San Diego's hotel tax.  He has stalled on signing the contract that would allow the hoteliers to start using the proceeds to promote tourism and the hotels of San Diego.  In an earlier post, I noted that he wanted to use the revenue for "public safety," but now he is just saying that he had said the tax is illegal.  If the tax is illegal, it can't be used for any activity, including public safety.  Meanwhile, the UT article linked above notes that there are lawsuits proceeding against the hotel tax, claiming it violates Proposition 26, passed 2010, which requires a supermajority vote of the people to raise taxes.  Here is what the state constitution says about taxes and votes, from Article XIII C, California Constitution:

Text of Section 1:
Definitions. As used in this article:
(a) "General tax" means any tax imposed for general governmental purposes.
(b) "Local government" means any county, city, city and county, including a charter city or county, any special district, or any other local or regional governmental entity.
(c) "Special district" means an agency of the State, formed pursuant to general law or a special act, for the local performance of governmental or proprietary functions with limited geographic boundaries including, but not limited to, school districts and redevelopment agencies.
(d) "Special tax" means any tax imposed for specific purposes, including a tax imposed for specific purposes, which is placed into a general fund.
(e) As used in this article, “tax” means any levy, charge, or exaction of any kind imposed by a local government, except the following:
(1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.
(2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.
(3) A charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof.
(4) A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property.
(5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law.
(6) A charge imposed as a condition of property development.
(7) Assessments and property-related fees imposed in accordance with the provisions of Article XIII D.
The local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.


Text of Section 2:
Local Government Tax Limitation. Notwithstanding any other provision of this Constitution:
. . .
(d) No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote. A special tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved.

Sorry for the extended legalese, but I am hard pressed to see how this tax, paid by hotel guests, who do not receive a direct benefit from the tax, can be passed by the hotels themselves.  The city clerk tabulated the votes for the tax, so it appears to have the force of law of the city government behind it.

The hotels could solve this problem themselves, by putting together a local association and agreeing to pay into a fund to promote tourism.  There would be a free rider problem for hotels that wanted the benefits, but didn't pay in.  Perhaps the Tourism Marketing District could omit links and mention of those hotels names in their promotional materials and web sites.  Using the police power of government to enforce the hotels association dues is out of constitutional bounds.

Meanwhile, what happens to the money piling up if the tax is found to have been unconstitutional?  It would be a nightmare to refund the customers, but if I were a judge in the case, that's what I would require.  That would also be a mess to clean up, but so would any other plan that would attempt to deal with the fees collected.  The sooner the courts resolve, the better.

Hotels, Politics and San Diego

Looking for local news to blog about, I notice the extent to which news regarding rich hoteliers looms large locally.  Perhaps because tourism is so important to the local economy, we see so many stories.

1. Evans Hotels was recently granted an extension to the lease of the Bahia Resort land on Mission Bay for another 21 years under circumstances that call into question the real motives of the council. Andrew Keatts at VOSD has the story.  The $75,000 annual payment doesn't seem like much for such a choice location, but I am no expert. I really distrust any "public-private" venture.  Rich business interests can easily use influence and donations to get good deals that wouldn't be available in a free market where another private party owned the land.  I would like to see the city sell the land at auction and use the money to make up pension shortfalls. 

2. Dave Maass seems to have taken a particular dislike to Doug Manchester, local financier famous for developing the Manchester Hyatt downtown, ever since Manchester purchased the U-T.  Most recently Maass reported that Manchester's company's admitted to violating FCC regulation on cell phone boosters.  I have responsibility for cell phone contracts where I work, so I can understand Manchester's frustrations with coverage.  But we successfully worked with a vendor to fix the problem, we never considered taking matters into our own hands, even though we had access to technology to do so.  But Maass seems really intent on making Manchester look bad, so I wonder where that animus comes from.

3. I previously posted about Filner's illegal attempt to repurpose hotel tax revenue for "public safety."  The tax was approved by the city council prior to Filner's inauguration, another 39 years, to be specific.  It is highly unlikely that the new mayor could make such a change now, according to the VOSD, because of the restrictions on fees that can be passed without a public vote. 

Why do hotels attract attention, political and otherwise in San Diego?  I guess, because that's where the money is.