San Diego and the TMD

from the San Diego Free Press

It’s time for the San Diego City Council to work within the law instead of desperately searching for ways around it.

Can’t we all just get along?—Rodney King

On Monday the San Diego City Council heard comments on the city’s Tourism and Marketing District.  You might have heard about it in recent weeks, because it’s been the source of a lot of controversy down at City Hall.

The TMD became a major news item last week when Mayor Bob Filner crashed a news conference called by City Attorney Jan Goldsmith.  Let’s just say that the two men don’t agree on a whole lot, and the exchange was one of the more entertaining political back and forth’s in San Diego history.

Very brief synopsis of the TMD controversy, in case you haven’t heard:  Last year, the City Council approved a plan to allow San Diego’s private hoteliers to “assess themselves” an extra 2% transient occupancy “fee” in order to use as a collaborative effort to market San Diego– and thus their own properties–to the nation’s tourists.  The deal handed the formerly public Convention and Visitor’s Bureau over to private control (the hoteliers), and would provide the hotel collaborative $30 million or more per year for the next 39 years.

Suffice it to say that there are all kinds of problems with this new way of doing business, not the least of which is that it appears to be illegal, as in against California state law.  Any tax hikes must first be put to a vote of the electorate.  The hoteliers and City Council thought they got around this little annoyance by calling it a “fee,” even though the hoteliers themselves don’t pay it, and it shows up on hotel guest bills as a “tax.”  To make a long story short, the City Council approved the plan with the full support of former mayor Jerry Sanders, and now the hoteliers, nay, TMD, wants its money.

Sanders didn’t sign the final contract to put the plan into full effect before he left office, and now it’s left to Filner to do so.  Only Filner refuses to sign it—and rightfully so, in my opinion—insisting that it’s an illegal tax.  So now the hoteliers are suing for enforcement.

Per Goldsmith, Filner’s requests can be summarized in four parts:

• Indemnify the city from any costs should the tax be found illegal by the courts.  Goldsmith says that the contract already does so.
• Provide more money for the city’s general fund, which the City Attorney says would be illegal, since it would “certainly eliminate any basis for arguing that the TMD assessment is a fee.”
• Shorten the term to one or two years instead of 39 ½ years.  The City Council is free to do this as a matter of policy.  The hoteliers would then have to revote on the new terms.
• A living wage requirement, which the City Attorney says cannot be done as a part of the TMD (more on that in a minute).

Before the City Council, supporters of the new TMD arrangement made some compelling arguments.  They want to be able to promote tourism in San Diego, partly by embarking on a national advertising campaign like Los Angeles and Las Vegas have.  The San Diego TMD had planned a series of ad buys in various markets in order to keep up with the Joneses, so to speak, and are depending on money from the new “fee” in order to fund it.

Tourism is a major part of the San Diego economy, so it makes sense to go out and promote our fair city in order to attract as many visitors as possible.  I don’t think that anyone is disputing that point.  At least I’m not.

The problem stems from the manner in which they intend to do it.  Traditionally it’s up to the ConVis—a public entity—in conjunction with local business interests to promote San Diego as a vacation destination.  But to hand the keys to the city’s finances to private interests with little to no oversight for 40 years?  That’s ludicrous!

To make matters worse, according to attorney and open government activist Mel Shapiro, Goldsmith issued an opinion last July that recommended the City Council not approve the agreement, determining at the very least that it was legally dubious.  Note (also see Edit below):  Initially I could not find the memo in question, but I have since located it online and will read through it when I have a chance.

It seems to me that this should be an easily solvable problem, if only our public officials would decide to work together for the betterment of the city.  Setting aside the apparently illegal nature of the agreement for a moment, Mayor Filner has expressed a willingness to meet the TMD proponents at least part of the way.  We can start by shortening the term of the contract.  See if it works, and if it doesn’t, we’re not locked into this ridiculous 40 year contract.  If it does, it can certainly be renewed.

There appears to be enough wiggle room to make everyone at least mostly happy, if only the powers that be would be reasonable and actually talk to one another.  Filner may be a bit on the surly side sometimes, but he’s a reasonable guy who’s generally pretty open to sitting down at the negotiating table, even with people he disagrees with.

Then there’s the matter of the living wage ordinance.  Opponents of the idea insisted that it would cripple local businesses to actually have to pay their employees a decent wage, and would drive businesses out of town.  It passed anyway, and exactly the opposite has happened.  In fact, paying people a decent wage actually boosts the local economy.  It should also be noted that the majority of the hotel owners who will benefit from this little agreement are owned by out of state entities, meaning the profits they earn in San Diego get shipped somewhere else, while the wages they pay their employees by and large get put directly back into the local economy.

Since the TMD is touted as a public-private partnership, and further, since it’s likely that the courts will rule the “fee” an illegal tax, my question to Mr. Goldsmith is this:  Why wouldn’t the current living wage ordinance as modified in 2008 apply to this contract as it does with any other service contracts with the City?   Other than slightly cutting into corporate profits that don’t benefit the city directly anyway, sounds like everyone would win.  The TMD gets their marketing money and thus gets to drum up more business, and the workers in the low wage tourism industry earn enough money to maybe actually be able to live in one of the more costly locales in the country.

So memo to the City Council and the TMD privateers:  Pull yer heads out and work with this duly elected mayor and do something for the betterment of the City of San Diego.  The City Council should have learned its lesson by now that they can’t simply skirt the laws they don’t like.  We’d all be much better off if they’d instead hunker down and find a way to work within it.

Edit:  I attended the City Council meeting yesterday, but did not stay ’til the end.  Had a story to finish.  But in watching the City Council comments online, Jan Goldsmith did identify the “Memorandum of Law” that Mel Shapiro brought up, and I’ve managed to find it.  Here it is.  I will read through it, but going by Goldsmith’s comments, there still seems to be a whole lot of questions as to whether the TMD assessment as written is legal or not, and whether protections for the city and the taxpayers are adequate or not.