Faulconer’s Proposed Tourism Tax Increase: Perpetuating the Hourglass Economy

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By Lori Saldaña

I’ve been reviewing various reports about the proposed ballot measure and special election that seeks to increase the Transient Occupancy Tax (TOT). Proponents tell us this is needed to fund a Convention Center expansion, pave our streets, and provide shelter for homeless people — wow!

Impressive — if true.

I’ve shared these thoughts and research points with others, including a member of the Convention Center board, and wanted to include others in the conversation.

First: for 20+ years I’ve taught Business IT skills as part of the Community College’s Workforce Development program. Throughout that time I’ve been looking at what actual jobs result from different types of taxpayer “investment” and what that means for my students.

Related: The classes I teach are free — subsidized by taxpayers via the State of California’s community college funding to develop and support the state’s skilled workforce.

Many of my students are immigrants, English learners, disabled, women, and/or older workers who have lost their jobs and are returning to school as part of retraining for new employment. Many are veterans, and/or homeless or living in supportive housing, and are dealing with physical and learning disabilities, addictions, PTSD and related health issues.

These students are in school because they want to be prepared for good-paying jobs to support themselves and their families. They see education as a step to achieving those goals. We research job postings, refer them to career counselors, help with their resumes, and look forward to turning them from “tax eaters” to “tax payers.”

This year, the largest graduating class in district history completed their studies and earned certificates, diplomas or degrees. As the Chancellor noted: “A total of 11,542 degrees, certificates, and diplomas were awarded to the Class of 2017, or, by another measure, 11,542 dreams were achieved.”

So my concerns about San Diego taxpayers subsidizing the convention/tourism/hospitality sector — and for that matter, picking “winners and losers” in any economic market — is that many of the related jobs that are created are not permanent or good paying. They will not help our students achieve their dreams.

This, in turn, contributes to a low-wage regional economy and increasing homelessness/food insecurity rates among working people in San Diego.

“Between April 2016 and April 2017…Five sectors experienced year-over job losses: Trade, Transportation & Utilities (down 800), followed by Leisure & Hospitality (down 300)…

Question: Why would we raise taxes to fund an industry that consistently loses jobs and often pays low wages?

Moreover, if an expanded Convention Center would bolster these sectors, the jobs are often seasonal. They are the types of jobs that contribute to people becoming “working poor” who can’t afford housing or food.

According to another report:

“In some of San Diego County’s major industries, almost half of employees have incomes too low to live self-sufficiently.”

“Jobs that pay too little to cover basic expenses are concentrated in some of the largest industries in the region, including tourism (hotels, restaurants, and entertainment), other services, retail sales, construction.”

Credit: Center on Policy Initiatives

So even though BUILDING an expanded Convention Center employs many people during the construction phase (mostly, but not always, men) — this is for a relatively short time. This is simply not sustainable in the long term, if the buildings they create will not be used by people doing good paying jobs in the future.

And I write this as a former union carpenter, who appreciates the skills — and the risks — of this work. I was able to save enough money to return to SDSU, earn a master’s degree in education, and receive a teaching contract. Now, I see students in my computer labs who were injured doing construction work and are being retrained with skills for different work.

Finally: the idea that local General Fund revenues will increase with more tourism jobs may be true — but TOT is dwarfed as a revenue source by property taxes and sales taxes.

Let’s look at what that means in real terms:

Low-wage workers in San Diego cannot afford to buy a home with the median price of over $500,000, so they don’t pay property taxes (directly) or get a federal mortgage tax benefit.

Instead, they pay other people’s mortgages and property taxes via high rents, which means they have less money to spend on shopping, which means lower sales tax revenues for the city. From 2016-17, they declined by $13 million, or 4.5%.

So the Mayor’s proposal, in the long run, is a bad deal for most San Diegans. And a few million (or less) for homelessness won’t keep up with the structural problems that result from subsidizing low-wage, seasonal and/or temporary jobs in construction, tourism, hospitality and related services.

If the Mayor and others in San Diego continue to create low-paying jobs and an hourglass economy, they will undermine our region’s long-term capacity to develop good-paying jobs, expand home ownership vs. lifetime renters, and stimulate retail sales.

Credit: HRMagazine/UK

This, in turn, undermines many other sectors of economic growth. It contributes to high housing prices, which discourage businesses from expanding and/or relocating here since their employees can’t afford housing without increases to their salaries.

Tourism also hurts affordability, by taking formerly affordable housing off the market (see: Air BnB and vacation rentals in beach areas). So for those who are already here: housing insecurity (e.g., couch surfing), homelessness and other problems have been escalating in recent years.

Bottom line: the proposed Tourism Occupancy Tax and the city’s continuing emphasis on expanding and relying on tourism/hospitality vs. other job sectors is simply not sustainable. It does not create enough good-paying jobs, and will not adequately fund services for preventing/managing homelessness, which may continue to increase under this scenario.

I welcome your comments and thoughts on this topic. And please share if you think it’s worthwhile.