by Katheryn Rhodes and Mandy Havlik
In a Times of San Diego interview Mayor Todd Gloria discussed upcoming Budget cuts and he stated: “I am willing to do tough things. And I am willing to tell the public the truth. And they are probably not used to that.”
City of San Diego Mayor Todd Gloria claimed that the City Council directed him to exhaust every revenue option before entertaining any budget cuts. In November 2024, Measure E for a new +1% Sales Tax to the General Fund barely failed 50.31% to 49.69%. And the only 06/02/2026 ballot measure for new revenue is the “Empty Homes Tax.”
However, new revenue streams have not been exhausted. Since 2014 Katheryn Rhodes has put forward several Ballot proposals to Reclassify Online Travel Companies (OTC) as Hotel Operators in the plain language of the TOT Ordinance in order to get the full Transient Occupancy Tax (TOT) rate to no avail.
In 1965, before Online Travel Companies (OTC) existed, was the first and only time the citizens of San Diego voted to approve the City’s Transient Occupancy Tax (TOT) Ordinance, including Definitions.
In 2006 the City of San Diego sued the Online Travel Companies (OTC) in order to get the full 10.5% Transient Occupancy Tax (TOT) rate. (See City of San Diego vs. Hotels.com Case Number: GIC861117.) The 10-year multi-million dollar lawsuit ended on 12/12/2016 with a California Supreme Court decision on Case S218400. The Supreme Court ruled that “OTCs are not operators within the meaning of the ordinance.” Therefore, in order to get the full TOT Rate, the City of San Diego has to change the plain language of the Definition of Hotel Operator in their TOT Ordinance to include OTC by a public vote.
In order to create two new revenue streams on Wednesday 03/18/2026 City Council District 2 Candidate Mandy Havlik presented our proposed Ballot Measures for the 11/03/2026 election as Item-3. Sub-Item A. . ( See Video Time 1 Hour 36 minutes to 2 Hour 2 minutes.
To our surprise, Booking Holdings, who represents many Online Travel Companies (OTC), and the San Diego County Lodging Association also wanted to change the plain language of the TOT Ordinance. Plus have the OTC be the tax responsible party and collect the full TOT rate to make the City whole.
The City Council Rules committee voted unanimously to forward our ballot measures for additional consideration to be put on the 11/03/2026 election.
Twenty years after the original lawsuit was filed, 12 years after Katheryn started her quest, and 10 years after the Supreme Court case was decided, the City Council approved our Measure 1 to potentially change the plain language and Definition section of the TOT Ordinance to Reclassify OTC as Hotel Operators by a public vote.
Measure 1.
Shall the City of San Diego update language to confirm equal treatment of traditional and online hotel bookings by reclassify Online Travel Companies (OTC) as Hotel Operators in an amended Ordinance, and amend Municipal Code (MC) Section 35.0102 Definitions for “Operator” to include the words: “Online Travel Companies (OTC), Third-Party Agents and “Rent” to include the words “Hotel Fees such as Resort Fees and Cleaning Fees”?
In order to codify the intent of the voters to redefine Online Travel Companies (OTC) as Hotel Operators amendments are required to Municipal Code (MC) Section 35.0102 Definitions to include the words: “Online Travel Companies (OTC), Third-Party Agents” in the definition of “Operator;” and “Hotel fees such as Resort Fees and Cleaning Fees” in the definition of “Rent.” Proposed changes are underlined below.
“Operator” means the Person who is the proprietor of the Hotel, Recreational Vehicle Park, or Campground, whether in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee, or any other capacity. “Operator” includes Online Travel Companies (OTC), Third- Party Agents, a managing agent, a resident manager, or a resident agent, of any type or character, other than an employee without management responsibility.
“Rent” means the total consideration charged to a Transient as shown on the guest receipt for the Occupancy of a room, or portion thereof, in a Hotel, or a space in a Recreational Vehicle Park or Campground. “Rent” includes charges for utility and sewer hookups, Hotel Fees such as Resort Fees and Cleaning Fees, equipment, (such as rollaway beds, cribs and television sets, and similar items), and in-room services (such as movies and other services not subject to California taxes), valued in money, whether received or to be received in money, goods, labor, or otherwise. “Rent” includes all receipts, cash, credits, property, and services of any kind or nature without any deduction therefrom.
Background.
The City of Anaheim changed their plain language of their TOT Ordinance in 2022, and has an 17% Effective Hotel Tax Rate consisting of a 15.0% TOT and 2% Tourism Marketing District (TMD).
Anaheim’s ballot wording stated that the TOT Ordinance would “be updated to require online and other travel companies to collect and remit taxes on the full rate charged to guests for accommodations, generating up to $3 million annually” in new Revenue.
Prior to the change in the plain language, in FY-2022 Anaheim collected $177 million in TOT. After the wording changed to include OTC, in FY-2024 Anaheim collected $243 million in TOT. An increase of +$65.7 million or +37% in additional General Fund revenue in 2 years with just an update in TOT Ordinance wording to allow Online Travel Company (OTC) to collect and remit taxes.
Anaheim voters were expecting a lowly $3 million increase, but got $65.7 million in new revenue instead. Resulting in a massive increase of actual revenue versus expected revenue.
Two years after the City of Palo Alto updated their TOT language in 2014 to confirm equal treatment of traditional and online bookings, Hotel tax revenues increased by 56%, per each 1% of TOT. Two years after the City of Santee updated their language in 2012 to include OTA as Hotel Operators, Hotel tax revenues more than doubled, per each 1% of TOT.
In addition, the City of Los Angeles has a proposed ballot measure for the 06/02/2026 Primary election to change their plain language to do the same.
Currently, the City of Los Angeles has a 14.0% TOT rate and a 1.5% Special Tax. LA has another June ballot proposal to increase their TOT by +1%. For a new Effective Hotel Tax Rate of 16.5%. The same as San Francisco.
On 03/03/2020, the original Convention Center Expansion Measure C included a poison pill to guarantee that a new now $1 Billion Convention Center Expansion be built. The Fifth Avenue Landing leasehold at the location of the planned Expansion is set to end on December 31, 2026. So a decision to build or not to build a Convention Center Expansion will not be made until 2027.
If a new Expansion is not authorized by the City Council, then the new 1.25% to 3.25% Special Hotel Tax would have to end on April 30, 2035, approximately 9 years from now.
See Municipal Code Section 35.0201(b) Imposition of Special Tax.
Currently the plans for a Convention Center Expansion have stalled. Construction costs have skyrocketed and there is a glut of empty Convention Center spaces nationwide.
Measure 2.
As an alternative to the Special Hotel Tax that may end in 9 years, we have proposed our Measure 2, which is a two-part question and would bring in more revenue.
Part A. “Should the City repeal the up to 3.25% in Additional, Voter-Approved Transient Occupancy Tax (TOT) and Related Bonds for the Convention Center Expansion in Municipal Code Sections 35.0201 to 35.0312, and instead increase the Hotel Visitor Tax charged to hotel guests to a level similar to other major cities by +4% from 10.5% to 14.5% citywide by adding Municipal Code Section 35.0109 Additional Tax Imposed?
Yes.
No.”
Part B. “Regardless of whether you voted yes or no above, in the event the TOT increase is approved should the revenue be used for:
a. A General Fund Tax (50% Voter Approval Required) which pays for police, fire and emergency services, parks and recreation, libraries, and other city programs, and associated pensions?
Or
b. A Special Tax (67% Voter Approval Required) with 1% for Convention Center Repairs, 1% for Homeless and Affordable Housing, 1% for Infrastructure, and 1% for Arts/Libraries/Balboa Park. Or anything the City Council wants instead of an unneeded $1+ Billion Convention Center Expansion, with a citizens’ oversight committee and audits by the City Auditor?
This will give both the City Unions, and Homeless, Affordable Housing, Infrastructure, Arts, Libraries, Balboa Park advocates the incentive to cooperate to get a Yes vote on Part 1 to increase the TOT rate, then compete against each other in Part 2, only after revenue increases are assured.
Currently, the City of San Diego has an effective Hotel Tax Rate of up to 15.75% consisting of a 10.5% TOT + 1.25% to 3.25% Special Hotel Tax for the Convention Center Expansion + 2% Tourism Marketing District (TMD). The Special Hotel Tax is 3.25% downtown where most large hotels are located, and 2.25% in Mission Valley, Ocean Beach, Mission Beach, Pacific Beach, and La Jolla where many Short-Term Vacation Rentals (STVR) are located.
This ballot Measure 2 would increase the TOT by 4% citywide, and increase the effective Hotel Tax Rate by +0.75%, to 16.5% citywide (14.5% TOT + 2% TMD). To be the same rate as San Francisco, and the proposed rate for LA. And less than the 17% for Anaheim.
Conclusion.
The FY-2025 Annual Comprehensive Financial Report (ACFR) shows that San Diego collected $332 million in TOT, or $31.6 million for each 1% of TOT. For Measure 1 if the TOT increases +37% like Anaheim, that would create +$123 million in new TOT revenue. If TOT increased only a modest +20%, that would create $66.4 million in TOT.
For Measure 2, a +4% TOT increase citywide would create +$126 million in TOT. The 1.25 to 3.25% Special Hotel Tax is estimated to bring in +$77 million. A difference of +$49 million if the original Convention Center Expansion Measure C is repealed, and a new 4% citywide TOT is approved by voters.
Please give feedback and comments. Especially on how the proposed 4% TOT should be spent in order to create the largest coalition of voters. And stop Mayor Gloria from imposing budget cuts that hurt our neighborhoods.
Mandy Havlik is a candidate for City Council District 2
Saturday 03/21/2026 from 11 am to noon, City Council District 2 Candidate Mandy Havlik and I (Katheryn Rhodes) will be on KNSJ’s Talk of the Town with Mike Aguirre and Arthur Aguirre to discuss our Ballot Measures for Transient Occupancy Tax (TOT) revenues on visitors.
Please call in to the KNSJ studio number at
619-790-KNSJ (5675) with comments and questions.
I fear any new revenue stream will just be gamed again into higher employee wages/bonuses vs giving the Citizens any productive result. There really needs to be some serious austerity happening at the City, and not the usual nonsense from Gloria about how it has to be from Libraries or Parks. How’s about the City not monitoring every single eviction in San Diego, like passed a couple of years ago? What’s next, monitoring every layoff, with submittal & review required to proceed. There is a lot of overreach to unwind.
Hi Norman:
Agree with your concerns.
However, with Measure 1 the money belongs to the City’s General Fund and we are letting a portion of our existing TOT revenue slip through out fingers and go instead to out of state Online Travel Agencies (OTA). So it would be better that our TOT goes to the directly to the City, so save us from further budget cuts.
If Measure 2 passes with only 50% to 66% and voters pick Part A, then the new revenue would go into the City’s General Fund.
But if Measure 2 gets more than 67% and voters pick Part B then the new Revenue is a directed Special Tax that can be put into locked boxes and cannot be used for employee bonuses and excessive Middle Managers.
If Measure 2 does not pass at all, then the City may build an unneeded Convention Center Expansion when the Fifth Avenue Leasehold expires on December 31, 2026. The original Convention Center Expansion estimate was to be @ $500 million, and new costs estimates increased to over +$1 Billion. Which could put San Diego into an even bigger financial hole than 101 Ash Street. Hopefully there will be an uprising to kill the project. A public vote is a solution to stop excessive spending by special interest and Mayor Gloria for new construction. While also allowing funding for ongoing Convention Center Repairs, Homelessness, Infrastructure, and Arts, Balboa Park, and restoring Library hours. It is better than doing nothing.
I’m not entirely sure that “Sound Bite Nation” will take the time to grasp the nuance and required voter thresholds to follow the bouncing ball on this one. I hope I’m wrong on this one. Thanks for your efforts.
If measure 2 items were previously financed by the general fund, then the money not having to be appropriated by the general fund could still fund bonuses and MM’s in the end and plugs Todd’s deficit. ie: arts/libraries/balboa park spending could decrease by the same amount from the general fund that’s increased by the measure. If I read this right.