A Quick Explanation of the Convention Center Tax Ruling

Ryan T. Darby Ryan T. Darby 9 Comments

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The Superior Court has issued a tentative ruling upholding the hotel tax increase used to finance the convention center expansion. Here’s a quick breakdown of the ruling for a lay audience:

First of all, Judge Prager’s ruling is not set in stone. A judge issues a tentative ruling on a motion based upon the arguments filed by the parties, and it contains his likely ruling. However, the parties may still attempt to persuade the judge to change his mind at the motion hearing, which in this case is calendared for March 13, 2013, at 10 a.m.

That being said, Judge Prager’s tentative ruling is very well reasoned and logically incorporates the complicated statutory scheme and binding case law into his decision. The primary issue is whether the City is allowed to assess a special tax to finance the convention center expansion through a vote by the hotels, rather than the people of San Diego.

The California Constitution (Article 13A, §4) provides that a city may levy a special tax (“any tax imposed for specific purposes”) by a two-thirds vote of the “qualified electors.” San Diego’s City Charter further states that the Council may levy a tax based upon the vote of “qualified electors” who comprise the affected “area” within the city.

So, what is a “qualified elector”? Government Code section 53326(c) provides that landowners are the electors where the special tax targets the subject non-residential property, according to the state Supreme Court. Municipal Code section 61.2710(a) further provides that the qualified electors of special taxes on hotels “shall in all cases be the Landowners.” Finally, the “home rule” doctrine of the California Constitution (Article 11, §5) grants charter cities like San Diego the power to establish the mechanisms for a special tax election so long as it concerns a “municipal affair,” rather than a “statewide concern.”

Thus, the Court has tentatively concluded that the City of San Diego possesses the legal authority to levy a special tax based upon a vote by the hotel owners, rather than the broader San Diego electorate.

The Court’s tentative ruling (available here) obviously goes into greater detail, and I don’t intend to overly simplify it. However, the media tends to focus on the policy ramifications of judicial rulings rather than the legal arguments and rationales, so I hope this sheds some light on the latter for a lay audience. I haven’t reviewed this case in great detail, but Judge Prager’s analysis seems very persuasive.

Ryan T. Darby practices civil law in San Diego and serves as the president of the San Diego Republican Lawyers.

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Comments 9

  1. Ryan,

    Do you believe the votes of all qualified electors should count equally or is there legal precedent or reasoning to allow some votes to count more than others?

  2. Hypocrisy, this isn’t a smoke-filled union hall where union bosses get to bully the people into voting the way they want.
    You answered your own question. The precedent is the law. Legal votes should always count more than ones that are not legal.

  3. Michael,

    I have no idea what you are talking about.

    My question referred to the fact that not all hotelier’s votes were weighted equally. A vote from a larger hotel counted more (in some cases significantly more) than a vote from a smaller hotel.

    The only precedent I know is that of landscape maintenance districts where the votes of larger land owners are given more weight. In that case, however, those landowners will also be paying more of the fee not passing it on to their customers directly as the hotels will.

  4. Post
    Author

    Hypocrisy,

    Actually, the Electoral College (which elects the President of the United States) is a perfect example. The 538 electoral votes available nationwide are generally apportioned among the states on the basis of population, but this apportionment obviously is not perfect. As a result, a voter in one state typically has more influence in determining the election that a voter in another state.

    That being said, Judge Prager relied upon charter cities’ supreme powers over their own distinctly municipal affairs, as prescribed by the California Constitution’s home rule doctrine. The judge seems poised to affirm the tentative, according to the Union-Tribune: http://www.utsandiego.com/news/2013/mar/13/judge-/

  5. Unsolicited views on TOT, TMD, and moving Marketing/Sales from public to private and the Relation to a new Waterfront multi-purpose NFL Chargers Stadium and Contiguous Convention Center Phase III Expansion.

    Support Mayor Filner now in his fight against the City Council, City Attorney Goldsmith, Council President Todd Gloria, the downtown elite, San Diego County Taxpayer Association, the Chamber of Commerce, and the entitled Hoteliers; or forever hold your peace. Because San Diego’s opportunity for a new privately finance NFL Chargers stadium on State public Tidelands will be lost if Mayor Bob Filner loses the Tourist Marketing District (TMD), Convention Center Financing District (CCFD) , and the Quid Pro Quo arrangement to privatize Convention Center Sales and Booking.

    1. How many Tourism Authority Board Members are also paid as in-house Consultants? How much have individual board members have been paid since 2008 with stipend to attend board meeting, or general consulting contracts. All extra money not spent, was to be divided up between the City and Tourism Authority. Paying Board Members salaries would result in no money for the split in extra funds. Recently, a Tourism Authority Board Member, forgot who, said he had to quit working for the Tourism Authority and go back to his private Hotel due to Filner’s refusal for funding. How much money do the Board Member make annual? Are local Hotel CEOs double dipping by having one public Tourism Authority salary, plus another salary fom their private Hotels?

    2. TMD cannot use to subsidize civic events like the Rock and Roll Marathon, which does increase greatly Hotel nights, but is also a financial benefit to many industries including restaurant, nightclubs, taxi, etc. Doesn’t funding great civic events erase the Specific Hotelier Only Benefit required to change a “Special Tax” into an “Assessment” or fee?

    3. City Attorney Goldsmith approval the City Council decision to move booking and sales of the Convention Center to the private Tourism Authority was made through a Quid Pro Quo arrangement. The No-Bid Contract did not follow Managed Competition guidelines.

    The deal included that the Hoteliers would not vote against the new 2 percent TMD or 3 percent Special tax in exchange for moving Convention Center Booking to the private Tourism Authority.

    The Hoteliers have stated they wanted to move the lucrative smaller medical convention from our public Convention Center (that pays down our annual $14 million public debt for Phase 2) to private Hotels owned by Tourism Authority Board Members. Major Conflict of Interest. It would be great to see the new Booking of new Tourism Authority since July 1, 2012, to see if the Hoteliers got their way for private financial gain, at the expense of Taxpayers.

    4. How about a better public explaination on the reasons why the Convention Center staff had to take back Booking and Sales of the public Convention Center from the private ConVis in 2004? Was not the Booking and Sales move back in 2004 due to lack of transparancy, incompetence, and/or possible corruption? Inquiring Minds Want to Know. Between 2004 and 2012 the public Convention Center staff did a exemplary professional job and exceeded goals for Booking and Sales. Instead of being rewarded, the Convention Ceenter Sales and Marketing staff were given Pink Slips and new private Tourism Authority bosses.

    5. An interesting fact is that the February 16, 1965. Proposition C for a 4 percent Transient Occupancy Tax (TOT) included Section 35.0116 Utilization of Revenue that allowed Annual allocation to the San Diego Convention and Tourist Bureau, former ConVis, with a maximum of 60 percent of TOT for Advertisement and Marketing and the rest for enhancing naturally beautiful San Diego.

    The 40% Match would be from funds raised by the Private ConVis, Hoteliers assessmen/feet, and gowntown business community, and 20% Match with fund from the County of San Diego. Exactly how much private money did CONVIS, now the Tourism Authority raised privately and from the County. .

    The new informative Tourism Authority “Why Travel Matters” webpage documents that ConVis started out with 59% of TOT funding in 1965 to 6% in 2007. Exactly how much private funds did CONVIS raise since 1965 in order the meet the maximum 40 percent TOT Match? How much money did the County Board of Supervisors give to ConVis in order to take advantage of the remaining 20 percent Matching TOT revenue?

    http://www.sandiego.org/campaigns/why-travel-matters.aspx

    Can any of the reduction in TOT funding by the City of San Diego to the new Tourism Authority/ConVis be due to lack of Matching private and County funds ?

    6. San Diego can have a multi-use NFL Stadium and Contiguous Convention Center Expansion, only if the public is allowed to vote to increase Hotel taxes by 5 percent to a maximum 15.5 percent. The City Council and Hoteliers already pre-approved a 5 percent increase (2% TMD + 3% Special Tax) for an Effective 15.5 percent Maximum Hotel Tax rate. Without a public vote, the Chargers will not get a new stadium on our public State tidelands. Thus opening up half Qualcomm stadium for affordable housing apartments, returning Veterans, and student housing, with the other half a river front park. In a few months, the City Council will hold a hearing on the San Diego River Master Plan Enviromental Impact Report (EIR).

    http://www.tinyurl.com/20120619

    There will be more Special Elections in May/June 2013. San Diego could combine State ballots and put the issue of a legal 5 percent Tax Increase for Sales, Marketing, Convention Center Expansion, and Infrastructure projects. Since we need to get 2/3 voter approval anyway, add that none of the new public TOT Revenue created can be put into the bottomless Pension Pit and/or the General fund. .

    7. Also at the next Special Election, the City of San Diego could put forth a Ballot proposition to change SANDAG’s allocation of funds to Transit First instead of new North County Freeways. Local elected officials and the public-at-large have been played.

    The TranNet funds could have always be used for more than just Transit. projects and regional infrastructure. Transnet funds can also be used for local Community Plan updates, beach sand replenishment, east-west Bicycle corridors along our regional River sheds including San Diego River, San Dieguito River, Chollas Creek, and Otay. Thus saving City money for other infrastructure projects .

    SANDAG is our Federal and State required Metropolitan Planning Organization (MPO), and is using the 2004 TransNet vote to say that SANDAG has a legal loophole to NOT financed Transit First. When of course SANDAG can authorize different projects than was put to voter in 2004 by a 2/3 approval vote of SANDAG members.

    The 2004 vote also required SANDAG to put a new Tax Increase up for a public vote by 2008 for environmental and sustainable projects. SANDAG changed the2008 vote deadline several times with the required 2/3 SANDAG Board Members approval. The new date for a potential SANDAG Tax Increase in now 2014. Without a public vote, SANDAG staff will never change. Freeways will get bigger, and San Diego will continue to crumble.

  6. Thank you for encouraging guest column submissions.

    I have emailed Rostra at least 3 times with guest column submission.

    Each time was ignored.

    Chargers fans better understand the implications of staying quiet.

    From Admin: We don’t believe that to be the case. You emailed us one time asking to be a regular blogger; we were not adding bloggers at that time. There may have been one other email we may have missed. If so, our apologies.

  7. Mr. Darby. Thank you very much for your great explanation. The issues are Ownership and who Qualifies as a Landowner.

    The people of the great State of California, everyone, owns our public State Trust Tidelands along San Diego Bay, and Mission Bay. The Landowners are the public. Therefore citizens are qualified electors.

    http://en.wikipedia.org/wiki/Voting_Rights_Act

    Some of the largest San Diego hotels have Master Leases for publically-owned Port and City property.

    Lessees are not Landowners. Lessees are not allowed a Vote to increase Special Taxes on public lands.

    http://en.wikipedia.org/wiki/Public_trust_doctrine

    The Public Trust Doctrine enforced by the California State Lands Commission has the duty “to protect the people’s common heritage of tide and submerged lands for their common use.”

    Thank you again for your legal explanation.

    The State Lands Commission needs to come to the City of San Diego’s rescue.

    http://slc.ca.gov/

    Trying to steal elections to increase Special Taxes on public lands is unpatriotic.

  8. “Lessees are not Landowners. Lessees are not allowed a Vote to increase Special Taxes on public lands.”

    Mr Darby can offer a better legal opinion than I but Lessees do have a leasehold interest which permits them broad rights of use of said properties.

    Rather than arguing against the ruling, you might find more consensus from the center-right people by exposing the tax for what it is; a crony capitalist, collectivist use of force to thwart competition.

    Hoteliers want to pay for the convention center expansion–fair enough. They can certainly raise room rates to pay for said expansion. But hoteliers don’t want to risk losing customers to non-participating competitors so they ask for a line-item change (tax) to force competitors to participate.

    The whole thing is subject to the political process which makes “public” lands then a trough for looters. Anyone who has read “The Law” by Bastiat saw this coming.

    The convention center has become a property by the hoteliers, of the hoteliers, and for the hoteliers. It might make sense to sell the whole thing to them and get City government back in the business of guarding the beaches, fielding professional emergency services (police, fire, ambulance), and maintaining a pot-hole free infrastructure.

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