San Diego Hotel Tax Update

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In a ruling that certainly disappoints, Judge Steven Denton has dismissed the lawsuit of Mel Shapiro challenging the 2% hotel tax that supports the San Diego Tourism Management District (TMD).  The suit was dismissed on the technical grounds that Mr. Shapiro lacked standing to file the suit because he was not an affected hotel owner.
 From the U-T:

Shapiro, the judge concluded, “does not contend he falls into such a category of persons affected by the assessment/tax. Therefore, (he) does not have a direct interest for the purposes of a validation action.”
That legal argument, if it is sustained in a final ruling, could lead to dismissal of the other two suits.
“Under this ruling, only the hotels would be able to challenge the assessment because they pay the money,” said
[City Attorney Jan] Goldsmith. “It would set a strong precedent for the other two suits.”

I agree that only those with standing should be able to sue, even when I am sympathetic to the desired outcome of the plaintiff.  However, the City Attorney’s comments imply that a San Diego resident who stayed in a local hotel and was forced to pay the tax would lack standing.  This seems to violate common sense.  As I posted previously, the tax is collected under the color of authority of the city government, the city clerk certified the hotelier’s election result.  If so, why can’t a private citizen who had to pay the tax, challenge the ruling?

Hopefully, an affected hotel that was not in favor of the TMD tax will challenge the it.  The TMD tax needs to get in front of the California Supreme Court.  The consequences of the murky legal character of the tax can only hurt the city, if they are not resolved.  To be clear, I remain opposed based on arguments presented previously.  I sincerely hope for a lawsuit that will bring clarity to the matter, because there is still risk from a lawsuit that is ruled to have standing.

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Comments 4

  1. “However, the City Attorney’s comments imply that a San Diego resident who stayed in a local hotel and was forced to pay the tax would lack standing. This seems to violate common sense.”

    I didn’t imply it. I said it because that is what the judge held. The judge found that only the hotels are legally required to pay the charge, not the guests. Whether the hotels pass on the charge is up to them. They make those decisions regularly– for example, whether to pass on water bills, power bills and other charges.

    My comments accurately explained what the judge decided.

  2. Post
    Author

    City Attorney Goldsmith, thank you for that clarification. However, it still seems that a hotel guest would lose in court if he or she refused to pay the tax. It also doesn’t explain why the city is involved in the election to instantiation of the tax.

  3. If hotel guests object to a portion of their bill, it is between the hotel and them.

    Our July, 2012, Memo of Law explains the city’s involvement. Take a look at page 9, section C.

    http://docs.sandiego.gov/memooflaw/MS-2012-21.pdf

    The San Diego media did a terrible job reporting the TMD matter. They have not told the story and got too hung up on the conflict of who said what to whom. As a result, people are confused.

  4. Post
    Author

    Proposition 26 carves out a number of exceptions to the tax. The relevant exception in the case of the TMD tax would be:

    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.

    The issue that should come before the courts is whether the benefit of the TMD accrues only to the hotels. My first reaction is no; tourist attractions like Sea World and restaurants and nightclubs benefit from the work of the TMD. This would seem to put the city at risk if a hotel owner challenged the tax in court.

    The hoteliers have never really responded to the suggestion of the City Attorney as to why they won’t form a private association to assess themselves these fees outside of the working of the city government. My thanks to the City Attorney for the link to his legal opinion, which helps clarify this issue.

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