City of San Diego sued over release of tourism funds

SAN DIEGO - The governing board of San Diego's Tourism Marketing District has voted to sue the city to compel Mayor Bob Filner to release funds necessary for administering the agency.

The TMD has been the subject of dispute since it was revealed that Filner has refused to turn the money over. The inaction has put programs advertising San Diego as a vacation destination on hold.

The mayor has outlined four changes he wants in a 40-year renewal of the TMD approved by the City Council late last year.

TMD Chairman Terry Brown announced the board's intention to go to court in a memorandum to City Council President Todd Gloria.

Brown's statement read:

"On behalf of the Tourism Marketing District Corporation, I would like to inform you that the corporation regrettably authorized the filing of a lawsuit today in superior court to compel Mayor Filner to sign the contract the City Council approved last year with the TMD. Under that contract, the TMD acts as the City's agent to administer the TMD assessment and to deliver the tourism marketing services it funds.

We do this reluctantly, but given the proposed alternatives, which we believe would be severely detrimental to the many thousands of people employed or who work in the tourism and hospitality economy, we feel we have no choice but to move forward in the courts. We've filed this suit in the interest of protecting and preserving a partnership with the City that has served our industry and tourism employees, and the many small businesses that work with the tourism and hospitality industry – as well as the City of San Diego and the regional economy.

Despite the filing of this lawsuit, the TMD Corporation and the tourism and hospitality community are grateful for the City Council's support of our joint efforts to provide thousands of jobs and millions of dollars in economic benefit to the city.

It should be noted that the Corporation is not seeking damages against the City.

We look forward to resolving the contract execution problem expeditiously, and moving forward in our efforts to build on past successes and reap the economic, social and cultural benefits of TMD's collective marketing efforts.

The TMD Corporation values our cooperative relationship with the City and we hope this unfortunately necessary lawsuit will be only a temporary delay so we can all get back to the good work, great jobs and economic benefit the tourism and hospitality community provides for the people of San Diego."

TMD supporters, including hoteliers and some City Council members, say it is a vital part of marketing to prospective tourists -- and when more visitors come to the region, lodging houses and the city earn extra money.

But a report issued Friday by the city's independent budget analyst said there is no way to account for the TMD's impact on the city's room tax revenue, known in government parlance as the Transient Occupancy Tax, or TOT.

"While TMD promotions and marketing does support hotel room night stays, which is the basis for TOT assessments, it is extremely difficult to quantify the TOT receipts directly related to the TMD's activities," the IBA report states.

"There are many factors that drive the choice of destination for travelers, such as local attractions, recreational opportunities, general economic conditions, visitor age and income, transportation costs and available alternatives. While marketing is surely one of these factors, it is very difficult to isolate its impact."

According to the IBA report, the city of San Diego collected $724.3 million in hotel room tax income during a five-year trial period for the TMD. Revenue from the TOT is split between the general fund, which pays for basic services like public safety and libraries, and a promotional fund.

The city's TOT is 10.5 percent. Hotels add an additional 2 percent to fund TMD programs.

Filner wants to indemnify the city in case judges rule against the way the TMD funds are collected; direct some of the TMD funds toward public safety; shorten the term of the extension to a year or two; and have hoteliers pay their employers a living wage.

At a news conference earlier this week, City Attorney Jan Goldsmith said the extension already offers the city indemnification and it would be illegal to redirect the money. Filner's last two concerns could be addressed by the City Council, Goldsmith said.

Filner issued this statement regarding Friday's decision:


"Last November, before I was inaugurated, I began asking for negotiations with the hoteliers on the Tourism Marketing District to secure a better deal for San Diego taxpayers. Unfortunately, the hoteliers have steadfastly refused all attempts at negotiations. They continue to insist that -- for 40 years -- they alone will decide what happens to $30 million per year of public funds.

I offered to discuss ways to create greater transparency and accountability in the use of these public funds. They refused to discuss it.

I offered to discuss, as I often did during my campaign, a better deal for the taxpayers, in which tourism pays its fair share of public safety and other costs directly linked to tourism. They refused to discuss it.

I offered to discuss a better deal for San Diegans who work to clean the rooms in our local hotels, providing a living wage to help support workers' families. They refused to discuss it.

I offered to discuss ways to better protect San Diego taxpayers from having to foot the bill if the courts find, as I suspect they will, that this entire scheme is illegal. They refused to discuss it.

I even offered to simply implement the currently proposed agreement for a one-to-two year period, so that we could have time to discuss the concerns of San Diego taxpayers. But again, they refused to discuss it.

Throughout this entire process, my repeated requests for negotiation have been met with threats and scare tactics.

Now those same hoteliers who have refused to negotiate for three months have decided to sue me in an effort to force me to sign an agreement that rips off San Diego taxpayers. Well I wasn't elected to fight for the interests of a small band of wealthy hoteliers -- I was elected to fight for the taxpayers of San Diego.

Tourism is a vital and important part of San Diego's economic recovery. We must move quickly to lawfully and effectively promote San Diego as the amazing tourist destination it is, but we must also safeguard the interests of San Diego taxpayers in the process.

In the days ahead I will be conferring with leaders of our City Council, the Convention Center Board, the San Diego Tourism Authority, and respected business leaders to develop and implement a different approach for marketing San Diego. Working together we will maximize our tourist economy while protecting local taxpayers.

As Mayor I cannot and will not allow a small group of wealthy hoteliers to hold our economy hostage to their personal agenda of secrecy and greed."

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