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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.
Lori Saldaña
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Thank you Lori! You wrote an important piece. This needs to be more part of the conversation. I will keep this article as a reference and resource. How do we best focus our tax dollars? The argument has been framed as tourism revenue vs. no tourism revenue. Really it is tourism revenue vs. high wage and innovation economy revenue. In addition to property and sales tax, high wage jobs produce more local payroll tax revenue for the city. In any case, it doesn’t have to be a choice between the two but it is clear that our Mayor’s focus on convention centers and sports stadiums makes high wages and innovation an afterthought. I’ve heard that Universities have a multiplier impact of 5 (1 univesity job creates 5 private sector jobs). So while the Mayor pushes the TOT increase to expand the convention center, a much too small amount is allocated for the homeless, and none for inclusive high wage economic development. Do we want to be a rentier economy or a maker economy? The UCSD catalyzed bio and high tech industry on Torrey Pines Mesa has created a balanced economy for the city. The city provided land grants and other subsidies to make it happen. Now we are faced with a stark contrast. In Mission Valley, SDSU seeks to expand. Instead the Mayor is pushing a soccer stadium and private development, opposed by SDSU, and negotiated in secret, without a competitive process. And in downtown, the Mayor plans to double down on the subsidization of the tourist (rentier) economy with nary a dime for the maker economy. It’s a strategic choice for the city: rentier economy vs maker economy.
Excellent points. As I tell my students: education is the best investment we can make. No one will ever take a student’s skills, knowledge, degrees, certificates or diplomas away from them.
I welcome more of these comments, to help develop this into a longer piece -or even a series- to include solutions, e.g. the City/County partnering with schools (as other cities in California have done) to invest in scholarships and grants, making higher education affordable for more of the students living in low-income households; or City Council members partnering with educators and investing funding in after-school programs (see: Barrio Logan College Institute) to offer after school STEM activities at all levels, especially for girls and women, from households in neighborhoods where residents may lack access to computers, broadband Internet, etc. etc.
As for Torrey Mesa- the City first began to encourage and invite businesses to move in and create a technology research area, adjacent to UCSD, in the 1970s and ’80s. It has now grown into the Golden Triangle and Sorrento Mesa- all great examples of the education multiplier effects you mention.
In addition, this was “clean” development in an area overlooking the Pacific, near Torrey Pines State Park. It remains an excellent model of maintaining San Diego’s unique environment, while stimulating the economy and creating skilled, good paying jobs. The resulting housing developments in Mira Mesa, Carmel Valley, Peñasquitos etc. soon followed- offering (at the time) affordable housing for many of the employees at those new businesses.
I welcome a report on how and why San Diego has fallen off that pathway of encouraging more skilled/tech jobs while also permitting nearby housing to avoid turning our freeways into parking lots every morning and evening.
Another thank you to Lori. And I’m also copying the article into a folder for reference later. Tourism jobs are low-paying and well short of the cost of living. Can restaurant workers, uber drivers, hotel maintenance, , even well-dressed guides and convention center hosts afford homes here? Of course not. Will their rents increase? Of course they will, especially under a plan to build a stadium (hot dog venders, ticket takers) and expand the convention center (coffee kiosk operators) means there’ll be more workers who can’t afford to live where they work.
Your question — “Why would we raise taxes to fund an industry that consistently loses jobs and often pays low wages? — can quickly be answered. WE don’t do it; our pr politicians do it because they’ve been vetted by the hoteliers and insurers and investors in tourism, elected by their contributions and, later, employed directly by those same people. They were elected to perform tricks on behalf of the so-called founding fathers of this city, and they’re doing the high-paying jobs they were paid high wages to do.
A lot to digest but served up in very palatable logic and reasoning. I appreciated both Lori’s insight and the intellegent comments. Just imagine if we had a genuine democracy and Lori Saldana was our mayor, making sound decisions based on looking deeper than the turf of a sports stadium for the long term good of all of our community.
Oh, and let’s not forget the impact that rising sea levels and climate change could have on a tourism dependent economy. David Alvarez asked at the city council meeting last week if rising sea levels had been considered in the convention center expansion and after a lot of hemming and hawing the answer was “No”.
Thank you Jeeni. The “dewatering” costs of the current Convention Center are $750K/year, and the claim is that will not increase even with expansion.
You do not discuss what the Union-Tribune writers have also failed to discuss: that there may be hundreds of San Diego residents living in “low-end” motels paying the TOT. City ordinance provides that if someone is living for more than 30 days in a motel, the TOT does not have to be collected.
Some motels will not allow continuous occupation for more than 30 days because they are concerned that the unlawful detainer statutes would come into play thereby depriving them of the right to simply lockout the occupant for a failure to pay.
The City Treasure presumably has some data from which the number of residents (as opposed to tourists) could be ascertained. However no writer/columnist at the U-T or The Reader with whom I have communicated cares to pursue the issue, perhaps because they think readers are more interested in whatever projects the TOT will help pay for than the plight of the almost-homeless.
Great point- thank you. The idea that only visitors will pay for this expansion is absurd. All San Diegans pay, via the impact of chronically low wages described here.
I have never seen it mentioned that having a below-market Transient Occupancy Tax provides a significant economic subsidy to large downtown hotel owners. Cities which attract significant numbers of tourists, such as San Diego, have average an TOT of 16-18%. Ours is only 10.5%, (plus a 2% tax/fee for tourist marketing funds – but supplemental charges, above and beyond a TOT, are also assessed in other cities).
This disparity means hotels in San Diego can charge above-market rates and still have the total hotel bill be lower than cities where the TOT is 6-8% higher than ours. I believe this helps explain why our TOT is so much lower than what the market dictates it should be – it is another example of how, for decades, our City Council and Mayor’s office have elevated the interests of major property owners over the interests of ordinary citizens.
I understand there is already a nationwide glut of convention space and that San Diego and other cities routinely discount rates for use of their Convention Center by 50% or more, such that they rarely, if ever, operate profitably. This, too, is a huge subsidy that directly benefits downtown hotel owners, and is rarely discussed. I don’t see any reason to expand the convention center if it is only at capacity once a year, during Comic-Con. Building additional convention center space is likely going to benefit downtown hotel owners more than the city as a whole.
Nevertheless, I believe the TOT should be increased to 16.5%, and the funds should be used as needed for the general fund, for marketing San Diego as a tourist destination, for infrastructure (including streets repairs/improvements), for Balboa Park deferred maintenance, perhaps for schools, and other ongoing needs of the city.
I inadvertently left out funding for homeless programs in the last sentence.