Hotel tax raise to be decided

A disagreement between Del Mar hotel owners and the City Council at their Aug. 4 meeting over a ballot measure designed to give the city power to raise transient occupancy tax (TOT) has prompted a delay in the introduction of an ordinance and the calling of a special Aug. 11 council meeting to decide the fate of the ballot measure.

"I think we need another week of conversation," said Councilman Richard Earnest.

Last month, the Del Mar City Council approved resolutions necessary to submit a ballot measure for the Nov. 4 general election to increase the transient occupancy tax (TOT) paid by hotel visitors up to an amount not exceeding 13 percent. Based on estimated TOT revenue for the 2008/2009 fiscal year of $1.75 million, increasing the rate from its current 10.5 percent to a possible 13 percent, would generate approximately $417,000 more revenue for the city per year.

The idea for the tax increase was first proposed to the council by the city's Finance Committee and discussed at the council's marathon budget workshop held in late June. The council indicated a desire to either increase the city's TOT rate through a ballot measure, or implementing a Tourism Marketing District (TMD) like the one put in place recently by the city of San Diego. Under a TMD, hotel operators collect an additional room fee - usually around a 2 percent increase - to be added to a fund used for city projects such as beatification or infrastructure. Unlike TOT proceeds, which go directly into city coffers, a corporate entity or existing city non-profit group usually controls and dole out the TMD funds.

The Del Mar ballot question decided on though by the council last month, included aspects of both the TOT and the TMD. As currently drafted, the ballot measure will be phrased to allow the city to collect "up to" 13 percent in TOT to match the rate of neighboring cities, and the wording of the ballot measure would allow hotel owners in town to form tourism marketing district and the city would have the ability to set the TOT rate at an amount less than 13 percent so that the TMD and TOT rate combined would equal 13 percent. Additionally, if in the future, neighboring cities increased their hotel tax rates above 13 percent, Del Mar under wording of the ballot measure, would have the flexibility to match those rates. The city of San Diego currently has a combined TOT and TMD rate of 13 percent. Neighboring Solana Beach has in place a straight 13 percent TOT rate.

But a request by Del Mar hotel operators Monday for the city to forgo the TOT raise and instead implement only the tourism marketing district has thrown somewhat of a monkey wrench into the issue.

Speaking on behalf of hoteliers, Thomas Mackey of the Clarion Del Mar Inn, indicated any sizeable increase of TOT tax would interfere with business operations and might dissuade visitors, especially corporate entities from choosing a Del Mar hotel. Instead, he said, the marketing district would directly fund downtown improvements and allow for increased marketing while attracting guests to a more vital and attractive city.

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