Council TOT Action
Stirs Controversy
September 2008 | by Sam Borgese and Wayne Dernetz

Del Mar residents will vote this November on an ordinance authorizing the City Council to raise the hotel tax (TOT) from the current rate of 10.5 percent up to 13 percent. But the Council’s actions to place the measure on the ballot raised a controversy within the community over the relationship of the TOT to a parallel proposal from Del Mar hotel owners to form a Tourism Marketing District (TMD). The TMD would authorize an assessment similar to the TOT on hotel room rentals and be used to develop a marketing program aimed at attracting more visitors to Del Mar. 

The TOT is the City’s second largest source of general-fund revenue. It supports such services as fire, law enforcement, emergency medical, lifeguards, park maintenance and other general government functions. Del Mar receives an estimated $1.75 million in annual revenues from the TOT. An increase in the TOT rate to 13 percent could add $400,000 more in additional general revenue. 

On July 21, the City Council approved resolutions placing an ordinance on the November 4 ballot authorizing the TOT increase. By State law, such measures may be submitted only at general elections. The Council authorized Deputy Mayor Crawford and Councilmember Hilliard to draft a ballot argument in favor of the measure. 

On August 4, Crawford and Hilliard returned to the City Council with their proposed ballot argument. The City Council also received an ordinance to increase the TOT rate, pending voter approval or rejection in November, recommended for introduction. At that same meeting, the City Council heard a request from Mike Slosser, General Manager of L’Auberge Del Mar, asking the Council to consider “partnering with the hotels to implement a TMD” and to “pull the TOT from the 2008 ballot.”

Following the hotel owners’ presentation, Councilmembers Earnest and Hilliard urged their Council colleagues to take some action to support the TMD effort. The Council divided on this question. They then continued the TOT discussion to the August 11 meeting. 

On August 11, the City Council received a revised ordinance for introduction that included a new “Subsection D,” along with the original form of the ordinance presented on August 4. Subsection D provided that, before approving any adjustment to the TOT rate, the City Council must consider the combined impact of the TOT rate and any TMD assessment on Del Mar room rates in comparison to room rates in other communities. It stated the intent is to maintain, to the extent feasible, a combined TOT rate plus TMD assessment “that is competitive in the local market.”

Councilmembers Earnest and Hilliard explained that Subsection D would satisfy the concerns of the hotel owners. Mike Slosser confirmed this in a statement to the City Council. Jen Grove of the DMVA and Cami Matson of the North San Diego Convention and Visitors Bureau also spoke in favor of the TMD. But several Del Mar residents opposed any limitation of the TOT in favor of the TMD proposal, arguing that the TMD issue was premature and deserved more consideration.

After further Council debate, a motion was made to introduce the revised ordinance containing Subdivision D. Councilmember Abarbanel offered a substitute motion to introduce the first ordinance received on August 4. His motion was not seconded. On a four to one vote, Abarbanel opposed, the Council introduced the amended ordinance including Subdivision D. The City Council also approved the text of the ballot argument in favor of the TOT measure as submitted on August 4. That ballot argument does not include any reference to the controversial addition.

Following the August 11 meeting, five former Del Mar council members, Mark Whitehead, Brooke Eisenberg, Jan McMillan, Jacqueline Winterer and Deborah Groban, filed a ballot argument opposing the TOT measure, now designated as Proposition H by the Registrar of Voters. They assert that the City Council has not revealed the full story to the voters and that the last-minute change in the ordinance could concede a portion of the City’s TOT revenue, estimated at about $300,000, to the hotel owners for their marketing program. 

Individually, members of the City Council contended that Subsection D only requires the Council to consider the combined effect of the TOT rate and any TMD assessment but does not otherwise limit the Council’s ability to exercise its full authority in setting the TOT tax rate.  They contend that if voters approve Proposition H, it will provide new options and needed flexibility for the City Council to meet a number of financial goals and objectives.

As Sandpiper goes to press, events continue to develop. Check www.delmarsandpiper.org for further updates.