Friday, June 22 , 2018, 3:11 am | Overcast 60º


SBCAN Opposes Bed Tax Rebate for Luxury Hotel Projects

Group believes that, as drafted, the proposal would not protect the public or ensure a public benefit

The Santa Barbara County Action Network opposes the proposed hotel incentive program, which would provide a rebate of the Transient Occupancy Tax (bed tax) to developers of luxury hotels and set up a dedicated “Tourist Promotion Fund.”

“We view this as a misuse of the voter approved Transient Occupancy Tax,” said Dick Flacks, SBCAN vice president for South County. “Any change in the dedication of TOT funds should be approved by the voters.”

The county Board of Supervisors will be voting on Tuesday for an ordinance creating the TOT rebate program.

The program was initially conceived as a way to facilitate the development of the Miramar Hotel by Rick Caruso as a luxury hotel resort. The ordinance is now more generally applicable to new or expanding hotel projects.

County staff argues that the revenue return from such projects would serve the county budget. Any use of public funds to promote private development should produce substantial public benefit. After a careful review, SBCAN finds that the proposed ordinance as drafted does not protect the public or ensure a public benefit.

“Since the concept was introduced to the Board of Supervisors in March, SBCAN has studied the measure and reviewed measures from other jurisdictions,” Flacks said. “We have urged changes in the proposal that would help protect the interests of the county and county taxpayers. While the county has made some changes to the original proposal, including restrictions on sale or transfer, applicability of prevailing wage for construction jobs, and a sunset provision, the proposed ordinance does not adequately protect the interests of county residents.”

According to SBBCAN, the proposed ordinance lacks the following essential features:

» “Corporate Benefits Agreement” through which the county could enforce good corporate behavior. In addition to prevailing wages for construction (which by law is included), such an agreement would include local hiring on the construction project. Employment policy for the hotel operation should be part of an agreement. The hotel should agree to high standards for the hotel staff, including neutrality toward union organizing, job training, wages at the highest standard of the industry, health benefits for workers, and non-discrimination in employment. Of particular interest to SBCAN is an agreement for supporting affordable housing for hotel staff.

» The TOT returned to the developer should be less than the revenue the project generates. For example: The county projects that the Miramar Hotel will provide an increase in property taxes to the county of about $1.2 million a year. Of this amount, about $250,000 would go to the county General Fund (the rest goes to other districts). The county also projects that the Miramar project would produce taxable sales of $20 million. At the current 7.75 percent county tax rate, the county General Fund would receive 3.25 percent, or $650,000. If these estimates are correct, the TOT rebate should $900,000. But the county is proposing to $1.5 million-a-year rebate for 15 years to the Miramar project.

» Any use of the county General Fund (which is funded in part by the TOT) should be part of the county budget process and compete for funding with other vital programs. The proposed ordinance guarantees a percentage of the TOT for hotel industry promotion outside of the budget process.

» An independent business evaluation of the project must be conducted to ensure that it is feasible and likely to produce the returns claimed. The fact that developers have not been able to get financing for this kind of project and that other luxury hotels in the area appear to be underutilized ought to raise a red flag. Such an independent evaluation is provided in some other communities that have enacted a TOT rebate.

— Dick Flacks is the South County vice president for the Santa Barbara County Action Network.


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