The ire and opportunity of tourism – San Diego Union-Tribune

Pitched battles over how much visitors to San Diego should pay have been going on seemingly forever.

The newly proposed tax on short-term rentals and second homes in the city, along with other levies targeted at tourists, may bring that debate to a new level: Should out-of-towners, including corporations, cover a greater cost of public services for all residents and be seen as part of the solution to closing the city’s recurring budget deficit.

This dynamic in San Diego is emerging as a dispute over the impacts and benefits of tourism worldwide is having a moment. Concerns about overtourism are being voiced in popular destinations, and fees on visitors, or talk of charging them, are increasingly common.

So is hostility toward tourists, a word that has long been used as a pejorative in some contexts. In places like Barcelona, visitors have been harassed and hosed down by water-pistol-toting locals. The new Japanese prime minister even made regulating tourism a part of her campaign, in addition to cracking down on illegal immigration.

The opposing view is that discouraging tourists could hurt local economies that rely on them.

While perhaps interesting timing, that all seems to have little connection to what’s going on in San Diego, where tourism is a huge economic driver and concern about overtourism rarely enters civic discourse. The region has long embraced tourism for the most part, or at least blithely put up with it.

One notable exception is complaints — mostly in coastal communities — about the growth of short-term rentals and the behavior of some people who stay in them. That led to a crackdown in the city and a new system to regulate them.

San Diego City Councilmember Sean Elo-Rivera is the leading proponent of the idea that visitors and certain corporations not headquartered here are not paying their “fair share” for being in San Diego, insisting they take more than they contribute. That theme was also behind his successful push to increase the minimum wage for most tourism workers to $25 an hour, which will be phased in over four years.

The San Diego Regional Chamber of Commerce, among other opponents, strongly disagrees with that argument on the new tax proposals, as they did in contesting the wage increase. They contend those proposed taxes will negatively impact local residents, specifically short-term rental owners, and will further strain their budgets on top of a string of new or higher fees for trash collection, parking and more.

Like hotels, short-term rentals already are assessed transient occupancy taxes (TOT) by the city.

In addition to providing the city with needed revenue, Elo-Rivera believes many property owners will give up the short-term rental concept and rent to longer-term tenants to avoid the tax. The same pressure to rent would be on owners of mostly vacant second homes in town, he said.

He said that could ease the region’s housing crisis.

There are many more facets to this argument. But an overarching one is whether tourism should continue to be viewed as the goose that lays the golden egg (and thus not possibly killed by higher taxes) or a gold mine that should bring more benefits to the public.

The total economic impact of tourism in the San Diego region during fiscal year 2024 was $22 billion, according to the San Diego Tourism Authority.

The city’s TOT on hotels and other lodging generated $310.7 million, the authority said.

Proposals to seek more public revenue through the TOT and other sources from tourism and hospitality businesses — among the most influential forces in San Diego — are typically met with tough resistance. Concerns about competitiveness with other cities and even survival are voiced.

However, that resistance can flip to support when the tax is on those businesses’ terms, with a direct benefit for them. Take 2020’s Measure C, to raise hotel taxes. The measure is still in litigation, but court rulings have upheld the measure, which received just a hair below a two-thirds majority.

The main reason for the tax was to raise revenue to expand the waterfront convention center. That was seen as a boost to lodging and hospitality industries, which supported Measure C, and possibly the overall economy.

The bulk of the tax money would go toward the convention center, though significant amounts would be directed toward homelessness and road repairs. Those last two weren’t merely altruistic add-ons but were deemed important to win voter approval.

Taxing tourism has more appeal than other levies for the obvious reason that people voting on it generally don’t pay it (excluding the relatively small numbers of those taking staycations). That was part of the pitch for Measure C.

In recent years, voters have rejected local sales tax increases for transportation and general revenues, though some cities in the county have approved similar tax increases. And property taxes, though not cheap because of sky-high home prices, are still a limited source of revenue because of Proposition 13.

The recent San Diego fee increases, which aside from Measure C were not directly approved by voters, will help but won’t solve the city’s structural budget deficit that has been papered over for years. City services have cost more than the revenue coming in, even as many of its taxes were lower than in other cities.

Elo-Rivera’s proposal still needs fleshing out, though the current suggestion is a $5,000 annual tax per bedroom on short-term rentals and second homes. Should it move forward in detail, a measure could go on the June ballot.

In addition to this essentially being framed as a tourism tax, the antipathy in some quarters toward short-term rentals and the need for housing could further heighten its appeal.

That might make for a difficult opposition campaign, but far from an unwinnable one. The big players in the short-term rental industry, namely Airbnb, potentially have lots of money to spend against it.

Airbnb could take a different approach, according to Scott Lewis of the Voice of San Diego. He wrote that the company conducted a recent poll asking voters if they supported 2022’s Measure B, which cleared the way for the city’s new trash collection fee on single-family homes. Outrage erupted when the fee turned out to be much higher than backers of Measure B said.

“The implication is that Airbnb and others may strike back and try to put a measure on the ballot repealing the trash fee, which would blow a massive hole in the city’s budget,” Lewis wrote.

That threat could put pressure on Elo-Rivera and other rental tax supporters to back off.

This would be no squirt-gun fight.