An amendment to the city of San Diego's contract with its Tourism Marketing District, which will free up more money for advertising the area as a vacation destination, was passed by the City Council on Thursday on an 8-1 vote.
The action voids a previous deal that ended a months-long struggle over funding for tourism promotion earlier this year.
The new plan is designed to protect the city's general fund against lawsuits over the way the district is funded while releasing more money to the agency. The standoff between former Mayor Bob Filner's and the city's hotels put campaigns that advertise San Diego tourism on hold.
According to city Financial Management director Craig Sturak, hotel tax revenues to the city are falling below budgeted levels, despite a big first month to the current fiscal year fueled by Comic-Con International.
Under the basic funding arrangement, hotels collect a 2 percent levy on room rates and send the revenue to the city. The charge is separate from the normal room tax.
The city turns the revenue over to the district — commonly known as the TMD — to promote San Diego to tourists and support special events that bring visitors to town.
The lawsuits challenge the 2 percent levy as an illegal tax.
Filner's plan called for hotels to pledge to indemnify the city in case any legal judgments invalidated the district, which would require the money to be paid back. His deal, which Councilman and now-mayoral candidate David Alvarez helped to negotiate, resulted in only 18 percent of collections actually going to the TMD because so few hotels ended up agreeing to protect the city, according to municipal documents.
Alvarez was the lone dissenter Thursday.
The new agreement will provide the TMD with an extra $6 million to use for promotion, with $4 million held back to establish a reserve account which could be used in the event of an adverse legal judgment. The reserves will grow annually to $30 million by 2017.
"I think we have to acknowledge that even in this agreement there is a holding back of some of those funds, and it's for a reason, there is a risk," Alvarez said. "How comfortable each one of us is with that risk is, I think, what this comes down to."
He said he didn't have enough data to show a return on investment for the agency's advertising efforts that outweighed protecting the city's finances.
Councilman Kevin Faulconer, who will face Alvarez in the mayoral runoff election next year, said fewer visitors to San Diego means less room tax income for the city budget.
"We're talking about jobs, but we're also talking about revenues that we use in this city every single day to pave our streets, to keep our libraries open, to keep our rec centers open," Faulconer said. "(The room tax) is the third-largest source of revenue that we have in the city of San Diego."
Council president and Interim Mayor Todd Gloria called the amendment "a no-brainer" that should have been done several months ago.
"I think it's a reasonable and practical approach to mitigating the risk, while making sure we're doing the best we can to grow jobs and stimulate our local economy," Gloria said. He said the amendment has more legal protection for the city than Filner's deal.
Gloria said the reserve money will be released to the TMD as soon as litigation concludes.
