1. Archive

Room taxes stick travelers with the bill

Here's an extra expense for out-of-town travelers that takes shelter under many names: hotel tax, bed tax, room tax and, my favorite, transient occupancy tax. (It makes me feel so cheap.)

Whatever it's called by the pooh-bahs in the province you're passing through, it's a tax you never got to vote on and one that doesn't always benefit you.

Instead, the $10, $15 or more per night added to your hotel bill is probably paying a police officer's salary, building a ballpark or convention center or optioning open space for parks. Worthy endeavors, perhaps, but why are you, not the locals, footing the bill?

Because it's easy to stick you with it. You're just passing through. And the voting booth was not on your itinerary.

In an era of antitax sentiment and cash-strapped cities, the visitor is a local politician's dream: She or he can be taxed, taxed, taxed until the cows come home, with few consequences for the elected.

When local governments impose levies on travelers, "They feel they don't have to answer to anyone politically," said Jim Abrams, executive vice president of the Sacramento, Calif.-based California Hotel & Lodging Association. It's the pocketbook equivalent of the speed trap.

Because a room tax is typically levied as a percentage of the room rate, the pain multiplies as the room rate increases. In the first six months of this year, Smith Travel Research, an industry information and data provider in Hendersonville, Tenn., reported the average room rate in the United States increased nearly 4 percent.

There are arguments to be made on both sides of the room-tax issue. Or really three sides: the visitor, the hotels and the city.

"Raising bed taxes in and of itself is not a bad thing to do," Abrams said. "If all or part of the bed tax is used to promote tourism, it's a very good thing to do." At least in the view of hotels, which benefit when you subsidize marketing costs for the destination in which they are located.

But most of the revenue raised by bed taxes in California, for example, goes to purposes other than promoting tourism, according to the lodging association. The average levy: 10 percent. The total raised: more than $1-billion statewide each year, Abrams said.

Nationally, the average total for various room, sales and special taxes levied on hotel rooms last year was 12.4 percent, according to the American Hotel & Lodging Association, based in Washington.

That's not small change.

San Diego is a prime example. Its transient occupancy tax pulls in more than $100-million annually. In fiscal year 2004, it was the fourth-largest source of revenue for the city's general fund, behind property taxes, sales taxes and vehicle license fees. (San Diego, unlike some other cities, doesn't assess a separate sales tax on hotel rooms.)

San Diego does use part of the occupancy tax to promote tourism. How much is debatable.

Of the 10.5 cents assessed per dollar of the room rate, 5.5 cents goes to the general fund and 5 cents goes to "special promotional programs" involving tourism, arts and culture, and other activities, said Tom Haynes, revenue analyst for the city.

In the current budget, only 1.25 cents specifically promotes tourism, said Mike McDowell, executive vice president of the San Diego Lodging Industry Association, which represents 24 mostly locally owned hotels.

City Council member Michael Zucchet put the figure at 1.6 cents, counting debt service for the city's convention center and the new ballpark.

In Zucchet's view, it's fair game to use the occupancy tax for "a lot of things that benefit not only tourists but local residents," such as parks, fire department operations and police.

Asked how these expenditures help visitors, he replied, "Last time I checked, most tourists would like to come to a safe city."

When San Diego first imposed the occupancy tax in the 1960s, at 4 cents on the dollar, it was touted as a device "to drive the economic engine of tourism," McDowell said.

After California voters in 1978 approved Proposition 13, which made it harder to raise revenue from property taxes, cities across the state bumped up room taxes and began siphoning them into their general funds, said Rick Lawrance, president and chief executive of the California Lodging Industry Association, based in Sacramento.

Today, San Diego's Zucchet said, an "extremely flexible council policy" allocates the transient occupancy tax. And a 40-year-old debate there has heated up again.

In March, San Diego voters rejected a ballot proposal to raise the tax to 13 cents on the dollar and specify how it would be used, including 2.5 cents of it to promote tourism.

McDowell said his group spent more than $1-million campaigning for the measure. It was favored by 61.4 percent of the voters but fell shy of the two-thirds needed.

This month, the City Council voted to put the increase before the voters again, on the Nov. 2 ballot, as Proposition J. This time, the measure broadly directs all revenue to the general fund for general governmental purposes. It doesn't mention promoting tourism.

Zucchet, who favors Proposition J, said the wording was changed to allow the measure to be approved by a simple majority. If it is approved, he said, he expects the council to increase allocations for tourism promotion.

McDowell's group is dubious, and this time, it opposes the tax hike.

Whose voice is missing from the debate? The travel consumer's.

Because, as always, we're just passing through.

Only our money stays behind.