By Toni Nelson, Capistrano Beach
I’m frankly a little confused by Mr. Kaufman’s remarks in his Nov. 6, Dana Point Times guest opinion piece, “Time to Re-Bid the TBID.” The Tourism Business Improvement District (TBID) was formed five years ago to provide funding for programs to help establish Dana Point as a world-class tourist destination. Funding for TBID programs is provided solely by the city’s four largest resort hotels—The St. Regis, the Ritz-Carlton, the Laguna Cliffs Marriott and the Doubletree Suites by Hilton—who voluntarily contribute amounts to the improvement district equal to $3 per room per night. The hotels’ aggregate contributions equal just under $1 million each year to fund tourism-enhancing programs within the city. The hotels are not required to pass this expense on to their customers, which they may or may not be doing. The $3 charge is not a compulsory tax on anybody; rather it fixes the amount that each hotel has agreed to voluntarily contribute to their joint promotion and marketing campaign.
The TBID is managed by a group composed of the four hotel general managers and oversight of TBID activities is provided by the city. Mr. Kaufman suggests that if the hotels don’t spend their voluntary contributions the way we (or some committee agreeable to Mr. Kaufman) decide, the city should just eliminate the TBID and ask the city’s voters to raise the hotels’ existing 10 percent hotel transient occupancy tax (TOT) by $3 per room per night to create a fund that the City Council can spend on whatever it determines is appropriate for tourism promotion. In other words, if you won’t let us spend your money as we see fit, we will just hike your taxes and get it that way. So much for “no new taxes.” Mr. Kaufman’s ridiculous plan would essentially convert a very generous, voluntary contribution to our community’s economic development into a burdensome tax and drag on the operations of our four most successful resorts.
Mr. Kaufman also suggests that there may be something shady or untoward in the accounting for TBID funds. He claims that since a report in September 2010, “they never again told the City Council what the actual revenue and expenses were.” This comment is particularly perplexing because I believe Mr. Kaufman is a former city councilman, and as such should know that the city actually performs the accounting function for the TBID. He should also be very familiar with the city’s Comprehensive Annual Financial Reports (CAFRs). Each CAFR contains a separate “Schedule of Revenues, Expenditures and Changes in Fund Balance—Budget and Actual, for the Tourism Business Improvement Fund” (page 65 in fiscal year 2014). This information is readily available to ordinary citizens, and it is completely clear and transparent. If more information is needed, I’m sure that a complete detailed accounting of the revenue and expenses can be easily obtained by making a request of the city treasurer.
Sadly, Mr. Kaufman’s peculiar musings about the TBID do not end there. He further submits “allowing the money to come through TBID allows the hotel to not pay taxes on the income and to have the TBID pay for things … rather than having to incur the expense of such marketing efforts.” Huh? Now I’m really confused. First of all, these funds are not “income” but more of a deferred expense—a setting aside of a marketing contribution for each hotel to be combined by the city with contributions from the three other resorts, and spent in a manner agreed to by all four entities. Basically, each hotel contributes $3, and they take their combined $12 and decide collectively how to spend it. I fail to see anything inappropriate with this. In fact, I think it’s kind of nice that the four main resorts work together to make marketing decisions in a cooperative manner that best promotes the entire city of Dana Point as a tourism destination, rather than just their individual resort facilities.
The TOT generated by these four hotels represents well over one-third of Dana Point’s annual top line revenue. Their aggregate contribution to our city’s economic well-being is significantly more than that if one considers the sales and real property taxes generated by the residents and tourists that are drawn to Dana Point, at least partially due to the amenities and environment these five-star resorts provide. In short, without these hotels, we’d barely cover our annual expenses like road maintenance, city administration and policing, and there would be absolutely nothing left over for capital projects or “extras” of any kind.
It seems a bit ungrateful to insist that these hotels spend their own voluntary TBID contributions in a manner that doesn’t make sense to them from a business and financial perspective. Mr. Kaufman’s suggestion that a committee (made up of many who do not appear to have any experience marketing a five-star enterprise) make the decisions is also ill advised. Who would you trust to promote the highest quality hospitality and entertainment experience—the management of the St. Regis or Ritz-Carlton or, as Mr. Kaufman suggests, local small business representatives and random citizens? He calls last year’s IlluminOcean program “very successful” and “impressive.” Really? I agree it was “fun” and “great for the merchants in the Harbor,” but truthfully, was it a five-star experience? How did it compare to the tasteful and elegant holiday decorations now displayed at our premier resorts?
And was it really “successful” by conventional economic measures? The IlluminOcean program was enjoyed by residents and no one denies that it was a lot of fun—a very expensive bit of fun at $1 million for the first year, with some major issues with the structures so unsatisfactory that the Harbor Department refused to take them for free—even with a $25,000 matching gift offered by the TBID management. We’ve heard numerous claims that IlluminOcean generated a huge amount in sales taxes, but the numbers don’t support this. In fact, sales taxes for the entire city grew only $300,000 last year, so it’s hard to argue this was a good investment by any reasonable measure.
I think we would do well to recognize the contribution these resorts make to our community. They’re paying over one-third of our city’s bills and they obviously know how to market their very successful resorts. In my opinion, we should be thanking them, not scolding them, and we should trust them to make appropriate marketing decisions that support our mutual vision of Dana Point as a beautiful five star city and international tourism destination.