Archive » June 28, 2012
Board passes controversial rebate for hoteliers
By Jeremy Foster, Staff Writer
The Santa Barbara County Board of Supervisors on Tuesday passed a contentious hotel incentive plan that advocates say could provide as much as $130 million in new tax revenue over 20 years.
Under the “Hotel Incentive Program,” the county would rebate 70% of transient occupancy tax (also known as the “bed tax”) back to high-end hotel developers. Approximately 20% would go toward general county programs and 10% toward promoting tourism.
The tax break, which follows efforts to get the ball rolling on the proposed 186-room Miramar Hotel project in Montecito, would be extended to developers whose hotels have values of at least $50 million each and have started construction after January 2012. Hoteliers currently renovating their properties would receive some bed tax rebate based on a three-year average of their incremental increases in revenues.
First District Supervisor Salud Carbajal, who voted to adopt the ordinance along with Supervisors Steve Lavagnino and Joni Gray, called the plan a “no-brainer” and contended the county had nothing to lose and a lot to gain by adopting it. “The worst that could happen is that nothing happens, there’s no exchange of resources, the status quo remains, we don’t make one additional dollar or give one additional dollar,” he said.
Carbajal’s district includes the long-delayed Miramar project, which has been called an eyesore and a potential safety hazard by its developers. Developer Rick Caruso’s firm had asked the county for a 15-year bed tax rebate for its $170 million project. Carbajal said the county would collect $10 million after 20 years if the Miramar stays as it is; but if the hotel is built, the county could collect increased property tax, the sales tax and 70% of the bed tax.
County staff estimates that upon completion the Miramar would bring in $1.7 million in property tax, $1.5 million in sales tax and $450,000 in bed taxes. Carbajal and Lavagnino said the plan offered an opportunity to generate much-needed revenue that could be spent on county programs such as social services, mental health as well as money for county Fire and the financially beleaguered Sheriff’s Department.
Second District Supervisor Janet Wolf, who voted against the ordinance along with 3rd District Supervisor Doreen Farr, said the ordinance “has more holes in it than my husband’s work-out T-shirt.” Sharing the concern of several speakers during public comment, she complained that the plan’s wording was vague regarding requirements to hire locally and pay prevailing wages. She also worried that the devotion of 10% to tourism promotion could be siphoned elsewhere at the board’s discretion.
Carbajal and Lavagnino assured everyone that these issues could be hashed out during each project’s application process. Matt Middlebrook, representing Caruso Affiliated, told the board that his company plans to hire locally and pay prevailing wages to some 1,000 construction workers.
Mary Harris, executive director of the Santa Ynez Valley Hotel Association, said the board was moving forward too quickly because none of the affected organizations in her area had been consulted.
Andy Caldwell, representing the Coalition of Labor, Agriculture and Business, said he’s been waiting two decades for the board to meaningfully partner with the business community on economic development. “The bottom line is if the hotel doesn’t get built, then you have no skin in the game,” he said. “If it does, you make an extra $1 million a year.”
Wolf and Farr were also concerned about the six-year window developers would have to break ground. While he contended that the plan could bring around 1,000 jobs, Lavagnino conceded that he was worried that Caruso would build without the incentive program.
“Do I roll the dice and not do the this, and construction workers in my district who have been out of a job for years still don’t have a job, or people who would have a job as a hotel clerk don’t have that opportunity?” Lavagnino said. “I can’t take that risk. Whether it’s 1,000 or 700 jobs, I don’t see anyone else coming forward offering hundreds of jobs.”
In other county news, the board unanimously agreed to consider placing a proposed 2% bed tax increase on the November ballot. The board will decide the matter on July 10.
Lavagnino brought the item to the board because the cities of Carpinteria, Goleta, Buellton and Solvang have all adopted resolutions to increase their bed taxes from 10% to 12%. The county’s rate is currently at 10%. He said the increase could generate $750,000 in 2012-13 and $1.5 million in 2013-14. The increase would only apply to hotels in the unincorporated county, even though residents outside this area would be able to vote on the proposal.
Carbajal said it was worthwhile pursuing and because 70 to 80% of the bed tax comes from his district, he would touch base with hoteliers in his area for feedback.
Just like the cities that have opted to support bed tax increases, the county is supporting a general tax, which requires a simple majority of voters to pass, instead of a specific tax that requires a two-thirds majority.
Joe Armendariz, executive director of the Santa Barbara County Taxpayers Association, urged the board to adopt a specific tax and promise voters that the extra revenue would be invested in the economy. He suggested he was uncomfortable with a general tax that would allow the board in the future to spend the money on general fund programs.
Farr said she was comfortable with the plan, noting that Santa Barbara increased its bed tax years ago and tourism has been “booming” since.