June 27, 2002

Hotel tax hike goes to voters

By DAN WHITE
Sentinel staff writer

After two hours of debate Tuesday, the City Council majority voted to put a measure on the November ballot that would boost the city’s hotel tax from 10 to 11 percent if two-thirds of voters approve.

Most of the tax revenue would still go to the city, but the extra 1 percent would fund tourism promotions.

If the room-tax hike is approved, the money would go to the nonprofit Santa Cruz County Conference and Visitors Council, which promotes tourism, mostly through advertising. The city then would no longer pay the CVC the roughly $400,000 a year it currently contributes.

The county Board of Supervisors, also on Tuesday, unanimously approved its own hotel-tax ballot measure after little discussion. Capitola, Scotts Valley and Watsonville have yet to qualify their own measures.

Qualifying the measures in Santa Cruz and the county were major victories for the CVC, because each locale collects roughly $4 million in hotel tax receipts a year, far more than other local jurisdictions combined.

Mayor Christopher Krohn suggested changing the initiative so the tax would go up by 2 percent instead of 1, with half the proceeds going to a planned homeless family shelter, the other half to tourism. Backers in the audience called it the "2 percent solution."

But most council members disagreed, voting 5-2 to approve the 1 percent initiative as written. Krohn and Ed Porter were the dissenters.

Krohn noted the 1 percent hotel tax initiative — which needs 67 percent voter approval — had a lackluster 53 percent approval in a recent city poll, and said the initiative needed broader appeal. Krohn said adding the benefit to homeless services could widen support.

"I see the 2 percent solution as a way to bring the community together," he said.

The hospitality industry has pledged to raise $100,000 to convince the public to vote for the 1 percent hike. Karen Darling, president of the Santa Cruz County Lodging Association, said Krohn’s 2 percent approach would have harmed the lodging industry because large-scale corporate customers would notice a big difference in their hotel bills and take their business elsewhere.

Its supporters, however, called the 2 percent plan a reasonable compromise. Many had fresh — and bitter — memories of Measure U, the initiative that would have increased the hotel tax by 2 percent, with the extra proceeds funding homeless services. The hotel industry spent heavily to fight the initiative two years ago. More than 50 percent of Santa Cruz voters backed it, but it failed because it needed a 67 percent majority.

Porter accused the council majority of ignoring constituents who fought for Measure U. He said it appeared the council sought consensus from the lodging industry but not these other voters when reviewing the 1 percent initiative. He also said it was a mistake to think of the $400,000 savings as a "gift" from the CVC.

"We heard the CVC is going to hand us back money," he said. "This is money we handed to the CVC. It’s not a gift."

The CVC says it plays a vital role in a local tourist industry that, according to state figures, generates an estimated $500 million a year.

But Measure U backers are still angry at the hotel industry for fighting Measure U. One speaker, Maureen Smith, told the council, "I feel like I’m being mugged. The hotel industry spent more money to defeat Measure U than any other measure in the history of Santa Cruz."

Contact Dan White at dwhite@santa-cruz.com