A proposal to tax vacation rentals in San Diego died in committee Wednesday, another blow to the push to shift some of the city’s financial burden to participants in its thriving tourism economy.
Councilmember Sean Elo-Rivera had hoped to target certain owners of vacation properties $8,000 for operating short-term rentals, with a surcharge for corporate ownership. The tax also would have been levied on owners of homes allowed to sit empty by absent owners.
More than 100 speakers testified before the Rules Committee, which spent five hours on the proposal before voting 3-2 to kill a scaled-back version of the plan.
After Councilmembers Raul Campillo, Kent Lee and Vivian Moreno made it clear that they objected to the original version of the proposal, Elo-Rivera altered his motion to focus only on corporate and absentee owners, not individuals. Council President Joe LaCava, who chairs the committee, seconded the motion but the changes were not enough to salvage the plan.
The proposal has been part of a multi-pronged effort to find new revenue sources for the city, which struggled with a deficit last year, with more to come. The city council managed to pass a balanced budget in June, but it’s not balanced now. LaCava said Tuesday that he and his colleagues “will be discussing mid-year adjustments to keep us on track for a balanced budget.”
Elo-Rivera has focused on the revenue side of the equation, in particular finding ways to charge fees to tourists and those who don’t live in the city for using San Diego amenities. At council, he backed fees for parking at Balboa Park, a plan that he, Lee and LaCava have backpedaled on as community, institutional and political pressure mounts.
Though targeting owners of short-term vacation rentals would have generated revenue, Elo-Rivera cited housing as his primary concern. The tax, he said, might “disincentivize” owners of short-term vacation rentals, potentially opening homes and apartments back up to local, long-term residents in a market where housing is notably scarce and costly.
The committee’s decision Wednesday means that the plan will not move on for review by the full city council. The council would have had the option of placing the proposal on the ballot for voters to decide later this year.
So the committee had room to allow more debate, but declined to do so, with Campillo expressing the greatest objections, including concerns that the tax could open the city up to a legal challenge.
“Fundamentally the city will lose more revenue on this it can ever hope to gain,” he said.
Moreno cited declines in travel that are hitting major markets, including San Diego. Though the city’s drop-off has not been steep, she said, she was unwilling to support a plan that “risks becoming a tipping point that erodes the buffer that we currently have.”
The fight proved contentious, with the San Diego-Imperial Counties Labor Council setting the tone by issuing a news release ahead of the meeting. The council accused opponents of using a political consulting firm to recruit and pay San Diego residents to attend public proceedings related to the vacation home tax.
Elo-Rivera took up that argument before the Rules Committee Wednesday, saying that “my understanding is that there were many people who were recruited, many who were paid to be here for the first time.”
Those behind the effort, he said, are “people who believe they should be able to charge as much as they want for rent, don’t want to pay people enough for a living wage and support for-profit prisons.” That complaint appeared to be aimed at the San Diego Regional Chamber of Commerce, which labor groups have complained is associated with the Geo Group; the firm runs the Western Region Detention Facility in San Diego.
Chris Cate, the chamber’s president and CEO, did not respond to the jibe, instead focusing on the merits of the rental proposal, which the chamber has opposed since Elo-Rivera first floated it last year.
“This broad tax is not a thoughtful solution,” he told the committee.
Other labor groups responded to the plan’s failure after the vote, with San Diego City Firefighters President George Duardo, in a statement, saying that “blocking the Empty Second Home and Vacation Rental Tax is a mistake.”
Another union, Laborers Local 89, lauded the Rules Committee’s decision. Valentine Macedo, the local’s business manager and secretary-treasurer, said “these proposals asked voters to approve new taxes without defined priorities, without guaranteed funding for infrastructure or housing production, and without certainty that the revenue would translate into real projects or real jobs.”
LaCava, before the vote, noted that he feared there is “a lot of gaslighting in this conversation,” meant to mislead the average San Diegan “who isn’t paying attention to what’s going on at City Hall.”
Kevin Hastings, an Ocean Beach resident, expressed his support for Elo-Rivera’s proposal during the meeting. “Man, I hate taxes,” he said, “but this might be the first tax I support.” He also name-checked Airbnb, an opponent of the plan, while addressing some of his fellow speakers.
Many of those who spoke out against the levy, he said, “will not be touched by these taxes, but you are here to toe the line on Airbnb. This proposal will help you. It will give you a leg up on people running a dozen Airbnbs.”
The loss is a blow in particular for Elo-Rivera, who held a series of news conferences last week in an effort to drum up support for his revised proposal, which first included a $5,000 per bedroom tax per applicable short-term vacation rental.
The setback follows his fall win on a city ordinance to establish a higher minimum wage for workers in segments of the hospitality industry.
In a statement, he called Wednesday’s outcome “deeply disappointing,” yet signaled where his next battleground might be.
“If anything,” he said, repeating his concerns about paid speakers at the committee, “the methods used by our opposition have only strengthened my resolve to keep pushing for a San Diego where homes are for people, not just for profit, and where powerful corporations are held accountable when they undermine our communities. That starts by going after corporations that are buying up homes that should be (for) everyday people.”
