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Council continues bed tax on distressed hotels
by Brian Simon
The City of El Segundo will not suspend the collection of the transient occupancy taxes (TOT) from local hotels. Mayor Pro Tem Sandra Jacobs, filling in for absent Mayor Mike Gordon, told the council that a revenue subcommittee had recommended either waiving the tax for 90 days or rebating the money to hotels in order to alleviate the effects from occupancy drops since September 11.
Members of the subcommittee, which included Gordon and Jacobs, recently met with 10 El Segundo general managers. Most of the hoteliers welcomed some sort of relief, though a couple, including the Hilton Garden Inn, had specific policies against accepting government grants.
The TOT or "bed tax" is paid by hotel guests. It generates $2.8 million a year for El Segundo’s general fund. Because the four council members present were evenly divided on the discussion, City Manager Mary Strenn could not direct the staff to explore a TOT revision.
Council member Kelly McDowell asked assistant city attorney Karl Berger if making direct payments to hotels would constitute legally prohibited gifts of public funds since TOTs are paid by guests. Berger said his quick study failed to determine whether such payments would be permitted.
McDowell thought singling out hotels was the wrong approach. "We need to help all businesses impacted by September 11 -- hotels aren’t the only ones in trouble," he said. McDowell listed airlines, travel agencies, restaurants, catering companies, and duty-free shop operators as examples of other businesses that are hurting financially.
McDowell also said there was no indication that hotels weren’t still making money despite the recent downturn. "The only data we have is for occupancy rates, which are down 15 to 20 percent," he said. "We don’t know about revenues generated from catering, banquet facilities, conference rooms and restaurants. Regardless, this is a cyclical industry and I sympathize with their plight. "
A better approach, McDowell said, is to launch an economic development effort designed to boost all businesses. Strenn has directed staff to explore new marketing campaigns and is expected to report to council with options next week.
Ted Zachariadis, general manager of the Doubletree Club Hotel, was disappointed to learn that a TOT waiver was no longer an option. "The TOT is the only relief the city could give us," he said. "It pays a portion of the payroll. Marketing could take six to nine months."
Meanwhile, Frank Godoy, GM at the Hacienda Hotel, was encouraged that the city was interested in providing help to hotels. He did not agree with McDowell’s assessment that money from other sources could pick up the slack. "The bulk of our revenue is from room bookings -- food and beverage are not that significant," he said.
Both Godoy and Zachariadis stated that El Segundo is not a true destination and that its hotels must rely on corporate business to survive. "It’s a corporate environment out here and people are holding back," Zachariadis said. ER