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SBCAN opposes proposed Hotel Incentive Program

“Any county partnerships with a private developer should produce substantial public benefit,” so says the progressive government watchdog Santa Barbara County Action Network (SBCAN). In March, the county Board of Supervisors heard staff and the public regarding a new program proposal to "incetivise" the building of luxury hotels. After months of “research” and frustration working with county staff, SBCAN issued an “Action Alert” and released a study Friday. They are asking the public to contact their supervisors in opposition.

County staff has prepared the ordinance, and the supervisors will vote this Tuesday.

“Santa Barbara County Action Network opposes the proposed Hotel Incentive Program, which would provide a rebate of the Transient Occupancy Tax (TOT) to developers of luxury hotels and set up a dedicated ‘Tourist Promotion Fund,’" SBCAN says. “We view this as a misuse of the voter approved Transient Occupancy Tax.”

After a request from Rick Caruso, current owner of the historic Miramar Hotel, for tax relief, county staff developed the concept of refunding a portion of the TOT after high-end hotel projects are completed. The Miramar property that has been derelict for over a decade.

County staff gave several examples of similar incentive programs in Southern California. In particular, Palm Springs estimated their ordinance generated $150 million in development. Using the example of the Miramar, staff believes the project will create 200 permanent jobs, 1,000 construction jobs, and significantly increase tourist dollars in the local economy.

In March, Supervisor Carbajal commented, “zero of zero is zero” describing doing nothing — “the pros outweigh the cons.” He pointed that “out of town folks” will pay the “taxes.”

But, in the case of TOT rebates it may move into negative numbers.

The TOT refunded “should be less than the revenue the project generates,” says SBCAN. Using the Miramar as an example and using county numbers, while property taxes would go up $1.2 million the county’s cut is only $250,000, the balance going to other districts and the state. Even if, as the county asserts, sales taxes increase $20 million the “County General Fund receives 3.25% or $650,000.” “But, the county is proposing a $1.5 million per year rebate for 15 years to the Miramar project.”

In the vote to move forward with the proposal, all the supervisors had questions and conditions. Still, for Supervisor Lavagnino, who entered the debate with “eyes wide open,” said, “I have to stay consistent, for me even if there is a possibility we can create 1000 construction jobs we need to move forward.” Supervisor Gray said, “I am in complete support of this. It’s an excellent Idea; it is government’s job to generate revenues.” Supervisor Wolf, the only one to object to the proposal, had reservations: “I’m troubled by this proposal … ” and “ … as it applies to the county it is bad public policy.”

The government watchdog study also brings up issues of transfer restrictions, prevailing wage agreements, local hiring, and most importantly: “An independent business evaluation of the project must be conducted to ensure that it is feasible and likely to produce the returns claimed.”

“This program originates as an idea to provide a TOT rebate for developer Rick Caruso which he claims would enable him to get financing for the rebuilding of the Miramar Hotel,” says Dick Flacks of SBCAN. “On the face of it, giving tax rebates to a billionaire to develop a resort for millionaires has led us to question the deal.”

Flacks cites the recent increase in TOT “adopted by a vote of the people,” and that “ … any effort to divert or dedicate proceeds from it should be voted on by the people.” He adds, “We are also proposing that the county get an independent consultant, knowledgeable in the hotel industry, to evaluate the claim that the hotel will eventually benefit county revenues.”

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