Hotel-Tax Increase Urged to Fund Sewer Work

San Diego City Councilwoman Judy McCarty on Thursday proposed using a 2-cent increase in the city’s hotel room tax to help finance part of the expected $1.5-billion cost of upgrading the city’s sewage treatment system.

As part of her proposal, the District 7 councilwoman would ask City Atty. John Witt whether the hotel tax revenue, which must be devoted to promoting the city, can be used to offset the expected quadrupling of sewer users’ monthly bills over the next three to five years.

McCarty said her reading of the municipal code indicates that such a scheme is possible, though it might require approval by voters. “It’s certainly worth considering and asking the city attorney,” she said. She said she believes the use of the tax on sewers to be legal “because tourists flush toilets too.”

McCarty said the tax money could be deposited in the general fund, then designated for use on the sewage treatment project. McCarty aide Kirk Mather said the same plan is used to designate hotel room tax revenue from the Marriott hotels for the new convention center.

Witt said Thursday evening that he had not spoken with McCarty, but speculated that her proposal might be workable. “There are no restrictions on the use of the transient occupancy tax as far as city laws are concerned, but it will have to be analyzed in terms of Proposition 13,” Witt said.

According to the original rules of the hotel tax, which Witt wrote more than 20 years ago, the City Council has the freedom to say how the money should be used. But the passage of Proposition 13, the tax-cutting initiative, in 1978 complicated matters, Witt said. Under the proposition, a two-thirds vote of the electorate may be required to raise the tax, depending on the use to which the council wishes to put the tax revenue, he said.

“It’s a highly technical area and it’s one that we’re going to have to take a good look at,” Witt said. “I’ll have to consult with my staff, and we’ll give the council an answer as quickly as we can.”

The proposal puts McCarty at odds with Mayor Maureen O’Connor, who wants to use an increase of as much as 2 cents in the “transient occupancy tax” to improve Mission Bay and Balboa parks, partly fund her proposed Russian arts festival, help local arts groups and finance a city office of protocol.

A 2-cent increase in the hotel room tax, from 7% to 9%, would generate about $7.5 million annually.

McCarty said that the arts festival, which O’Connor made the centerpiece of her State of the City address in January, should be funded by private donations and arts groups.

She asked: “$7.5 million to fund Russian arts with all the problems we’ve got here?” The price of the festival, tentatively scheduled for 1990, has been estimated at $3 million to $4 million.

The city is nearing a July 1 deadline for complying with a federal Clean Water Act provision that requires it to install a secondary sewage treatment system. Such a system would remove 85% to 90% of effluent from sewage before it is dumped in the Pacific Ocean.

$1.5 Billion Cost

The conversion, which will take years, is expected to cost about $1.5 billion. No federal or state grants are now available to help pay for the project, though the city would be eligible for low-interest loans.

If the hotel room tax cannot be used for sewage treatment, McCarty said, she will ask Witt to rule on whether the funds can be used to shore up sagging buildings in Balboa Park, construct projects in Mission Bay Park or finance the city’s capital improvements.

Witt said Thursday he would have no opinion on the legality of using the money for those projects until he consults his staff.

Times staff writer Leslie Wolf contributed to this story.