June 19, 2009

RPV Update --Terranea and the TOT Tax

Dear RPV Residents,

I am reevaluating my prior support for increasing the transient occupancy or hotel tax (“TOT”) from 10% from 10% to 12% and I invite your comments. The increase to 12% would make RPV’s rate consistent with the rate charged by most coastal communities with resorts. However, the increase is proposed not only on its own merits but also as part of the package to assist Terranea. While the increase will flow to the city, we can expect requests for further aid in the future. In contrast to Terranea, small businesses and property owners in RPV face increasing burdens, many of them improperly imposed by the council through poor handling of planning appeals. This raises significant issues of fairness.

Terranea gets special treatment in the form of large tax rebates that were likely not necessary. Terranea’s developer Lowe inaccurately told us years ago that 65 acres of city land near city hall was needed in order for the resort to be developed. Had we given the land away, the future site of any real civic center would have been lost. I was the first to publicly oppose this when I was on the planning commission. Now the resort claims it needs millions in tax rebates to open. In my judgment this is not true. I understand and respect that others may have a different judgment, but I do not want to act in accord with that judgment. Perhaps a TOT tax increase stands on its own merit. The bailout of Terranea does not stand on its own merit. It is sensible in many cases to provide government assistance to save a business. But here the lenders on the property had a very strong incentive to operate the resort and would have done so quickly even if Lowe had been unable to open. Thus the council gave away millions of dollars in tax revenues on the strength of a bluff and did so even though its own staff and advisors recommended it not do so.

Voting for the TOT tax increase might be construed as an endorsement of the council’s inequitable treatment of businesses and property owners in the city. On the other hand, the city desperately needs the additional revenue. The final vote will take place at the council meeting on June 30th and 4 votes are needed for the TOT increase proposal to be placed on the ballot. I invite your thoughts as to what I should do.

Tom Long
Councilmember
City of Rancho Palos Verdes