The precarious balance between imposing taxes needed to pay for legitimate public services while not driving away revenue-producing commercial activities has always been tricky to maintain. A consistent principle for accomplishing this effectively must be that any new tax or fee should not put at risk more revenue than the levy would bring in.
<p>To The Examiner, it appears as if San Francisco Treasurer Jose Cisneros would be violating exactly this principle if he continues to insist on enforcing a long-dormant provision in the municipal tax code that would end the well-established exemption of airline crews from the hotel-room tax, which is 14 percent.
It is sound business practice that careful consideration must be given before raising prices if your customers could easily switch their patronage to competitors. Many of the major airlines that routinely put up their out-of-town flight crews at San Francisco hotels have already sent letters to members of the Board of Supervisors, warning that what is effectively an immediate 14 percent cost hike would cause them to book their crews into the numerous Peninsula hotels close to San Francisco International Airport.
If the airlines actually followed through on this threat, it would set off a domino effect that loses millions of dollars for the San Francisco economy. Close to 1,000 of The City’s 30,000 hotel rooms are booked by airlines every day for their crews’ layovers, and each crew member is estimated to spend $140 per day on meals and incidentals, according to the Hotel Council of San Francisco.
This is big money for The City, and losing the air crew clientele would likely trigger sufficient room vacancies to result in the loss of hotel jobs (many of them lower-income), shakier revenues for downtown restaurants and retailers plus forced cuts in room prices. The loss of municipal revenues gained from all these other activities might considerably outweigh the $195 million presently collected from the hotel tax.
Treasurer Cisneros argues for going after the room tax on the grounds that airlines could already find numerous cheaper hotels outside San Francisco if they were so willing to deprive their crews of The City’s renowned attractions. Also the hotel tax “permanent resident exemption” was intended to help homeless persons transition into single-occupancy hotels and specifically covers only stays of 30 consecutive days or more.
Whether or not the airlines should bequalified similarly to “permanent residents” because of the sheer volume of their hotel bookings is a gray area that the Board of Supervisors ought to consider. Perhaps a lower hotel tax rate for high-volume users might be fair. But until such issues are fully clarified, the treasurer should not be so quick to risk taxing the airline layover “golden eggs” out of San Francisco.