By Nick Rimedio
A month ago, I wrote an editorial about the “Road to Recovery” to start a conversation with all of you for our city’s future. It noted that as we reopen West Hollywood, we are faced with a choice about how we direct our council in replenishing the financial reserves that were used to cover the millions of dollars in deficits caused by the COVID shutdowns.
As I shared, I strongly believe that we need an economic plan that focuses on job creation, driving tourism, and filling our restaurants, bars, and boutiques to ensure that we create surpluses that sustains services for our most vulnerable populations and protecting the jobs of city staff. Tonight, the city is formally presenting the budget plan for fiscal year 2021/2022, which I was interested to read to discover if that focus was there. I was disappointed to learn that the plan shared several alarming concerns, and worse, it appears incomplete as it does not consider the far ranging costs for the Hotel Worker Protection ordinance being pushed by Mayor Lindsey Horvath and Council Member Sepi Shyne.
As a full disclaimer, I run a hotel, so I definitely have strong feelings about the hotel ordinance that I can share at a later date. But my perspective for today’s story is from the vantage point of someone who runs a business and is responsible for a budget to ensure that both my owners and employees are successful. As residents and businesses within West Hollywood, we are the shareholders for the city’s budget, and it is the Council’s responsibility to make sure that the budget plan prepared by staff is sound, and thoroughly researched. Without research and planning, the numbers are fundamentally inaccurate which poses inherent risk to the resident services and social programs contained within.
My first concern is the sobering forecast of continuing to run in the red for the foreseeable future. With a budget deficit projected at $10 million dollars following losses of $20 million dollars from the last year, the report shares that “staff projects revenues will take several years to recover to pre-pandemic levels.” It further asserts that tourism is the city’s strongest sector for jobs as well as taxes, and that “West Hollywood depends on a healthy tourism industry to provide a significant portion of its municipal revenues.” If that is the case, where is the comprehensive plan needed to make sure that we have a strong tourism industry to power the city’s revenues?
Instead, Mayor Horvath and Council Member Shyne are pushing special interest driven legislation that will in fact harm city revenues and increase the budget deficit. The hotel ordinance is that prime example as it contains multiple impacts that have neither been studied nor examined as it pertains to this budget. This is especially outrageous when considering the fact that this item was organized in March which was a month prior to when the first draft of the budget came out in April. But, not all have been silent in the calls for study. Council Member D’Amico and Mayor Pro Tem Meister both supported a study following the suggestion from the West Hollywood Travel & Tourism Board at the June 5 city council meeting, which also saw the recommendation from incoming city manager David Wilson to schedule a study session in July. These recommendations were summarily dismissed by the majority of the council so this item continues to remain suspiciously in the dark.
As it pertains to the budget, the most pressing impact of the hotel ordinance is the unintended consequence that it is in fact a tourism cap that will cripple the hotels in their recovery.
It creates a de facto limit on the number of rooms that housekeepers can clean which will force a hotel that could sell 80 rooms to limit their occupancy to 40 rooms as there is a major labor shortage in this job market to find the additional staffing needed.
This will result in fewer rooms being sold and subsequent fewer hotel tax dollars being created to support city revenues. Fewer visitors in our hotels also means fewer people patronizing all of our other businesses such as restaurants, bars, and shops all of which generate sales tax. The Los Angeles Hotel Association conducted a survey with the hotels and found that the potential collective revenue impact is in the range of $50 million to $80 millions dollars, to which the city’s exposure at 12.5% (this is the hotel tax percentage levied on hotel room revenues) would be in the range of $6 million to $10 million dollars. The potential impact to sales tax is even higher.
In conclusion, the budget being presented tonight is fraught with risk, and should not be passed without a commitment to conduct proper research and a study session in regards to the hotel ordinance. Questions should also be asked to the council in regards to their long term plans for balancing the budget as well as how they propose to cover revenue losses generated by any potential legislation. It is simple math that any revenue losses right now are a threat to our resident services and social programs. If you agree with me, please call on the council and ask them to stop passing a budget without doing the homework first. West Hollywood, like all of us, is still healing from the previous fifteen months, and it is clear more than ever that the decisions made today will shape the outcome of our recovery.
Nick Rimedio is a seasoned hospitality veteran bringing twenty-five years of industry experience as the General Manager of La Peer Hotel. Beginning as a restaurant busser and dishwasher, Nick’s career took him from his hometown of Akron, Ohio to Chicago, Las Vegas, Napa, and now West Hollywood where he has worked over the last 8 years. In his second term as Chair of the West Hollywood Chamber of Commerce as well as the West Hollywood Design District, Rimedio also serves as Secretary of the West Hollywood Travel & Tourism Board, Beverly Hills Chamber of Commerce board of directors, and on Forbes Travel’s Standards Advisory Committee which is an international board of twenty hoteliers.