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Monterey County Hospitality Association Letter that Opposes CV Cityhood

September 8, 2009

Robert Sinotte, Interim Chair
Save Carmel Valley – No on Incorporation
PO Box 22231
Carmel, CA 93922

Dear Mr. Sinotte:

The Monterey County Hospitality Association (MCHA) has studied thoroughly the issue of incorporating the 'Town of Carmel Valley.' We have concluded, without dissent, that incorporation is a bad idea and should be opposed.

MCHA is the trade association for the hospitality industry of Monterey County, which includes what is more commonly known as the 'travel and tourism' industry; ours is a two billion dollar per year industry that employs almost 23,000 workers and generates over $55 million per year in local taxes.
Our reasons for opposing incorporation are fairly simple and easily understood.

First, the boundaries of the proposed town make no sense geographically or politically. A 'town' of almost 42 square miles that is almost 12 miles long but includes only 12,000 people is simply unworkable. By contrast, the nearby Village of Carmel-by-the-Sea is home to approximately 6,000 residents and covers a little over one square mile. Including the commercial areas and denser and more compact residential areas at the mouth of the valley, the vast majority of which asked to be excluded from the town boundaries, is inconsistent with the proponents' stated intent to 'preserve the rural character of Carmel Valley.' There is nothing 'rural' about those commercial and residential areas; the motive for insisting these areas be included is financial, not aesthetic, a fact that becomes obvious from a review of the 'comprehensive fiscal analysis ' of the incorporation proposal. Without those unwilling areas included, a 'Town of Carmel Valley' cannot support itself.

Second, the 'comprehensive fiscal analysis' is flawed and fails to reflect the unavoidable financial difficulties a 'Town of Carmel Valley' would face. The 'town's' receipts of Transient Occupancy Taxes and sales taxes in the analysis are unrealistic; the analysis does not examine adequately recent trends in our industry or the expert forecasts for the travel and tourism that are available. Occupancy levels and revenues per available room (RevPAR) are down dramatically over the last two years (data readily available from several disinterested sources) and forecasts for 2010 and 2011 indicate a long and difficult struggle to 'normal' travel and tourism patterns (also available from several disinterested sources). Similarly, the analysis does not reflect realistic interpretation of the current decline of commercial or residential property values; the consequence is that 'town' revenues from property taxes are unrealistically inflated.

The 'comprehensive fiscal analysis' is also flawed in its assumption about the cost of services the 'town' will have to provide and does not take into account the costs to the 'town' of easily
anticipated problems such as adequate flood control or water contamination from septic sewage or failure. The myriad state and federal mandates on political subdivisions, largely unfunded or underfunded, are either ignored or glossed over with blithe assumptions about the likelihood and probably understated costs of arranging cooperative arrangements with pre-existing government entities. In short, the 'town' proponents are "whistling past the graveyard" in asserting that taxes in the proposed 'town' will not increase or that services will not decline.

Our review concludes the 'comprehensive fiscal analysis' overstates 'town' revenues and understates 'town ' costs. With only relatively minor but realistic changes in revenue and expense assumptions, it would be quite obvious a "Town of Carmel Valley" will not be fiscally stable or sound, will not be able to make its 'revenue neutrality' payments to Monterey County, and instead will join an unfortunately long line of local cities struggling to make ends meet by seeking tax increases or even contemplating municipal bankruptcy.

We wish you well in your effort to defeat the proposal to incorporate. Our industry's ability to maintain employment and remain competitive would be seriously jeopardized by incorporation.


Sarah Cruse, President

Last Updated: Sep 20, 09

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