"We didn''t know what a big scar the demolition of the San Xavier warehouse would leave in our hearts," says Barbara Bass Evans, co-chair of the Monterey Action Coalition (MAC), a grassroots activist group. The sardine-era warehouse was deemed unsafe and torn down last year. "If we had some access to funds, we might have been able to save it."

Evans and other MACtivists say removal of the San Xavier was one catalyst for a drive to preserve the city''s cultural and arts heritage. In order to provide more funds for that effort, MAC has proposed a ballot initiative to increase the city''s Transient Occupancy Tax (TOT) by .5 percent. The additional tax--which brings the city''s total TOT bite up to 10.5 percent--would mean more than $500,000 to Monterey''s cultural institutions.

But, for the proposed tax increase to go to voters in November, the group either needs to convince the Monterey city council to place the initiative on the ballot or secure 1,488 signatures from Monterey residents by June 15. And for the initiative to pass, it must receive approval from two-thirds of the voters.

To say the initiative faces an uphill battle may be to understate the case--particularly as two heavy hitters in the hospitality industry have come out in opposition to the tax increase.

Bob McKenzie, the director of the Governmental Affairs Committee--a joint committee between the Monterey County Hospitality Association (MCHA), and the Monterey Peninsula Chamber of Commerce (MPCC)--says the two organizations aren''t opposed to an increase in TOT taxes, per se, but are opposed to the way this initiative proposes to spend the increased revenues.

On Tuesday (5/4), in a joint letter to the Monterey City Council, the Chamber and the Hospitality Association wrote: "The Monterey County Hospitality Association and the Monterey Peninsula Chamber of Commerce have both opposed, as a matter of long-standing policy, increases in the Transient Occupancy Tax unless all or a substantial part is devoted to tourism promotion and marketing supported by, and supervised by, the hospitality industry."

In 1995, the hospitality industry backed Measure F, a 1 percent TOT increase that would have raised money primarily to market Monterey as a tourist destination. Grassroots organizations and citizens vociferously decried the proposed tax (with slogans like "Enough is Enough!"), saying that Monterey already had enough tourists. In June of that year, the initiative was handily defeated when it received less than 45 percent of the vote--far less than the two-thirds approval it needed.

Still looking to bolster the number of Monterey-bound tourists, McKenzie says that earlier this year, members of the hospitality industry met with MAC members to discuss a raise in the TOT and to devise a cooperative approach to MAC''s nascent proposal. He says the hospitality outreach was rebuffed by MAC. "Not only were they told no, they were told that rudely," says McKenzie.

Walter Keintzel, a founding member of MAC and a Monterey planning commissioner, remembers the meeting differently.

"We met with five or six of the hotel managers, small to medium size places, and it was quite a cordial meeting," says Keintzel, who claims hospitality had their own motives for wanting a TOT increase. "We realized we had a lot of interests in common.

"They beat around the bush a little bit. What I told them is that if you are asking to make the increase a larger one so that you folks have another chance at taxes for national promotion, we''re not going to touch it with a 10-foot pole."

When it comes to tourism, MACtivists seem to be attempting to spin the issue two ways. On the one hand, they have been careful to avoid the taint of ''95''s Measure F by scrupulously rejecting the hospitality industry''s request to tie TOT funds to marketing efforts. On the other hand, they say their measure will, intrinsically, serve to increase tourism.

Molly Erickson, a member of MAC and chair of Monterey''s planning commission, says, "I believe that funds raised from the TOT can be dedicated to our cultural resources and that will be the best promotion possible for our city. Word of mouth is by far the best advertisement. Satisfied visitors who return home and tell people about the buildings they see and the cultural activities they have participated in are an ideal and quality source of future visitors."

The difference between Measure F and MAC''s proposal, says April Harrison, co-chair of MAC, is that the former proposal "offered nothing to the residents; it just aimed at increasing tourists. Tourists are the bread and butter of this community but you also have to offer something to the residents. We have to make a balance between what the community needs and what the tourists want."

According to Mary Buskirk, a member of Monterey''s Colton Hall Museum and Cultural Arts Commission (and a boardmember of both the local Artists'' Equity chapter and Arts Habitat), what the community needs is more available money for the arts.

Buskirk says that at a recent Cultural Arts Commission meeting, groups seeking funding from the city requested more than double what the city has to spend. She says the proposed TOT could meet some of those groups'' needs as well as attract other cultural groups to the area.

"I''d love to see them supporting the existing organizations in the city," says Buskirk. "And then, of course, if we had this kind of real funding from the TOT, we might be able to attract new things to the city. We could, for example, possibly commission some public sculpture. We haven''t been thinking enough about what is possible because we didn''t know where funding would come from."

During the course of interviews with supporters of the TOT, The State Theater emerged as the most cited example of where potential funds could be used. Its purchase and renovation, say MAC members, could provide convention groups with an elegant 1,200-1,500 seat house for special functions, as well as provide local and touring performance groups with a bigger Peninsula venue than is currently available. Although the MAC tax wouldn''t provide nearly enough to purchase the building (the