Photo by Sam Hodgson
The San Diego Convention Center
Ask those who support expanding San Diego’s Convention Center if the City Council has ever voted on a financing package for the $520 million project and you’re more likely to receive a scoff than an answer.
Of course not, they’ll say. And they’ll go onto describe the litany of council approvals for the expansion over the past couple years as minor steps in a long process. Nothing more than that.
But there’s problem with that response, as one council member learned Tuesday afternoon. Once you take enough steps forward, you can’t go back.
The council was locking in Tuesday the tax hike that forces hotel guests to pay for the expansion; it totals about $36 million a year over 30 years.
Another government, the Unified Port of San Diego, already has decided how much it will pay: an average of $2 million a year over that timeframe. That leaves city taxpayers as the only remaining source of money. Their contribution now is pegged at $3.5 million a year, a number supporters justify by pointing to projections showing the expansion will increase the city’s bottom line. But unlike the hotel guests and port, no one has capped the taxpayer dollars that would go toward the project. Taxpayers remain at risk.
Enter Councilman Carl DeMaio, a big expansion booster, a mayoral candidate and a self-proclaimed taxpayer watchdog.
He had an idea to limit taxpayer risk. Any money generated by the visitor tax increase in excess of what was needed to pay for the expansion, DeMaio argued, should be used to pay taxpayers their $3.5 million annual contribution back. DeMaio wanted that to happen Tuesday when the council voted on the visitor tax hike. It’s the same point he made, he said, when the council voted on the tax hike back in December.
“I’m not going to back down on this issue,” DeMaio said.
City staff members dissembled. DeMaio continued to push. Eventually, the city’s outside lawyer stepped in.
No, the attorney said, it can’t be done. For DeMaio’s idea to work, the lawyer continued, the council needed to have voted on it in December, the last time the expansion came before them.
With that response, DeMaio learned the council had taken too many steps forward to go back on this one.
Crestfallen, DeMaio haltingly said he wasn’t sure he could support the visitor tax hike without a cap on the city budget’s contribution.
“If you’re counting votes,” he said, “I think it’s going to be important for us to come up with a solution for this.”
DeMaio was out of time to speak. But his exchange set off the busiest section of the almost 2 1/2 hour council hearing. Confabs were had.
Steve Cushman, Mayor Jerry Sanders’ point man on the expansion, hustled over to Mike McDowell, the key powerbroker among city hoteliers. McDowell has a starring role because hoteliers are the ones who will vote on increasing their guests’ taxes to fund the expansion. DeMaio himself approached fellow Republican Councilman Kevin Faulconer, who had expressed interest in capping taxpayer risk at an earlier hearing.
As these dealmakers whispered to each other, Councilman David Alvarez decided he wanted to speak with the ultimate dealmaker. The mayor sat in the audience and Alvarez called him up to the podium.
“Thank you for summoning me, Councilmember Alvarez,” Sanders said to laughter from the crowd. Council members rarely ask the mayor anything during hearings.
Alvarez had some questions about another step in the expansion’s approval process. In exchange for their votes to tax their guests more, hoteliers want greater control over the Convention Center’s board. Alvarez asked Sanders if a news report that said the mayor was behind a plan to give hoteliers that control was accurate.
“That is, except that’s not what’s before you today,” Sanders said. “That’s in negotiations after this.”
Alvarez asked the mayor the same question a different way. But Sanders continued the same tactics expansion supporters have used during every council decision. He told Alvarez the council was only voting on part of the Convention Center expansion whole. After this response, Alvarez thanked the mayor and Sanders sat down.
Twenty minutes later, it appeared whatever negotiations DeMaio was trying to engineer were finished. DeMaio’s chief of staff returned to his seat behind the councilman on the dais.
By that point, it was Councilwoman Marti Emerald’s turn to speak. She didn’t like what was happening.
“I don’t want to be spoon-fed one little step at a time,” Emerald said. “In truth, today is a decisive moment because we are defining the exposure for the hotel industry. But nowhere are we defining the exposure to taxpayers who ultimately are picking up the tab.”
“Without the protection for taxpayers,” she continued, “I’m really uncomfortable moving forward.”
Emerald’s comments prompted defenses from Sanders’ deputies. His chief operating officer emphasized the mayor’s stewardship of the city budget. Cushman, the expansion point man, pledged that the final expansion package would have no more than $3.5 million a year coming from the city budget.
After they were finished, DeMaio asked for more time. It was a significant moment for him. Would he hold to his desire to cap taxpayer risk or would he vote in favor of the plan as it was presented? By then, other council members had made clear the tax hike was going forward on Tuesday with or without DeMaio’s support.
DeMaio decided to call McDowell, the hotel powerbroker, to the podium.
“Will you commit on behalf of your industry, in consultation with your industry, to work with us to address some of the concerns that you heard today?” DeMaio asked.
“We’d be happy to work with anyone who has a question about where we can go and what we can do to make this occur,” McDowell replied.
And with that, DeMaio said he’d support the visitor tax hike on Tuesday. But, the councilman added, he still hoped his concerns about the expansion’s funding would be addressed at a future hearing.
The vote on the tax increase happened next. It passed 6-2 with Alvarez and Emerald in opposition. The tax increase now goes to the city’s hoteliers for their own vote in April.
It was unclear what commitment DeMaio actually got McDowell to make. After the meeting, McDowell said he didn’t pledge to use excess revenue from the visitor tax hike to pay down the city budget’s share, as DeMaio had suggested during the hearing. Instead, McDowell said he agreed to help try to find some additional sources of revenue. But where that new money would come from after the city’s spent years developing its current financing plan, McDowell didn’t know.
“Nothing fresh on the mind,” he said.
It will take a while before we’ll know for sure if there’s any more money added to the pot. After taking another step forward on Tuesday, the council now is expected to vote on the expansion’s full financing plan in May.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?
Please contact him directly at email@example.com or 619.550.5663.
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