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Tuesday, Nov. 18, 2008 | Chula Vista leaders, already struggling under the weight of a housing-fueled economic meltdown and an old-time political feud, absorbed another setback Monday when Gaylord Entertainment Company scrapped its plans to build a $1 billion convention center complex.
The announcement marks the second time in as many years that Gaylord has withdrawn from talks to build the project that was expected to anchor Chula Vista’s waterfront revitalization. Last year, the company blamed labor unions for stymieing its plans, although key players kept negotiating behind the scenes throughout this year. On Monday, however, the company said it couldn’t shoulder the project’s infrastructure costs and generate the profit it needed.
“From the outset, we knew that overcoming this obstacle was a tall order. As we have jointly dedicated significant internal and external resources to analyze all possible alternatives, we have concluded that there is no workable solution despite our collective best efforts,” Bennett Westbrook, the company’s senior vice president for development, wrote in a letter to city and port officials Monday. “This conclusion is amplified all the more by the current tumultuous economic environment.”
Chula Vista and the port had offered $308 million in public subsidies to help pay for the project’s infrastructure. Port Commissioner Steve Cushman said the company had asked for additional public assistance to make the deal pencil out.
Cushman said it’s unfortunate the deal didn’t get done two years ago when it was close to being hashed out. “This is a difficult time for us as this was a sensational project for Chula Vista and the South Bay,” he said.
Gaylord entered into formal negotiations with Chula Vista and port officials in 2006 to build up to 2,000 hotel rooms and 400,000 square feet of convention space on port-controlled bay-front land. It was envisioned to be the centerpiece of the redevelopment of 550 acres of largely port-owned industrial and marsh land that stretches from the Sweetwater Marsh Wildlife Refuge to just south of the South Bay Power Plant.
Despite its location along the bay front, Chula Vista saw its growth explode inland during the housing boom as brand-new residential developments spread out across its dusty hills. The city coffers filled with revenues from the boom and its accompanying retail spending, and the city matched that with ambitious spending on everything from employee pay and benefits to a new City Hall and police station.
City officials then turned their gaze toward the city’s neglected waterfront for its next frontier of growth, hoping to convert the assorted plots of open land, warehouses and factories, and an aging power plant into more development.
Then, the housing bubble burst. Now, with the city’s sales and property tax revenues shrinking, city officials are looking at having to trim 13 percent from next year’s budget. At the same time, a political brawl has broken out as two city managers have been forced out and City Councilman Steve Castaneda and Mayor Cheryl Cox have gone head-to-head.
Cox pointed to the Gaylord proposal as the savior for city finances and made it clear it was her top priority. Still, she took heat last year when the deal fell apart for not playing an active role in nurturing the relationship between the company and labor; Cox blamed unions for the deal’s 2007 disintegration.
In a separate letter to labor leaders, Westbrook notes the progress the unions and his company had made recently and says that although some might blame the unions for the project’s demise this time around, it “is simply not the case.”
Lorena Gonzalez, secretary-treasurer of the San Diego-Imperial Counties Labor Council, said unions would sit down to work with another developer if Chula Vista and the port move forward on another project.
“Despite several heated moments throughout the course of negotiations, we were pleased with the progress of negotiations related to the project ‘s construction, operation and environmental standards,” she said in a prepared statement. “Before today ‘s news, the Labor Council was very optimistic that Gaylord ‘s proposal was on its way to becoming a world class destination, save for the financing.”
The construction was projected to convert the barren, industrial, inaccessible waterfront into what city officials envisioned as a bustling recreational and hospitality complex.
Gaylord promised to invest $846 million of private financing. The port and city agreed to add $178 million to pay to improve infrastructure — roads, sewage lines — to prepare the 550-acre waterfront site for development. The two agencies agreed to invest another $130 million in Gaylord’s convention center.
Now, Cushman said officials will move ahead with Plan B, which he said would be a smaller hotel and convention center on the site.
The city could also feel increased urgency to step up its negotiations with the Chargers, who have been talking with city officials for two years and are studying the feasibility of building a new stadium on the site of the existing South Bay Power Plant.
But, with the power plant currently tagged with must-run status, hundreds of millions of dollars of public assistance on the table, and the Chargers also looking to build hotels and retail development alongside the stadium, the site envisioned for Gaylord could gain consideration.
Mark Fabiani, Chargers special counsel, said it’s too soon to say if the team would move over to fill the vacuum left by Gaylord’s departure.
“The port and the city need to sort all of their options out,” he said. “We remain interested although the economy makes any project of this size impossible (at the moment), we’ve got a long-term view and we don’t think the economy will stay this way forever.”
He said the team wouldn’t need the financing for its project for a year or two because of the time the project would take to make its way to fruition.
Gaylord ‘s departure is the latest in a long line of failures by South Bay politicians and business leaders to clean up and develop the waterfront.
On Monday, Westbrook personally delivered the news to Cox during a meeting between the two that Cox said had been on her schedule for months. “As you can imagine, I am deeply disappointed,” Cox said during a press conference Monday evening.
Cox and her husband, San Diego County Supervisor Greg Cox, have for decades been key players in the city’s attempts to revive its long-beleaguered bay front. Had she been able to land Gaylord, Cox would have cemented a legacy that she and her husband have sought for decades.
“Every mayor and City Council for 35 years has hoped something would happen on Chula Vista’s bay front, and this was the best thing that ever came along,” Cox said. “We had a plan and a lot of hopes and dreams that it would work.”
Gaylord would have brought as many as 9,000 jobs to Chula Vista during the project’s construction, and 3,000 permanent jobs, according to company and city estimates. The city stood to reap nearly $2 million annually in sales taxes.
“This was a $1 billion investment that would have lasted for 60 years,” Cox said.
The project’s complexity and costs ultimately drove Gaylord’s decision, Cox said. She also said, in so many words, that the Tennessee-based company had grown tired of trying to do business in California with all of its environmental and other regulatory hurdles.
Cox ticked off a list of issues Gaylord will not have to deal with in Mesa, Ariz., where it has now set its sights for a western facility. “Three-thousand, two-hundred acres of privately owned land; no Coastal Commission; no State Lands Commission,” she said.
And though she said Westbrook insisted that the company’s decision was not based on the difficulties it had with the area’s labor unions, Cox did mention the reception the company received in Chula Vista to those it received in other cities where it has built convention center complexes.
“They were welcomed with open arms in Dallas, Nashville, Orlando and Washington, D.C.,” Cox said. “They come here and are not welcomed.”
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