Thursday, March 26, 2009 | There’s a Cold War brewing among convention centers around the country. But instead of stockpiling nuclear weapons, they’re loading up on space where orthopedic surgeons and information technology specialists can gather in droves.
That’s what supporters of an expansion for the San Diego Convention Center say they’re up against. With competing facilities from different cities mulling larger facilities, they say San Diego must do the same or miss out on huge conventions that rake in millions for the region.
A city of San Diego task force is studying various aspects of an expansion: whether to build it, where to put it, and how to pay for a project that Mayor Jerry Sanders has estimated will cost $1 billion, including a hotel and water taxi.
Proponents say an expanded convention center will essentially pay for itself by drawing in more visitors who will stay in the region’s hotels, shop in local stores, and use their attendance at the American Association of Neurological Surgeons conference as an excuse to fly in their families for a trip to SeaWorld.
That spending fills up the city’s coffers with hotel and sales tax revenue, or so the argument goes. Even if that holds true, someone still has to figure out where the money will come from to build it — a task the mayor said is up to the committee to figure out.
Part of the difficulty is that Sanders has said the funding can’t come out of the city’s general fund — its day-to-day budget that covers libraries, public safety, parks and more. San Diego Unified Port officials have also said their funds are unavailable.
The port paid for the original facility to be built in 1989 and footed part of the bill for its 2001 expansion. But Port Commission Chairman Steve Cushman, who is also heading up the Convention Center task force, said the port has approved $100 million in capital projects unrelated to the Convention Center and plans to complete another $100 million.
“We are not in a position to contribute as we did in the previous two,” Cushman said.
The expansion will likely be funded through bonds paid back with a hodgepodge of revenues. Sanders said the revenues will “probably have to have a nexus to the Convention Center.”
Some possibilities that could be discussed: hiking the hotel tax, increasing assessments in the tourism marketing district, rental car fees, surcharges on taxis leaving the airport, and a tax on food and beverages.
“It is going to take us cobbling together a large number of potential sources,” Cushman said.
He cautioned that the actual funding proposals will almost certainly differ because any talks about how to pay for the expansion are several months away. The task force is now discussing the potential viability of a larger center.
Another issue up in the air is the location for a proposed expansion. Efforts so far have focused on 16 acres of land next to the current building. In September, the Convention Center purchased a one-year option for the exclusive rights to lease the land, which is owned by the port.
But another idea that’s been floated is expanding the convention space into a separate building across Harbor Drive in the area near Petco Park being developed by John Moores’ company.
Those who favor an expansion note that the center’s visitors generate significant revenue, including more than $30 million a year in hotel taxes. An analyst for the convention center estimated that in 2007, convention attendees spent an average of $1,462 each, or more than $900 million total. Those numbers come from face-to-face surveys of about 600 of the 630,000 people who attended conventions in 2007.
Advocates say increasing the exhibit space by 200,000 to 300,000 square feet will prevent shows that are outgrowing the center, such as Comic-Con, from leaving. And it will allow the city to compete for conventions that are already too big for the center.
Michael Hughes, vice president of research and consulting for Tradeshow Week and a consultant for the Convention Center, has identified two dozen conventions that are too large or on the verge of outgrowing the current center but might book space in an expanded center. They include events held by the American Academy of Orthopedic Surgeons and National Safety Council.
Even a newly expanded center would often go unfilled. Hughes said only about 10 to 20 weeks are considered prime convention times. Conventioneers, for instance, typically avoid the summer and the month of December.
“Half of the year, there’s too much exhibition space in the country,” Hughes said. “Half of the time, there’s not enough.”
He said an expansion could make smaller conventions more likely to book by increasing the dates available during those prime convention times. Hughes acknowledged that most conventions would prefer have a facility to themselves, but said those fears should be allayed if venue officials are experienced at hosting multiple events.
Task force member Lani Lutar, president and CEO of the San Diego County Taxpayers Association, said there’s a “strong case to be made” for the demand for a larger center. But she said that doesn’t necessarily mean the city can afford an expansion now.
She questions whether past figures provide a good way to gauge future revenues, given the recession.
“We live in a different world right now and looking back at the past may not be an accurate predictor of the near-term future,” Lutar said.
While the economy should recover in the long run, she said, no one knows exactly when that will happen.
“That’s why the timing of this project — when you might pursue this, when you might seek financing, when you might break ground — all those questions must be considered,” Lutar said.
On Thursday, the task force is slated to hear a report on the potential financial impact from consultant PricewaterhouseCoopers. Task force members may vote on whether to continue studying an expansion at the same meeting. In the unlikely event the task force decides not to keep moving ahead, it would essentially end the possibility of an expansion in the near future.
The task force has been hearing largely from those advocating an expansion, including paid consultants for the Convention Center such as Hughes. But Cushman said task force members are taking their task seriously by asking hard questions of the consultants. The task force is slated to present a recommendation to Sanders in September.
The arms-race aspect of convention center expansions has raised the question of whether an expansion, if it goes forward soon, would be the last in San Diego.
The PricewaterhouseCoopers report includes a proposal for a third expansion of 1 million square feet, though it notes that the lack of available land may make a contiguous expansion difficult.
But Hughes notes that Las Vegas, with its three huge convention centers and nearly limitless supply of hotel rooms, has the market cornered on megaconventions. He believes expanding San Diego’s exhibit space by at least 200,000 square feet will fill the city’s needs for the next 20 years.
“They don’t need to be 1.5 million or 2 million square feet,” Hughes said. “The number of shows that are truly that large is small, and San Diego doesn’t have the hotel rooms and never will to host the largest conventions.”