It Won’t Cost the Taxpayers a Thing

The argument for a larger San Diego Convention Center is a familiar one in the city: Build it and it will pay for itself in new taxes and other economic impact from convention-goers.

The pitch isn’t far off from another proposal under consideration: a plan to rebuild City Hall and redevelop the surrounding area in a way that supporters say would save the city millions over the years. Even a plan to build a downtown library has chugged along, with Mayor Jerry Sanders voicing conditional support for the building as long as the money doesn’t come from the city’s general fund, its day-to-day account.

The proposals follow a familiar path in San Diego, where major projects are touted as a net financial benefit for residents, or at the very least, something that can be done essentially at no cost to taxpayers.

“That happens every place,” said Steve Erie, a political science professor at the University of California, San Diego, “but it’s been elevated to a fine art in San Diego, partly because of our anti-tax culture, so we have to promise to give taxpayers something for nothing.”

Anti-tax sentiment may be only part of the story, with the city’s financial scandals and a lack of political willpower playing their own roles. Observers say the pattern has pernicious effects on the city: Politicians have incentive to oversell the potential benefits and undersell the cost to taxpayers. They also may be reluctant to push potentially worthy projects that don’t pencil out.

“We really need to talk about what is important to the city and be willing to pay for it,” said Michael Stepner, a local architecture professor who worked for the city as an architect and acting planning director. “That has been a problem of the city for a long, long time.”

To be sure, the three major building projects on the table differ in important respects. People who support one project may not support another, and say each should be judged on its own merit.

The Convention Center expansion is seen as a way to generate tax revenue because convention-goers stay in local hotels and shop in local stores, bringing in hotel tax and sales tax revenues.

The City Hall proposal also has revenue components because the city would sell land to developer Gerding Edlen and net taxes from stores and housing on the site. But the argument that it saves money stems from a preliminary financial analysis showing that the alternatives would be more expensive.

The library proposal isn’t being sold as a cost-saver. But Sanders and other local leaders have said they can only support it as long as general fund money isn’t being used to build it.

Mayoral spokeswoman Rachel Laing said such projects aren’t being sold to the public as free, but that the qualifier about the general fund is meant to assure citizens that money won’t be diverted from services such as public safety, libraries and parks. She said the mayor will only support the library if the deal can be structured so it won’t put the general fund at risk.

“It’s not saying we’ll build it for free,” Laing said. “It’s saying we’ll get grants, we’ll get other capital improvement funds … you’ll get the money somewhere else.”

Free Money

But in the desire to get a project built, the costs can be understated or made to appear as if they won’t affect taxpayers. That’s what happened with the library, said Lani Lutar, president of the San Diego County Taxpayers Association.

“The true cost of the downtown library has been misrepresented by utilizing state funds and CCDC funds to create this picture that the funds aren’t really taxpayer dollars, that’s free money,” Lutar said. “It’s as if the money isn’t coming out of our pockets.”

She said a fear of the Taxpayers Association is that if the funds can be raised for construction, the library will be built — pushing aside important questions such as how the city will find the money for the increased operating and maintenance costs.

Stepner remembers planning for the library when it was being discussed in the 1990s. He said city staffers had determined that the building would cost a certain amount based on construction estimates for libraries throughout North America. But he said elected officials said San Diego could do it cheaper and lowered the estimate. When the bids came in, they were in line with the original staff estimates, but made the library look over budget.

“That’s just the way we do things around here,” Stepner said.

One way the city has sold residents on free projects is through public-private partnerships, Erie said. He expects that will become more common with the city’s budget crisis. But he said residents should be skeptical of the numbers, pointing to the building of Petco Park as a cautionary tale.

The city agreed to shoulder much of the debt for the ballpark but required Padres owner John Moores to redevelop the surrounding area with the idea that new tax revenue would flow into the city and pay for the ballpark’s construction. A study supporting the figures said hotel taxes would grow by 8 percent a year for three decades. City staffers later acknowledged to a grand jury that the assumptions were optimistic but said their “given instructions” were to use those figures.

Erie said the fact that the city recently decided to use downtown redevelopment funds to pay off the ballpark bonds illustrates that the promised hotel-tax money hasn’t materialized.

“The taxpayer is generally on the hook,” Erie said, “and that’s the fine print that nobody understands until the bill comes due.”

Others disagree, saying the ballpark was a good deal for the city by bringing in property, hotel and sales tax revenues. By linking development to public financing for a stadium, San Diego created a model that has been copied elsewhere, said Mark Rosentraub, a professor of urban studies at Cleveland State University.

It never would have happened, he said, had voters been willing to buy the typical arguments for building stadiums. But Rosentraub said the Chargers ticket guarantee, in which the city bought unsold tickets to football games, had soured the electorate’s mood on publicly financing sports teams.

“The political environment required something quite innovative,” he said.

Rosentraub said San Diego has gotten a better deal from its stadium than New York, which subsidized new baseball stadiums that will have no economic effect on the city.

In San Diego, Rosentraub said, “while people of good intent can disagree that they would have preferred other changes, there’s no argument San Diego has changed.”

Building Cheap

Stepner said San Diego tends to concentrate on building things cheap instead of building them well, citing City Hall as an example.

Stepner remembers starting at the city in 1971, when the facilities were only a few years old and already “falling apart.” It wasn’t long before he heard horror stories about how the city cut corners by not building enough floors, reducing the number of elevators, and skimping on a mechanical system.

Stepner said those shortcuts have cost the city dearly in the long run. He’s not for or against the new proposal — he says now may not be the time to start construction but generally likes what he’s seen of the Gerding Edlen proposal.

However, Stepner thinks some of the retail and office space included in the proposal might be a way to make the project generate revenue and, therefore, more attractive. But he worries those buildings will detract from the city building, which he thinks should be the focal point.

“We’re trying to get it in for free by having all this rental space, so we aren’t building the building we should be building that says who we are in San Diego,” Stepner said. “Or maybe it does say something about who we are in San Diego.”

Stepner said San Diego’s attitude has long been “if we can’t do it for free, we shouldn’t be doing it.” A consequence of that attitude, he said, is that projects that don’t have clear financial benefits may be delayed, while projects that do go forward.

“You could argue that maybe Petco Park isn’t as important as the library, but we chose to build Petco Park because we viewed it as an economic generator,” Stepner said.

‘Not Unique to the World’The tendency to pitch projects as freebies is often chalked up to the electorate’s anti-tax sentiment and skepticism of government.

But Andrew Berg, executive manager of the local chapter of the National Electrical Contractors Association, believes a lack of political willpower is to blame.

He said San Diego isn’t more innately anti-tax than other places, noting that most people don’t like to pay taxes.

“We are not unique to the world,” he said. “We have allowed ourselves to go that way.”

The real problem, he said, is that “over the last 30 years, we haven’t had the leadership who was willing to tell us we can’t have it for nothing.”

Berg said city leaders haven’t tried to make the case to voters that a project might be worthwhile, even if there’s a cost to taxpayers. That doesn’t preclude an accurate financial analysis, but Berg said the discussion shouldn’t stop there.

“An honest discussion of whether things pencil out is very important,” Berg said. “It doesn’t mean you don’t do something if it doesn’t pencil out.”

He added: “Think about where our government is now and ask yourself whether Balboa Park would have ever gotten done. I doubt Balboa Park would have ever penciled out into a moneymaker for the city, but imagine what this city would be like without it.”

Councilman Carl DeMaio acknowledges that cities should take into account more than the bottom line in deciding whether to go through with a project — but not in San Diego.

Because of the city’s financial mismanagement, DeMaio said, “we do not have the luxuries other cities have.”

DeMaio said taxpayers won’t support paying for projects through a voter-approved bond because they feel their existing tax dollars aren’t being used wisely.

But, he said, elected officials and interest groups like the “downtown lobby” have refused to accept this sentiment and continue to push for projects like the City Hall redevelopment proposal despite the fact that the city can’t support it.

Erie said the question of whether voters or weak-willed politicians are the cause of San Diego’s love for free projects is a chicken-or-egg question. While elected officials will point to votes such as the rejection of hotel tax hikes in 2004 as evidence that city voters will never approve taxes, Erie said it’s up to politicians to explain the benefits, as they have successfully done elsewhere.

In San Diego, he said, politicians instead claim that projects will pay for themselves. And that creates an expectation for residents that such arrangements are the way to go.

“Every time a politician opens his mouth and says this isn’t going to cost you anything,” Erie said, “it just contributes to the feeling that in San Diego, you can get something for nothing.”

Please contact Rani Gupta directly at rani.gupta@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.