Seventeen months ago, this was the big question facing a possible expansion of San Diego’s Convention Center: Who is going to pay for it?
Seventeen months later, the question remains just as unanswered as it did then.
But now there’s a new twist. No one will say how much an expansion will cost, not even a ballpark estimate.
It’s an interesting development for a project that boosters argue will not only bring nearly $400 million in additional tourist spending and $17 million in new tax revenue each year, but also allow the city to retain mega conventions like the annual Comic-Con extravaganza.
Those trying to put together a financing plan for the expansion, including Mayor Jerry Sanders, argue that industries and government agencies benefitting from an expanded center will have to pony up. In a still-down economy, budgets of public and private entities alike can’t handle the strain unless they make something off the deal.
“It’s all gotta be new money,” said Bob Nelson, a new Unified Port of San Diego commissioner who has been part of expansion talks for more than two years. The Convention Center is on port tidelands.
Sanders tapped local powerbroker and former longtime port commissioner Steve Cushman to be his arm-twister-in-chief. Cushman will have to cajole groups that stand to make more money from more conventions, such as hoteliers and restaurateurs, into adding taxes to their businesses to help pay for an expansion.
The mayor and Cushman will have to make a similar case to the port and the city’s own downtown redevelopment agency.
No one has committed any money to the project. Those who eventually say yes will have to believe they’ll see a return on the money they plunk down.
“The project will prove itself by seeing if it can draw that investment,” said Scott Peters, the port commission’s chairman.
Optimistic economic projections aside, how much everyone’s willing to spend could well be the best indicator of the project’s worth. Everything, including the center’s price tag, depends on it.
“I’m hoping that the pot of money I am able to put together and the cost of the center will merge,” Cushman said.
In November, Convention Center backers unveiled a new design for the expanded center, drawing the most attention for a five-acre public park that would go on top.
But more importantly, the redesign kept the target for expanded exhibition space at 225,000 additional square feet while decreasing the overall size of the expansion by 38 percent. If completed, San Diego will have the largest contiguous exhibit space on the West Coast, which is key for conventioneers, said Steve Johnson, spokesman for the nonprofit Convention Center Corp.
The overall size decrease, Johnson said, means the expansion will be “significantly less expensive” than the $750 million original estimate, which included a pedestrian bridge.
Johnson said he didn’t have any cost specifics. Cushman refused to discuss a rough estimate, though he said $750 million likely wouldn’t have been feasible.
“To me that was a tall mountain to climb,” he said.
It’s all part of the process to get everyone on board. Cushman was unwilling even to talk about financing options he’s ruled out.
In his State of the City address earlier this month, Sanders started dropping hints. He set his sights most directly at hoteliers.
“We appreciate the hotel industry playing a key leadership role in completing the financing plan that will make this project a reality,” he said.
Hoteliers still need convincing.
Bill Evans, a hotelier and former member of the task force created by Sanders to study an expansion’s feasibility, said he hadn’t seen any scenario through which hotels could fund the Convention Center as planned.
“I am somewhat doubting in this economy that the hoteliers are going to stand up,” Evans said.
The only way Evans said he could see a plan working is if the city created a financing entity that charged hotels closer to the Convention Center more than those on the periphery, as they would benefit the most.
Direct public subsidies are being eyed, too.
Sanders also mentioned San Diego’s downtown redevelopment agency as a funding source in his State of the City address. An expanded center could further growth downtown, leading to higher property, sales and hotel-room tax revenues.
Late-night state legislation in the fall allowed the downtown agency to collect a big share of an estimated $6 billion in future property tax revenues, meaning it could have the means. But a plan from new Gov. Jerry Brown to eliminate redevelopment agencies could thwart that idea.
A confidential legal opinion from the city’s redevelopment lawyer also says the city could wrap existing debt from a previous Convention Center expansion into redevelopment bonds toward a new one.
The mayor didn’t talk about a contribution from the port, but it’s a foregone conclusion the agency will play a role. The port paid for the original Convention Center and chipped in on the first expansion, but has cried poor this time. The tone is softening a bit.
More economic activity on port tidelands means more dollars to the port’s bottom line.
“To the extent that the port benefits, it may be necessary for us to contribute,” Peters said.
At the least, the port is planning to enter negotiations with the operators of the Hilton, which is next to the Convention Center, to discuss building a 500-room hotel whose revenues could help pay for the expansion.
Cushman said he’d like to release details of the financing plan soon.
“I would hope within 30 days we’d be a whole lot further down the road,” he said. “Can I say we’ll get there by then? Well, a whole lot of people have to say yes.”