Steve Cushman is San Diego Mayor Jerry Sanders’ special liaison charged with figuring out how to pay for an expansion of San Diego’s Convention Center.
The project came in at $500 million; much lower than the original $711 million estimate.
“There aren’t going to be any more ornaments on this Christmas tree because that’s all the money there is,” Cushman told me.
Then the mayor assured us that the money would not come from the eternally crippled city.
“As I have said from the very beginning, the expansion of our Convention Center should be paid for by those who will benefit from it,” Sanders said in a statement.
So who is that?
Not the Port of San Diego. The patron of the first Convention Center will pay some token annual fee. But its income has dropped precipitously in recent years. (It is, like most everything, Mexico’s fault. Fewer tourists cruise to Mexico and pay the port fees on their way.)
The bulk of the funding is to come from a new entity: the Convention Center Assessment District, or CCAD.
Now where will the CCAD get its money?
Passing the Buck
When a family stays in a hotel in San Diego, they pay a nightly rate. In addition, they pay 10.5 percent of that for the Transient Occupancy Tax. And if they stay in a large hotel, they pay 2 percent more for the Tourism Marketing District.
The CCAD will add yet another 3 percent on the bill for hotels downtown, 2 percent for hotels out to Mission Valley, and 1 percent for hotels even farther away.
But look at the mayor’s statement again: “the expansion … should be paid for by those who benefit from it.”
If that family stays in a Mission Valley hotel, goes to the beach and Sea World and then leaves, they’ll pay 2 percent extra each night for the Convention Center. But are they the people benefiting, as the mayor claims?
No. But the mayor’s sending a legal message as much as a political one. If the people who benefit from the Convention Center aren’t actually the ones paying for it, it’s a tax. And taxes require votes. Voters have twice killed hikes in the hotel-room tax.
Hoteliers argue they’re still the ones sacrificing. After all, that’s two percent that they can’t collect for themselves. Consumers have a budget and they’ll find the deal that fits their budget. If two percent of that budget goes to the Convention Center, it won’t go to the hotel. (Except that it will supposedly come back to them with all these new conventioneers, right?)
Hotels could simply pay for the Convention Center without passing the pain to the customers on their hotel bills. But then they’d have to compete with each other. If one of them raised their nightly price two percent to handle the investment, and another didn’t, the latter would offer lower prices.
They don’t want that. They would rather consumers at the hotels pay it — like a tax. But they also don’t want the public to vote on it. Yet Proposition 26, passed last year, requires that anything that looks like a tax gets a vote.
So how is this legal?
“At some point, a judge will opine,” Cushman acknowledged.
What we’re watching is the incredible contortions that come from people who want to impose a tax to build a public facility but don’t want to actually make the case for it to the voters.
And that’s what happens when a group of ardently “anti-tax” hotel leaders decides it wants its slice of the government cheese.
This also appeared in the July 2011 issue of San Diego Magazine.