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How can the city of San Diego continue to dream of big buildings at the same time police, fire, streets and libraries continue to struggle?
For years, Mayor Jerry Sanders and other boosters of a downtown library, Convention Center expansion and new stadium have answered the same way: The city will erect a firewall between the pot of money that pays for general city services and the pots that will pay for the big buildings.
But for the Convention Center expansion, that firewall is crumbling.
Backers of the $550 million expansion of the Convention Center will need $60 million from the city’s day-to-day operating budget over the next 20 years to finance the project, they said. The money will come from room taxes from a new 500-room hotel proposed as part of the expansion.
The project’s backers said the money wouldn’t even be in the city’s coffers if the city didn’t expand the center.
“The real truth here is that those revenues that can be characterized as general fund revenues would not exist but for the expansion,” said Charles Black, the project manager for the expansion. “That’s what’s going on here.”
Black also pointed to the expansion’s overall effect on the region’s economy. The expansion is projected to have a $700 million total annual economic impact, Black said.
But the grab for the day-to-day operating budget will cannibalize some of the city’s projected benefits. Expansion backers estimate about a $13.2 million annual bump in hotel-room and sales tax revenues for the regular city budget from the project. They want to use $3 million of that money.
Steve Cushman, Sanders’ point man on the expansion, said the city’s budget still would benefit from the expansion.
“Irrespective, there will be certainly well in excess of $10 million a year based on the previous studies that we’ve done that will go to the general fund on a net basis,” Cushman said.
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But the city likely would be on the hook should tax projections fall short.
Black and Cushman spoke to me after the City Council voted 7-0 to lay the groundwork for securing the majority of the money needed. If ultimately approved by the council and city hoteliers, visitors to San Diego will pay between 1 percent to 3 percent more on their hotel-room bills. This special tax is expected to generate $29 million to $30 million a year.
But that leaves a gap Cushman has been trying to fill since May. He’s targeted the Unified Port of San Diego and the downtown redevelopment agency for funds, though so far both have cried poor.
I haven’t spoken with council members or the mayor yet. But historically, they’ve all been opposed to using day-to-day budget dollars for the expansion.
In fact, recently council members have gone even further. After years of fighting, the council forced the downtown redevelopment agency to shoulder remaining debts for the first Convention Center expansion and Petco Park to relieve the day-to-day budget’s burdens.
They questioned any kind of spending from the day-to-day budget on the Convention Center.
“While no one questions the economic benefit of the Convention Center, many have questioned whether the Convention Center should be supported by the city’s General Fund — which traditionally supports neighborhood services such as police, fire, libraries, parks, streets, etc.,” a November 2010 memo from City Council members Kevin Faulconer, Todd Gloria, Carl DeMaio and Marti Emerald said.
Sanders has said repeatedly that businesses benefitting from the Convention Center expansion should pay for it. He addressed numerous big building efforts in a September 2009 speech to the San Diego County Taxpayers Association. After the speech, he called financing a Convention Center expansion “the bigger ‘if’” among projects he wanted to build.
“That’s working with industries around San Diego to see how we can finance that without using general fund money,” Sanders said.
During Monday’s meeting, city staff said they planned to release the full Convention Center financing plan by the spring, but council members said they wanted to see it before the end of the year.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?
Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.
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