The $550 million plan to expand San Diego’s Convention Center continues to clear hurdle after hurdle.
Monday the City Council voted to lay the groundwork for securing the majority of the money needed to finance the expansion. The plan relies on hoteliers and the council agreeing to tax hotel guests an additional 1 percent to 3 percent without a public vote.
The tax is expected to raise $29 million to $33 million annually, three-quarters of the cost to build the project. But neither the City Attorney’s Office nor its outside bond counsel will guarantee that a court will find the proposal legal.
“This is to some extent cutting edge,” said Daniel Bort, the city’s outside attorney, at Monday’s hearing. “While we certainly believe it is in every respect proper, for us to issue an unqualified opinion that would not be subject to any kind of legal challenge is not something that we’re in the business of doing.”
Last month, both Bort and Deputy City Attorney Brant Will told the council in separate memos that neither would provide a formal legal opinion on the financing scheme. Will wrote that the city’s plan “represents an unusual procedure for the formation of a special tax district and no assurance can be given” that a court eventually will find it legal.
The idea is for a court to do just that. Will and Bort said the city would take the financing plans to court for approval prior to issuing the bonds for the expansion. A court, Bort said, signed off on a similar plan for San Jose’s Convention Center expansion.
This position adds to the legal questions surrounding the Convention Center expansion’s financing. One big player circling the debate, the Chargers, continues to cast doubt on the expansion’s legality. Recall also that Convention Center backers already jettisoned their first plan for financing the expansion because of legal concerns. That plan required half of the city’s hoteliers to approve creating a business district to levy the charge, but a recently passed state initiative made the proposal dicey.
This option relies on a financing structure known as a Mello-Roos district, which levies a special tax on property owners to pay for public improvements and services. The district requires a two-thirds vote of city hoteliers to pass and is supposed to be more legally sound.
City Attorney Jan Goldsmith said he asked Bort for a formal opinion on the plan, but wasn’t surprised by the response. He added that he isn’t concerned about the plan’s legality.
“I think it would be a bit out of the ordinary for a law firm to give their stamp of approval because this is so new and cutting edge,” Goldsmith said.
The city hired Bort’s firm, Orrick, Herrington & Sutcliffe, in August for $70,000 to help develop the financing plan.
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 firstname.lastname@example.org or 619.550.5663.
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