Who wins big if San Diego expands its Convention Center? The mega hotels next door.

The three hotels, the Manchester Grand Hyatt, Marriott Marquis Hotel & Marina and the Hilton Bayfront, would reap $273 million in new revenue in the six years after the expansion opened, a consultant’s report says.

The report indicates the money comes with little risk. A hotel-room tax hike needed to pay for the expansion won’t affect business at the three hotels, says the study completed by a Unified Port of San Diego consultant.

At the same time, the city’s own proposed contribution to the expansion continues to increase. It’s now projected to be $105 million, $15 million more than it was in October. And the city’s budget analyst is warning that figure could continue growing.

“We think there’s reason to believe that the city’s contribution will be higher,” said Tom Haynes, a budget analyst.

The Convention Center hotel report cuts to the heart of the debate over financing the $520 million expansion of San Diego’s waterfront convention center. Backers, led by Mayor Jerry Sanders, argue that those benefitting from the Convention Center’s growth should pay.

And while some groups that benefit will pay, they’re moving to cap their costs. Meanwhile, city taxpayers are facing escalating costs and risk.

Last week, the port agreed conditionally to contribute $60 million to the project. On Tuesday, the City Council is voting lock in the maximum hotel-room tax hike for the expansion, which is expected to pay for the majority of the project.

But the council isn’t moving to limit costs to its day-to-day operating budget. And its burden continues to grow.

Sanders had originally said the project wouldn’t need money from the day-to-day budget, which has faced years of cuts.

But in October, expansion backers said they would need $90 million from the day-to-day budget, which pays for fire, police and other general city services. It was the first time proponents made a bid for that money.

That figure now has risen to $105 million.

Sanders and other backers say the day-to-day budget will benefit from the expansion. They point to a study that estimates general tax revenues will increase by roughly $13 million annually, which would more than cover the city’s yearly bill. But the city’s budget analyst warned that those projections are tough to calculate.

“While it is certainly expected that the expansion of the Convention Center would have a positive economic impact and generate additional tax revenues for the city, it is extremely difficult to estimate such impacts with any degree of accuracy,” Haynes wrote in a report.

Tuesday’s council vote would lock in the maximum hotel-room tax increase. Under the proposal, hotel-room taxes across the city will rise with guests staying at hotels closer to the Convention Center paying higher rates. Visitors at downtown hotels, including the three next to the Convention Center, will pay 3 percent more, those staying in Mission Bay will pay 2 percent more and those in La Jolla and other far flung areas will pay 1 percent extra.

Opponents of the financing package argue the three Convention Center hotels’ windfall shows that they’re not contributing as much as they could to the detriment of others.

“It basically says we’re going to keep the money ourselves and not share it,” said Murtaza Baxamusa, who’s analyzing the expansion for the San Diego County Building and Construction Trades Council.

Bill Evans, a Mission Bay and La Jolla hotelier and the most outspoken opponent against the financing plan, contends the package forces his guests to pay more than they should.

“I think it’s a ringing endorsement of the concept that they are going to benefit disproportionately,” Evans said.

Backers of the plan argue it’s equitable.

Steve Cushman, a local businessman who developed the expansion’s financing proposal for Sanders, said he changed to a tiered system to accommodate arguments that those benefitting more should pay a greater rate. The 3 percent rate at downtown hotels was the maximum the city could charge and have tax rates on par with other destination cities, he said.

“I’m not going to advocate that our hotels not be competitive with our peers,” Cushman said.

Typically, the city’s budget analyst offers the council a recommendation before a vote. In this case, it didn’t. Haynes said too much of the financing plan remains unsettled, especially the city’s contribution.

“There’s so many unknowns right now,” he said.

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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Liam Dillon

Liam Dillon was formerly a senior reporter and assistant editor for Voice of San Diego. He led VOSD’s investigations and wrote about how regular people...

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