San Diego’s $520 million Convention Center expansion needs money from lots of different pots. I wanted to highlight an argument from my Sunday night story on the expansion to show why Tuesday’s City Council vote is such a big deal.
The vote will increase San Diego’s hotel-room taxes by as much as 3 percent, pending a subsequent council vote and approval from city hoteliers.
The vote shifts risk from San Diego’s tourists to San Diego’s residents. An approval will begin capping how much tourists will pay for the expansion. At the same time, the city’s contribution from its day-to-day operating budget not only continues to grow, but remains open-ended. This same pot of money pays for police, fire, street repair and other general city services.
In short, the city and other public agencies are moving to limit the contributions from certain sources like tourists, but are leaving the day-to-day budget at risk for paying more.
Here’s how the city plans to pay for the Convention Center expansion:
City Taxpayers: Mayor Jerry Sanders and other supporters of the city’s big building projects have tried to erect firewalls between the pots of money that pay for the buildings and the pot that pays for struggling city services. For the Convention Center expansion, that firewall crumbled in October.
That’s when Sanders and other Convention Center supporters put a number on the expected contribution from the day-to-day budget: $90 million over the next 30 years. Last month, that figure jumped to $105 million, or $3.5 million a year.
Sanders and other backers justify this contribution because an economic analysis shows the expansion is projected to boost the day-to-day budget by roughly $13 million a year. If the city receives that return, supporters contend, it’s more than enough to cover the annual payment and still benefit the regular services that residents demand. In other words, city taxpayers will profit rather than pay.
This argument has two pitfalls. Revenue projections are difficult to estimate, the city’s independent budget analyst has said, and might not materialize as expected. The city’s contribution already has increased and could continue growing.
“We think there’s reason to believe that the city’s contribution will be higher,” Tom Haynes, a budget analyst, told me.
San Diego Tourists: The City Council will vote to increase hotel room taxes by as much as 3 percent on Tuesday. The tax increase will raise at least $1 billion over the next 30 years.
The proposal charges guests staying at hotels closer to the Convention Center more. But it still faces major criticisms about its fairness.
Take the three big hotels next to the Convention Center. They win big. They’re projected to reap $273 million in new revenues in the first six years after the center expands. An organized labor analyst has questioned if those hotels should be contributing directly.
A prominent hotelier with properties in Mission Bay and La Jolla argues that his guests will pay much more than his hotels will benefit. He questioned why visitors staying at hotels in Coronado, which is across San Diego Bay from the Convention Center, won’t pay anything.
Tuesday’s vote is a key step in capping the direct contribution from San Diego tourists, and is one of the council’s few opportunities to address those issues.
The Unified Port of San Diego: Last week, the port voted to approve $60 million toward the project with some conditions. The port’s bottom line benefits from increased business for its waterfront tenants, including the three hotels next door. The port’s contribution now appears capped.
Other Pots of Money: Backers of the expansion say they’re hoping the city’s redevelopment agency could kick in. This looks unlikely. The head of the downtown redevelopment agency has said there’s no money. And next month, the California Supreme Court is expected to rule on a lawsuit that could result in the elimination of redevelopment altogether. Other long-mentioned revenue sources, such as surcharges on restaurants in the Gaslamp Quarter and taxi cabs, have disappeared from the latest overview of the financing plan.
The Bottom Line: The financing plan to expand San Diego’s Convention Center remains very cloudy. But two major revenue sources, increased hotel room taxes and the port, are being solidified. Meantime, the city’s day-to-day budget remains at risk and faces a growing burden.
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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