The key part of the plan to pay for San Diego’s $520 million Convention Center expansion remains legally uncertain, City Attorney Jan Goldsmith said Wednesday.
“Expectations should be tempered,” Goldsmith wrote in a news release. “We do not know if this is a reliable plan to finance the Convention Center expansion.”
Goldsmith reiterates that the financing package relies on a tax increase San Diego’s hoteliers — not city voters — will approve. Without a vote of the public, the plan faces constitutional questions, Goldsmith said.
He wrote in the release:
The California Constitution requires that taxes be approved by a two-thirds vote of the qualified electorate. To be clear, this IS a tax. But, this tax would not be submitted to all voters in the City.
Instead, it would only be submitted to hotel property owners within the City. If two-thirds of that electorate approves the tax, the tax would be imposed.
Goldsmith’s warning comes before an April vote of the city’s hoteliers on a proposal to increase hotel-room taxes between 1 percent and 3 percent for the next 30 years. The tax hike will finance about three-quarters of the expansion. Goldsmith emphasized that the city plans to seek court approval for the deal before collecting the tax.
Goldsmith had identified this potential legal snag with the expansion deal before. But his comments Wednesday serve as a reminder that the city still needs to clear a substantial legal hurdle, underscoring one of the many concerns about the expansion’s viability.
The city of San Jose used a similar legal maneuver to finance its Convention Center expansion, but Goldsmith noted a judge’s consent in San Jose isn’t binding here. There’s also one major difference between the two cities. In San Jose, no interest group opposed the expansion in court. In San Diego, organized labor groups have said they’ll fight the expansion on legal grounds, adding to the leverage local unions have over the deal.
Assuming hoteliers approve the tax hike in April, the City Council is expected to vote on a full financing proposal, including a $3.5 million annual contribution from the day-to-day operating budget, in May.
Goldsmith also raised a series of significant questions about the financing proposal in his release:
1. Is the plan legal or illegal? That is not clear. It tests the boundaries of the law and there are legitimate arguments on both sides. Lawyers within our office have differing opinions. (The city’s outside attorney) would not issue an opinion on legality. Nor, will we. That’s why a validation lawsuit will be filed.
2. Why would the City Attorney’s Office allow the City to go forward with a plan that is legally unclear? There is nothing wrong with testing the boundaries of the law if that is what the client wants to do. After all, a similar – but not identical – plan was approved by a Superior Court judge in San Jose. If we believed that the plan is illegal, we would not sign off. There is a big difference between illegality and lack of clarity.
3. Should the City go forward with the financing plan? That is the policymakers’ call. Legally, there is nothing wrong with going forward as long as a validation lawsuit is filed. But, we should do so with our eyes open. Expectations should be tempered. We do not know if this is a reliable plan to finance the convention center expansion. In addition, a validation action is litigation and it may not be quick, particularly if there are appeals; and, it could be expensive.
4. Is there a potentially quicker and more legally reliable means of increasing taxes? Yes, a financing plan could be presented to the general electorate for a vote, not just to hotel property owners.
Update: This post has been updated to flesh out Goldsmith’s legal argument.
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 email@example.com or 619.550.5663.
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