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In September 2008, San Diego Mayor Jerry Sanders announced he wanted to expand San Diego’s Convention Center. A lot has happened in the three and a half years since.
Barack Obama became president. Popular protest toppled leaders in four Middle Eastern countries. And Sanders lost the equivalent of a middle-schooler in weight.
Over that time, the expansion has chugged forward. At the same time, doubts loom large about its ultimate success. The legality of the $520 million project’s financial plan remains an open question. And powerful special interests are continuing to squawk about what they’ll get from the deal.
Taken all together, it’s unlikely the city will stick a shovel in the ground any time soon.
Here’s a reader’s guide to help you follow the storylines.
The Super Hero
Expansion boosters want to bring bigger conventions to San Diego and keep growing ones here.
More conventions, backers argue, mean more jobs, economic development and tax revenues to the city. They’ve made the possibility that San Diego’s most famous convention, the annual pop culture-palooza known as Comic-Con, might leave for larger venues as Exhibit A for the expansion’s necessity.
In the spirit of Comic-Con, we created a new super hero to illustrate the expansion’s greatest challenge: money.
Meet Make It Rain Man. He has the daunting task of finding the cash to finance the project from a city that has seen a decade of budget deficits, declining services and growing pension bills.
Start with our video explainer to see how Make It Rain Man has cobbled the money together:
The Money
Make It Rain Man is based on a real person.
Sanders has enlisted retired auto salesman, civic leader and dealmaker Steve Cushman to develop the expansion’s financing plan. The project’s price tag is $520 million, but it will cost more than $1 billion to finance the expansion over three decades.
Here’s what Cushman has come up with:
San Diego Tourists | The expansion’s primary revenue source will be San Diego visitors.
• Guests at hotels nearest to the downtown Convention Center will pay 3 percent more in taxes on their room.
• Guests at hotels in Mission Valley and Mission Bay will pay 2 percent more.
• And those staying in more far-flung areas such as Rancho Bernardo and San Ysidro will pay 1 percent more.
This tax increase is expected to raise about $35 million a year, approximately three-quarters the cost of financing the expansion over the next three decades.
In January, the City Council approved this plan, capping the amount hotel guests will pay. Now the city’s hoteliers will decide on the tax hike at an April vote.
City Taxpayers | The city’s day-to-day budget is on the hook for $3.5 million a year for the next 30 years.
This money would come from the same day-to-day budget that pays for the police, fire, streets and other regular services that have faced financial pressures for the past decade.
Supporters of the expansion point to projections that show the project will create more new tax revenues than the city is paying.
Risks remain. If the new tax revenues don’t materialize, city taxpayers are on the hook. And taxpayers could wind up owing more. Expansion backers have made verbal promises, but haven’t formally capped the amount taxpayers will pay.
The Unified Port of San Diego | The port has voted to spend the equivalent of $2 million over 30 years toward the project with some conditions. The port’s bottom line is expected to benefit from increased business for its waterfront tenants, including the three hotels next door. The port’s contribution now is capped.
What’s Next on The Money: Assuming hoteliers approve the tax hike in April, the City Council is expected to vote on a final financing plan in May.
The Law
In California, the law is pretty clear. If you want to raise taxes, you need voter approval. If you want to raise taxes for a specific project, such as expanding a convention center, two-thirds of voters have to sign off.
But San Diego’s Convention Center expansion isn’t going to a public vote.
Instead, expansion backers think they can get around the law. They argue that the tax hike actually is on hotel owners, not hotel guests. Under this logic, hoteliers are the ones who can vote on the tax increase.
This plan faces significant questions.
City Attorney Jan Goldsmith said proponents were touting the proposal as a legal slam dunk when it isn’t. (To drive home the point, he even used capital letters to emphasize the tax increase.)
The city plans to ask a court if it can borrow the money through this scheme. Two big special interests, the Chargers and the hotel-workers union, contend the financing proposal is illegal. (The fact that the Chargers have inserted themselves in the discussion — or, as our Scott Lewis said, the team went “nuclear” — highlights what’s at stake.)
Despite the risks, backers of the expansion think their plan has a better chance in the courtroom than through a public referendum. The key hotelier behind the expansion has said winning two-thirds voter approval is “almost an insurmountable threshold.”
What’s Next on The Law: The city will learn definitively if its financing plan is legal from a judge. Goldsmith has warned the court case could take a year or longer especially if someone challenges the plan.
The Hurdles
More than money and the law could derail the expansion.
Hotels vs. Labor | Hoteliers want greater control over how the Convention Center operates. Organized labor doesn’t want that to happen. Hoteliers have threatened not to pass the tax increase unless they win this fight.
The Coastal Commission | The state’s Coastal Commission, which regulates waterfront development, needs to sign off on the expansion. The Chargers and labor representatives are dubious the commission, which prioritizes public access and environmental concerns, will sign off.
U-T San Diego | After developer Doug Manchester bought the city’s largest newspaper, it embarked on a crusade to build a mega-project that includes a stadium and a different Convention Center expansion at the 10th Avenue Marine Terminal, now industrial port land. The paper now is embroiled in an increasingly nasty fight with the port, but it’s also taken pot shots at the current Convention Center expansion. The U-T could fulminate from its bully pulpit against the expansion.
What’s Next on the Hurdles: The battle over Convention Center board control could be resolved by this spring when hoteliers vote on the tax. The current Coastal Commission schedule anticipates a final decision in spring 2013. What the U-T does is anyone’s guess.
The Schedule
At a January City Council hearing on the expansion, Sanders said he expected to break ground before he leaves office at the end of the year. Labor leader Lorena Gonzalez responded by laughing out loud.
Given the legal and Coastal Commission timelines, it’s unlikely Sanders will meet his goal.
That means Sanders’ successor will control the project. The three major Republican mayoral candidates, Carl DeMaio, Bonnie Dumanis and Nathan Fletcher, all support the expansion and at the least the financing plan’s outlines. The lone big name Democrat in the race, Bob Filner, opposes the financing package and is lukewarm on the project.
If You Want More
• Backers have used a 2010 consultant’s study to make their case.
• The city’s independent budget analyst responded to that report. A union official has released a study arguing the job creation numbers are inflated.
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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