San Diego’s hoteliers made an effort Friday morning to cap the city’s financial risk under the proposed Convention Center expansion. At the same time, they’re pushing for major changes to give them more control over how the center does business.
Up until now, the city has said it would pay $3.5 million annually for the next three decades toward the $520 million expansion out of its day-to-day budget, the same pot of money that goes toward police and fire and fixing potholes. Expansion boosters have justified the expense by arguing the city will realize hotel-room tax revenues far in excess of that amount from the project.
But as is, the current financing plan leaves the city on the hook should those new tax dollars not materialize. Friday morning, San Diego’s hoteliers pledged a way to pick up the bill if that happens.
Four years ago, hoteliers imposed a 2 percent tax on hotel rooms to market tourism and formed the Tourism Marketing District to oversee it. The district, whose board the hoteliers control, now has a $28 million budget.
On Friday the district board voted to make up the difference if city’s expansion bill would be more than $3.5 million. The vote, formalized in a letter to Mayor Jerry Sanders, effectively caps the city’s contribution at that amount.
“I think the letter sends a clear message to the city that we feel very strongly that this is such a great deal for the city that we’re willing to put some skin in the game,” said John Schafer, a vice president at the Manchester Grand Hyatt and a district board member.
The vote, however, comes with some big caveats.
The first caveat is the law. The 2 percent charge expires at the end of the year. The board wants the city to reauthorize the fee, and its offer Friday to help on the expansion is contingent on that extension. The City Council gave the initial go-ahead to the idea last fall. But the ultimate approval faces legal questions.
A new law could make the fee illegal without voter approval. The local hotel-workers union has threatened to sue if the charge gets reauthorized without a public vote. The plan to reauthorize the district now is months behind schedule.
The second caveat: If a major, unforeseen event, such as a terrorist attack or earthquake, occurs, the board has an out. In legal language, this provision is known as “force majeure.”
A major, unforeseen event has happened before. The center’s first expansion opened in the wake of the Sept. 11, 2001 terrorist attacks. The district’s lawyer, John Lambeth, said in an interview that if a similar event occurred around this expansion, the district likely would be off the hook.
“I tend to think that it would be force majeure,” Lambeth said of a similar terrorist attack. “But that’s going to be a factual question at the time.”
A Major Fight That Could Kill Expansion
The hoteliers’ move Friday morning comes in advance of big decisions about the Convention Center’s future.
The hoteliers want greater control over the center in exchange for their approval of a hotel-room tax to finance a majority of the expansion.
Early next week, both the Convention Center’s board and the City Council will vote on switching the center’s sales and marketing from the center’s control to the city’s private tourism promotion organization, the San Diego Convention & Visitors Bureau.
Organized labor doesn’t want hoteliers to control the board because many unions now operate in the Convention Center. It’s a major fight that could lead either side to attempt to kill the expansion if they don’t get their way.
We’ll have much more on this issue, but it’s all happening very fast and with little public discussion.
The Tourism Marketing District’s expansion guarantee didn’t appear on the board’s meeting agenda for Friday. I only found out about it because someone tipped me.
The board added to its agenda Friday morning under urgency provisions. District officials said Sanders had requested the letter in the last couple days.
The Convention Center board will hold a special called-meeting by telephone on Monday to approve the sales and marketing switch. And the council just announced on Friday will vote on the sales and marketing changes on Tuesday.
Here’s a draft of the letter the Tourism Marketing District approved sending to Sanders. The letter will be amended before it’s signed, Lambeth said, to clarify that the district needs reauthorization before the pledge takes effect.
If you need to get caught up on Convention Center expansion drama, check out our recent Reader’s Guide.
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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