The Morning Report
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Mayor Kevin Faulconer did not support a sales tax increase backed by police. He doesn’t seem to support a tax increase for infrastructure needs throughout the city. And a hotel-room tax hike for a new Chargers stadium was a nonstarter his pollster said would be impossible to pass.
But the mayor has found a tax increase he will take to voters: a hotel-room tax hike to expand the Convention Center along the waterfront.
It would be a smaller expansion than the one the city tried to build before a court threw the plan out. It would be a cheaper expansion — about $410 million as opposed to the $560 million project imagined before.
It would still, however, face fierce legal opposition and a high threshold for voter approval.
The news came with the release of a much-anticipated report about whether the Convention Center’s clients would support a different type of expansion. The report says both options — a separate facility across the street or a bigger bayfront facility — would make more money for the city and local economy than the current one.
But a bigger facility standing alone would do better. Here’s the breakdown the report provided:
The mayor says he found the study so persuasive that he has made his decision not to support a split convention center.
“Our customers have spoken and what they’ve said is they want to have us continue to push for a contiguous expansion,” said Steve Cushman, chairman of the Convention Center Corp. and the mayor’s point man on expansion efforts.
That will likely not be welcome news to JMI Realty, whose leaders proposed a convention campus near Petco Park across the street from the existing facility. It would be adjacent to a new hotel JMI would build.
The mayor is open to someday pursuing the campus alternative and there is support for JMI doing the hotel.
“Headquarters hotels are always dear to convention planners. The Hyatt and the Marriott are fabulous but like all good hotels, they’re pretty full all the time. Five-hundred new rooms at the Hilton and 1,600 across the street are going to be very valuable to our Convention Center,” Cushman said.
JMI representatives declined to comment.
If their plan is dead, so is any remaining hope from some Chargers fans that the football team might be lured back to the negotiating table if moving downtown was in play. The Chargers argued for a joint-use convention center and stadium for years — making the point along with others that the former plan to expand the Convention Center relied on a faulty legal argument that the city and hoteliers could raise taxes without a vote of the people.
Lawyers Craig Sherman and Cory Briggs, representing separate clients, proved that argument correct and crushed the Convention Center plan. The Chargers briefly championed a vision to work with JMI on combining this separate convention center facility with a stadium.
We all waited to see whether the mayor would support a split convention center or remain loyal to the original idea to simply add on to the existing facility along the bayfront.
Now he’s made his call.
But that’s not the end of the story. Not only does the mayor need to persuade voters to increase taxes, he also has to overcome another lawsuit from Briggs, who believes a larger Convention Center illegally blocks access to the waterfront.
“It’s the only remaining open space on the South Embarcadero and they propose to put a box on it. That’s not acceptable,” Briggs said. “We’re not going to spend one cent talking about a waterfront facility. It’s illegal and it’s not going to happen.”
The project did get Coastal Commission approval but Briggs’ suit was formidable.
“We’ll continue to work with Cory to try to move forward on this project. The mayor and I and Cory have been able to work together on a number of projects and would certainly hope somehow we can continue to work with him,” Cushman said.
While that fight continues, the mayor will also have to persuade voters to sign off on his plan in overwhelming numbers. No major opposition can arise against tax proposals seeking two-thirds support if they are to succeed.
Of course, the mayor already did want to raise hotel-room taxes to expand the Convention Center as a city councilman. But in the past, he did not want voters to get to approve them.
The court forced him to change his mind.
This won’t be an easy sell.
In 2004, with the hotel-room tax rate at 10.5 percent, voters twice rejected increases to it — one of the efforts had the backing of nearly all hotel interests along with police union, firefighters and an array of civic organizations. It got 64 percent of the vote, just short of the required 66.7 percent.
Now the hotel-room tax rate is effectively 12.5 percent — as hotels were able to impose their own 2 percent levy on top if the city’s without a vote of the people. The Tourism Marketing District, overseen by members of the visitor industry, decide how that 2 percent is spent. (That is also being challenged in court — and Briggs has separately proposed a ballot initiative that would wipe it out and raise the entire hotel-room tax to 15.5 percent, allowing the city to spend it how it might wish.)
I asked the mayor’s staff why they thought voters would support a tax increase in overwhelming numbers when other ideas were written off as impossible.
“The fact that expanding the Convention Center will grow our economy, will bring in revenue to pave roads and will help attract and retain large events like Comic-Con gives voters many compelling reasons to support it,” wrote Matt Awbrey, the mayor’s communications director.
Correction: The original piece quoted Cushman as supportive of a 600-room hotel near Petco Park. It’s actually 1,600-rooms as envisioned. And a previous version said the mayor was not open to a split convention center, but only a hotel across the street. He prefers and is pursuing the contiguous expansion but is open to both the alternative and the hotel, his spokesman wrote in a followup.