The Morning Report
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The San Diego Convention Center Corp. hopes to more than break even on a contract with the federal government to shelter migrant children.
The federal Administration for Children and Families’ Office of Refugee Resettlement last month agreed to pay the Convention Center Corp. up to $25.5 million to host up to 1,450 youth a day and provide various services. The federal agency is set to pay for services delivered, and the contract includes a 10 percent contingency, meaning that the final payout for the Convention Center Corp. won’t be known until after the operation concludes and could come in under $25 million.
The Convention Center Corp. for months offered the city, which also manages and has a financial stake in the center, a better deal to shelter hundreds of homeless San Diegans. The corporation gave the city a 15 percent discount on rent and provided some space free of charge.
The corporation, hammered by cancelations during the pandemic, didn’t offer those options to the federal agency and now hopes the new revenue can refill its dwindling reserve account.
The Convention Center Corp. reports that the federal government asked the corporation for its standard fees for typical events, and then quickly signed an agreement with those rates.
Convention Center Corp. CEO Rip Rippetoe defended that decision in a Monday statement.
“This emergency intake site is significantly more complicated and challenging than Operation Shelter to Home [the homeless shelter operation] and commercial event activity we have had in our building. We don’t know what the final cost will be,” Rippetoe wrote in an email to Voice of San Diego. “We feel it was responsible and appropriate to provide the federal government our standard rates to ensure we can cover all costs associated with this large-scale, continually evolving effort.”
The March 26 agreement with a division of federal Health and Human Services covers facility rent, utilities, trash, personnel services, supplies and pass-through costs for contracts that the Convention Center Corp. will handle to cover items such as telecommunications and parking. The agreement is set to end July 15.
Thus far, the Convention Center reports that the migrant shelter operation has used more space than the homeless shelter that came before it.
Corporation executives have said any cash they pull in will flow to the agency’s significantly depleted reserve account.
At a City Council budget committee hearing last week, City Councilman Chris Cate asked about net revenues that the financially struggling Convention Center Corp. might expect from the federal operation.
Rippetoe noted the agency has yet to finalize projections since the amounts collected depend on services and space used.
Chief Financial Officer Mardeen Mattix said the corporation hoped it would net some cash from the migrant shelter operation – and that it hoped to direct it to the corporation’s reserve fund designed to address shortfalls, emergencies and capital needs.
“We’re hoping — and it’s anticipated — that the value of the net proceeds that will come into us will hopefully replenish the loss of the reserves we suffered last fiscal year as well as this fiscal year,” Mattix said. “That truly was the intent and part of how this was budgeted. We’re hoping to get back to replenishing those reserves after the end of the operation.”
In a memo prepared for the Convention Center Corp. board’s budget committee meeting on March 22, Mattix shared projections that the agency’s reserve account could fall to $0 at the end of next year. The amount is far less than the roughly $3 million needed to adhere to a Convention Center’s policy ensuring the rainy-day and projects fund hits the equivalent of at least 8 percent of average revenues over the past three years.
The Convention Center Corp. had started last fiscal year with nearly $13.7 million in its reserve account and ended the year with just $3.5 million in that fund after dipping into it to help address operating expenses, debt and needed projects.
“As we know is the case for many other organizations and businesses, this extended pandemic — which shut down event activity for well over a year — made it extremely challenging to maintain reserves,” Convention Center spokeswoman Maren Dougherty wrote in an email to VOSD.
The Convention Center’s budget woes have continued this year.
The Convention Center Corp. in March projected a $16.5 million budget deficit for the fiscal year beginning in July before it agreed to shelter migrant children.
The corporation recently requested a $10.2 million subsidy from the city to help balance next year’s budget. If approved by the City Council, that amount would be on top of other assistance the city has typically forked over to aid the corporation with debt service for a previous Convention Center expansion plus annual expenses to clear groundwater from under the facility’s parking garage and book conventions. Last year, the city budgeted more than $15 million for those line items.