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Measure C proponents sold their initiative on the promise that a hotel-tax increase could fund a Convention Center expansion. But the measure, which city attorneys are now preparing to argue passed with a simple majority, also gave the city an out if it decides against an expansion or to delay the project – options that could be more appealing amid uncertainty about the future of the convention industry.
The hotel-tax hike, which also promises to pull in cash for homeless programs and road repairs, includes a clause declaring that collections can continue for 10 years for those other purposes if the city doesn’t take steps to finance a Convention Center expansion. The initiative language also states that the tax increase can continue as long as necessary to repay any bonds the city has issued for homeless initiatives or street fixes.
The bottom line: The tax hike doesn’t require a Convention Center expansion despite backers’ longstanding obsession with making one happen. And if city leaders don’t expand the facility, Measure C could still pull in millions annually for homelessness and road repairs, plus allow city leaders to seek hundreds of millions of dollars in upfront financing to address those causes. It could also fund upgrades at the Convention Center.
Keith Maddox of the San Diego & Imperial Counties Labor Council, a leader of the business and labor coalition behind Measure C, said that was a strategic move.
He said the citizens’ initiative was crafted to ensure the city could reap additional funds for homelessness, road repairs and the Convention Center even if the city decided an expansion wasn’t feasible.
“It was done very intentionally because definitely those monies are needed,” Maddox said.
Accordingly, Measure C gives city leaders the option to seek up to $750 million in upfront financing from the bond market for homelessness, which could back more housing development or other needs that could quickly eat up eat up annual tax hauls once projected to hit about $25 million a year in Measure C’s first decade. It also allows city officials to issue up to $400 million in bonds for street repairs after the measure’s first five years, the point when the measure starts siphoning off money for infrastructure along with homelessness and Convention Center projects.
Maddox said proponents set the 10-year timeline for proceeding with Convention Center bonding plans knowing it could buy the city time and also give the city new options to address two of its other major challenges.
When the initiative was announced in early 2018, civic leaders were grappling with how to deal with a duo who owned the rights to the property they envisioned for the bayfront Convention Center expansion. Delays to the long-wanted expansion project also led to concerns about increasing project costs that could foil or force changes to expansion plans.
The business and labor groups behind the ballot measure never predicted that the measure wouldn’t be presented to voters until March 2020 or that soon after that election, the tourism industry and the Convention Center would shut down overnight.
What they did predict: Pursuing Measure C as a citizens’ initiative might pave the way for a legal challenge arguing the measure passed with a simple majority if it didn’t cross the difficult two-thirds threshold for taxes for specific purposes. Now, following favorable rulings for citizens’ measures elsewhere in the state, the City Council voted earlier this month to argue that the measure that garnered support from 65 percent of San Diego voters in fact passed.
If a court decides the measure indeed passed with a simple majority, the initiative will give the city years to potentially consider its options and assess the state of a convention industry devastated by the pandemic.
If city leaders decide against an expansion, Convention Center funds collected annually or even via bond issuances of up to $850 million could instead be directed to “capital improvements to modernize the Convention Center,” per the initiative. Measure C also allows the city to potentially direct hotel-tax dollars into the Convention Center Corp.’s capital fund or to cover annual debt payments associated with a previous Convention Center expansion.
Attorney Gil Cabrera, a former Convention Center Corp. board member and Measure C supporter, said the initiative also gives the city the flexibility to maintain the full tax hike over the entire 42-year span by simply issuing bonds to modernize rather than expand the Convention Center.
“They could issue long-term bonds for the modernization, and by doing that within 10 years of the imposition of the tax, they get to keep the entire tax,” Cabrera said.
The Convention Center Corp. already has plenty of capital projects lined up. The corporation’s 2021 budget lists more than $111 million in needed capital projects and more than $7 million in expected maintenance and equipment replacement needs over the next decade.
The Convention Center Corp. board in late 2018 also reviewed conceptual modernization plans by Seattle-based LMN Architects that included $276.2 million in potential upgrades to the facility’s front entrance, lobbies and other areas.
Convention Center Corp. spokeswoman Maren Dougherty said the corporation’s understanding has been that modernization projects described in Measure C could include the capital needs identified in its budget as well as building upgrades needed to ensure the current building matches up with the potential expanded space. The conceptual plans could also be on the table for discussion with the city if a court deems Measure C passed.
Specific modernization plans for the existing Convention Center building had been expected to be developed along with plans for the new space, Dougherty said.
Regardless of the next moves in court or at City Hall, the Convention Center Corp. is set to get an updated condition assessment of its facility this summer that could inform future construction plans – with or without an expansion.
Thus far, Mayor Todd Gloria has publicly reiterated his support for Measure C by urging the City Council vote to pursue the legal argument that the measure prevailed, but he hasn’t detailed what might come next for the Convention Center. The mayor has said he won’t take any steps to implement the tax hike until the city gets a court ruling in the case.
City Attorney Mara Elliott’s office has said it anticipates a trial court ruling within a year, though an appeal of that ruling could extend the process.
City officials are likely to begin analyzing next steps behind the scenes before any court decisions.
Gloria spokeswoman Jen Lebron confirmed that mayor’s team expects to assess the viability of a Convention Center expansion and the hotel-tax collections that might be expected if Measure C is declared victorious.
But Deputy Chief of Staff Nick Serrano emphasized that the mayor’s office won’t be making decisions until its options have been vetted and a court has ruled.
Once that happens, Serrano wrote in a statement to Voice of San Diego, Gloria’s team will share its conclusions with other city leaders.
“We will return to the City Council when we have actual facts to share,” Serrano wrote. “We are not going to entertain hypotheticals.”