By Jen Lebron Kuhney & Lori Weisberg
November 29, 2011
The Port of San Diego conditionally agreed Tuesday to pay $60 million over 20 years to help finance a $520 million expansion of the San Diego Convention Center.
The unanimous vote of the seven commissioners comes as the city of San Diego wrestles with how to fund the mammoth project, which is designed to make the city more competitive as a convention destination.
Despite the vote of support, commissioners made it clear they still had reservations about financial details of the plan.
“We’re not exactly throwing the money in the bank today,” Commission Chairman Scott Peters said. “We still have a lot to do.”
The commissioners raised a number of concerns, including:
• How Chula Vista, Coronado, Imperial Beach and National City — the four other cities in the Port District — can reap some of the monetary benefits of the $60 million investment.
• What will happen to the city of San Diego’s level of commitment to the project when Mayor Jerry Sanders is termed out after the 2012 election.
• When the Port will begin making its $3 million annual payment and how soon revenues from the expanded convention center will cover the costs.
• What the worst-case financial scenarios could be and how the city and Port would handle them.
According to studies commissioned by the Port, it could gain as much as $6.2 million annually in lease revenues if the expansion of the convention center and the adjacent Hilton San Diego Bayfront Hotel are completed in 2016.
The convention center proposal calls for increasing exhibit space from 525,000 square feet to 750,000 square feet. The plan would also create 101,000 more square feet of meeting space and 80,000 square feet of additional ballroom space.
Still in limbo is the biggest chunk of the project’s financing — a proposed surcharge on hotel rooms that would raise roughly $30 million a year of the estimated $40 million annual expansion cost.
Under a plan proposed by Sanders’ office, all hotels in the downtown area would be asked to add 3 percent onto their hotel bills; Mission Valley, Mission Bay and Harbor Island properties would be assessed 2 percent; and all others 1 percent.
“As I have said all along, those who benefit from this expansion should have to pay for it,” Sanders said.
That plan, though, has not been embraced by many of the hoteliers located outside of downtown San Diego.
Sanders met with a number of them late Tuesday afternoon to hear their ideas for alternative proposals that they believe would be fairer to more distant properties that gain little benefit from San Diego conventions.
Many of the hoteliers at the meeting agreed that additional funding sources need to be identified, including tapping Coronado hotels and tribal gaming, securing naming rights for the center and drawing on facility use fees generated by the center, said Robert Rauch, a San Diego hotel operator and consultant.
The practicality of including Coronado hotels in the financing mix, though, may be problematic.
The San Diego City Council will be asked next Tuesday to take the first step toward forming a community facility district encompassing area hotels that would pay an annual assessment, much like the Mello-Roos districts that assess homeowners extra property taxes for schools, roads and other community infrastructure.
“The city of San Diego has not requested that Coronado participate in any type of funding, nor do I think that Coronado would consider doing such a thing,” Tom Ritter, Coronado’s assistant city manager, said Tuesday.
Meanwhile, Steve Cushman, a special assistant to Sanders on the expansion financing, said he is hoping the San Diego City Council will allocate $3.5 million a year in hotel room taxes to help fill the funding gap. He believes the request is justified given the estimated $12.7 million a year in additional transient occupancy tax revenue the city can expect to collect from an expanded center.
Cushman had been hoping to secure a like amount from taxicab fares and a share of food and beverage sales in the Gaslamp Quarter, but he said there currently is too much uncertainty surrounding that funding source.