Convention Center Expansion Proposal Moves Forward
Friday, April 9, 2010
The Port Commission approved a plan this week to give the San Diego Convention Center control of six acres of bayfront land. The move opens the doors to a proposed $753 million expansion of the facility and the construction of a 500-room hotel.
Kent Davy, editor of the North County Times
GLORIA PENNER (Host): The words Comic-Con and convention center expansion have become tightly connected recently. For folks that use social media, the message is being circulated that for San Diego to continue to host the mammoth comic book pop culture convention, the center would need to get much, much bigger and soon. Otherwise, Comic-Con might move north to Anaheim or even Los Angeles. And this week a major step was taken for that expansion to happen. Scott, tell us about this land deal with the Port of San Diego.
SCOTT LEWIS (CEO, voiceofsandiego.org): Well, there’s a section of land right next to the current convention center and it is – all the land along the port is state tidelands and it’s actually owned by the state. The state contracts out its management of the lands basically to the San Diego Unified Port District. And so the Port District then leases that land out to hotels, to people that run, you know, importing-exporting, whatever you have along the port, they all are leaseholders. In fact, the organization that represents them are called Port Tenants. They are tenants. And so there is a group that actually owns this little – or not owns, owns the lease to this little section of land next to the convention center and in order for the convention center to expand, they need to get ahold of that lease. And so what they did is negotiate with these leaseholders and with the Port to basically purchase that from them. So they purchased a lease from these people and now they are going to have to try to figure out how to pay for it.
PENNER: Okay, well, let me ask our callers on this one. I think this is an interesting one, an expansion of the downtown convention center to accommodate larger and larger conventions. There are some arguments for it, some arguments against it. We’re going to hear both as the program continues but I’m interested in your investment in this subject. Is this something you’re paying attention to? And the second question is, are you willing for public funds to go into the expansion. And we’re going to cover that as well. One more question before we go to the break, Scott. Was there an urgency to get this done? Because it seemed to happen very fast.
LEWIS: Well, I think the mayor is anxious to move on to the discussion of, okay, let’s actually put this in motion, let’s get an environmental review started but they couldn’t get any of that started, they couldn’t – until they actually said, okay, this is where it’s going to be, this is what we’re going to do to build it, and then they could get the approval and now start thinking about financing.
KENT DAVY (Editor, North County Times): Well, there’s also the issue of Comic-Con itself because Anaheim and Los Angeles both put in pitches to the Comic-Con organizers to move the convention up there and I suspect San Diego was pretty interested in trying to keep it if they can.
PENNER: Well, we’ll talk about that some more, too. We’re going to go into a break now. Our number is 1-888-895-5727, if you’d like to join us and talk about expansion of the convention center, the urgency that the Comic-Con situation seems to be putting on all of it and have you ever gone to Comic-Con? This is the Editors Roundtable. I’m Gloria Penner.
PENNER: Well, good morning. This is the Editors Roundtable. I’m Gloria Penner. I’m at the roundtable today with Kent Davy from the North County Times and from the San Diego Business Journal, Tom York, and voiceofsandiego.org has sent us Scott Lewis. And we’re talking about expansion of the convention center in downtown San Diego and the push that seems to be linked to the fact that Comic-Con, the convention, has outgrown San Diego and might very well take its business elsewhere unless we grow as well. Is that a good enough reason for that, for the expansion of the convention center? In fact, is the fact that some conventions are getting bigger and bigger a good enough reason to expand? Public money will be involved here. Tom, the president of the Taxpayers Association, who voted against the expansion as a member of the mayor’s Convention Center Task Force, said the expansion will need an infusion of cash from another public agency or multiple tax increases. What’s your opinion of her objection? Does it hold water…
TOM YORK (Contributing Editor, San Diego Business Journal): Well, somebody…
PENNER: …so to speak?
YORK: Somebody has to pay for the expansion. I think that it’s three-quarters of a – let’s see, $753 million, so that’s three-quarters of a billion dollars so somebody would have to pay for that. And I think what the City is looking at now is probably, you know, taxing, you know, such things as, you know, food service, hotel services, taxicab services, anything related to tourism to sort of fund this expansion.
PENNER: $780 million is what that expansion is predicted to cost and – I’m sorry, 753…
YORK: That’s what I have, yes.
PENNER: But that’s now. I mean, it’s not going to be built tomorrow. It’ll probably be built maybe 3, 4, 5 years from down the line.
YORK: Right, well, if they use bonds to basically underwrite some of the cost of the construction, the cost of the bonds will be twice as much as the cost to build. So you figure that we’re talking, you know, upwards to a billion and a half dollars here…
LEWIS: Okay, what’s…
YORK: …over 30, 40 years. Go ahead, Scott.
LEWIS: Yeah, like $50 to $70 million a year, basically, we’re going to have to pay…
LEWIS: …for a few decades now and so the question is—and I think a lot of people are bringing this up—is if we are going to raise that money and some people are still talking about perhaps just increasing the hotel tax, which could be used for any number of different city issues, if you are going to raise that money, is this the best place to infuse that for infrastructure to build the economy? And I think that there are some very smart people around the city wondering whether it is. Look at – If you think about it, this is an attempt to get a bigger slice of a set pie. This is the groups in the country that are – the pie is the groups in the country who are going to conventions. That pie isn’t necessarily growing. What we just want to do is fight for a bigger section of it. And so if – are we really interested in such a limited growth industry when you could perhaps invest in infrastructure that might spur the kind of growth that creates more pies, and I think that’s the big issue that a lot of people, economists and thinkers in San Diego are wondering whether this is the best investment.
PENNER: What do you think, Kent?
DAVY: Well, the problem that I think San Diego Convention has is that there are increasing opportunities for people to take its share of this pie away from them and that’s represented by Anaheim. Anaheim has got 200,000 square feet more convention space than San Diego does. That’s why Comic-Con’s interested in perhaps going up there.
LEWIS: But the convention center spokesman yesterday told me that they are booked out for the foreseeable future. So, no, they’re not afraid of losing anything. What they’re afraid of is not being able to compete for these bigger ones.
PENNER: And are the bigger ones more profitable?
LEWIS: Well, I suppose. I mean, we all focus on Comic-Con. They’re very easily identifiable. We all understand it. But there’s things like thoracic surgeons and proctologists, I don’t know, all kinds of groups that go around the country and so…
PENNER: You’re dealing with both ends of the body there, aren’t…
LEWIS: But my point is, is, yeah, they say that we’ve literally turned down 400 potential events that could’ve come if we’d had a bigger facility. Now that’s a fact we’d like to check but it’d be interesting to see if that were true. But if it – but that is – that brings a lot of money to restaurants and to a select group of businesses including hotels, and those people have a lot of influence on city hall.
PENNER: Well, let’s hear what our listeners have to say. They always have something interesting to put into our mix of conversation. We’ll start with Victor in Jamul. Hi, Victor, you’re on with the editors. Please go ahead.
VICTOR (Caller, Jamul): Yeah, I have a question. You know, I understand that the Port or whoever’s purchasing these leases from, that they’re going to pay like three times the worth of that lease, so the question is who are they related to to make that kind of a purchase. And I know that in San Ysidro they’re trying to force us with imminent domain. I would think if, at that point, why not use imminent domain but, like I said, sometimes we wonder who these leasees are and the relation between the people or the Port Authority that’s going to purchase that.
VICTOR: And that would save the taxpayers a lot of money.
PENNER: All right, let’s ask Scott Lewis.
LEWIS: Well, yeah, let’s get our players here clear. Yes, the Port District, again, oversees these lands and these leases. The City or the convention center itself is buying one of the leases from these people. Now, the Port did an analysis that said that the valuation of this lease was about $8 million less than what the convention center had agreed to purchase it for. Now, they – So there was a question and the Port said, well, do you guys – are you guys worried about that? Do you need to renegotiate? And the convention center said no, this is what we believe it’s worth. It’s kind of like the deal, you know, a house might not be that – worth that much but if that’s the only place you can put a great antenna, then that house is worth a lot to the person that wants to put the antenna there.
DAVY: There’s a different way to look at – the same idea, but a different way to look at it. The appraisal was done based on its use, I believe, as a parking structure area. This would be an appraisal presumably by the convention people that says a different use. It’s the same problem you have in, say, back country if you’ve got a bunch of property that’s – that currently you can subdivide for 20 houses and they downzone it so you can only get three out of, all of a sudden your appraisal isn’t worth as much.
LEWIS: Well, and that was the interesting part of the deal because the Convention Center Corporation is a nonprofit associated with the City and they’re the ones that agreed to purchase this. But eventually the City or some other entity will have to take over the payments to actually make this $13 million whole. And that’s what’s so – that’s what Lani Lutar at the Taxpayers Association was objecting to. Nobody knows who’s going to pay for this and nobody wants to talk about it. And they – and now we’re promised, well, it’s something we’ll discuss now in the next couple of months, in the next year. Well, nobody wants to step up and say, well, this is what we’re willing to sacrifice in order to make this thing happen.
PENNER: But meanwhile the private business group that owns the lease, they—what’s it called—Fifth Avenue Landing LLC, is sitting pretty, is it not, Tom?
YORK: It is sitting pretty. But at some point down the line they’re going to have to build a hotel on the property too, so I mean, they’re still on the hook for some cost of their own. But it does look like a pretty good deal up front when you analyze it.
PENNER: Let’s take one more call from Graham in Tierrasanta. Graham, you’re on with the editors.
GRAHAM (Caller, Tierrasanta): Hi. My question was is how much revenue does Comic-Con actually generate for the downtown area versus the cost of how much it would cost to expand the convention center?
PENNER: Do you have that answer, Scott?
LEWIS: No, and I don’t think anybody – Everybody always, you know, projects, well, the Holiday Bowl’s worth, you know, $8 billion dollars or whatever they say that it’s worth all the time when it comes in. The – 126,000 people come and they eat and they stay and they spend money and they do all kinds of things here. So that’s worth a lot to people who feed them and sell them things.
PENNER: Okay, thank you, Graham. Last question on this is from Richard in Tierrasanta. Richard, you’re on with the editors.
RICHARD (Caller, Tierrasanta): Hi, yes, first of all, you asked if we were following it, yes, I do primarily through the voiceofsandiego in their morning report. But I don’t have a problem with how much we paid for it because when you lease something like that you have a stakehold in it and I do think various appraisals based on the best use of the property varied all over the place.
RICHARD: And I think it’s unfair to just use Comic-Con because I think they’re just a figurehead and there’s several other conventions that will follow in their suit.
PENNER: So you think it’s a good investment, Richard?
RICHARD: I think it’s a good investment for the future. I have questions and concerns but at this point, yes, it looks okay.
YORK: I was going to say in answer to your previous question that the value that’s been put on Comic-Con as far as the spending goes, around $60 million in terms of…
PENNER: How much it brings…
YORK: …how much it brings.
PENNER: Just to the convention center or to the community?
YORK: To the community at large…
YORK: …in terms of hotel rooms and meals, that sort of thing.
PENNER: Okay. Final comments before we turn to the housing market. Kent, did you have something you wanted to say?
PENNER: No? Anybody else? A final comment? No? Then we are moving on to housing.
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