Deal To Fund Convention Center Expansion Draws Fire
Monday, May 7, 2012
The San Diego City Council will vote today on whether to ask a judge to weigh in on the legality of the funding plan for a proposed Convention Center expansion. But it’s another deal - that some say was struck to gain favor with local hotel owners - that has some people up in arms.
The San Diego City Council will vote today on whether to ask a judge to weigh in on the legality of the funding plan for a proposed Convention Center expansion.
Pretty much anyone with any power in San Diego agrees that an expanded Convention Center would be a good thing for the city. But the project isn’t cheap.
The up-front cost is about $520 million - more than a billion dollars with bond interest. City leaders feared a public vote on the project might fail, so they asked city hoteliers to raise room taxes to fund most of the expansion.
The scheme was successful. And earlier this spring San Diego Mayor Jerry Sanders announced the hoteliers overwhelming voted to go along with the plan.
"The vote’s not only good news for hotel and visitor industries, it’s better news for our economy," Sanders said. "This expansion will create 11,000 jobs, 4,000 construction jobs and 7,000 permanent jobs, generate millions of dollars in revenues for city services and pump nearly $700 million a year into our economy."
But there are those who think it may be a better deal for some than for others. Why? Many of the hoteliers are part of the San Diego Convention and Visitors Bureau (ConVis). And while hotel owners were voting on whether to increase their room taxes, the San Diego City Council voted to transfer a lucrative marketing and booking contract from the public Convention Center board over to the privately run ConVis.
That means ConVis will now book many of the conventions held at the center and can also set the center’s prices. David Alvarez was the only council member to vote against the deal, which he says was done to secure the hoteliers' vote.
"Hotel owners were clearly stating that, unless they received control of how we market and control the Convention Center, they were unwilling to support the tax that was promoted to create the fund to expand the Convention Center," he said.
Alvarez said it was a hasty deal that had no business plan and no proof this is a good move for the city.
San Diego Convention Center Memo
Memo to the Convention Center's Board of Directors from Carol Wallace, the president and CEO.
The Convention Center staff also strongly disagreed with the move. And local labor unions felt the same way. They worry that hoteliers will divert lucrative business away from the center, which generates public revenue, and into private hotels, which don’t always employ union workers.
"I think it is the most disgusting power grab I’ve ever seen at City Hall," said Brigette Browning, president of the local hotel-workers union. She calls the move a giveaway to hoteliers whose primary interest is making money for their own properties, not making sure the Convention Center is profitable.
"These hoteliers are not doing us a favor by supporting the expansion of the Convention Center. They are going to benefit from the Convention Center expansion one way or another," Browning said. "And if we really believed the citizens of San Diego had a value, not just rich hotel owners, then we would be saying to them, 'OK, what is the community component?' It’s not just about these guys making more money. It’s about all of us being more prosperous."
While critics of the move call it a give away to hoteliers, supporters of the switch say it will streamline operations and help get the expansion built.
"People keep saying it’s a giveaway. I’m not sure what the giveaway is. It’s a giveaway to 11,000 jobs," said Stephen Cushman. He is special assistant to the mayor on the Convention Center expansion.
Cushman has been working on the project for three years and helped create the financing plan. It relies on $35 million a year from the increased hotel taxes and $3.5 million a year from San Diego coffers for 30 years. The Port of San Diego is also kicking in $3 million a year for 20 years. Cushman says union fears that business will be diverted from the Convention Center are unfounded.
"Whether it’s the Town and Country, or the Manchester Hyatt, or the Marriot, wherever it is, each hotel has its strengths and each has its weaknesses," Cushman said. "But there is nothing like the San Diego Convention Center. There is no one that has the number of square feet, there is no one who can feed as many people. The new Convention Center is going to have an 80,000-square-foot ballroom. There’s no such thing like that in the city."
Cushman admits that hoteliers wanted certain assurances they could book as many hotel room nights as possible. And having more control of the center might give them those assurances. But he says the City Council will get regular updates on how the deal is working.
And this is not a totally new concept.
Up until 2004, ConVis actually had control over the center’s bookings. But the contract was taken away after questions were raised over how ConVis was spending taxpayer money. Current ConVis President and CEO Joe Terzi said the organization is more stable now. And he said having a profitable Convention Center is in everyone’s interest.
"We don’t expect to change the pricing; we don’t expect to change a lot of the standards," Terzi said. "And, frankly, we can’t. Because if we do that and the revenue stream to support the building goes away, no one is going to be successful. So we recognize there’s an obligation."
Terzi acknowledges that hoteliers will benefit from the deal. But he said that means San Diego as a whole will benefit as well, since tourism is such a big industry for the city.
But whether this deal will lead to the expansion that most everybody would like to see is uncertain. A judge will be weighing in on whether the funding plan is legal and that process could take more than a year.
Video by Nic McVicker
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