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Judge Holds Off Final Ruling on Convention Center Financing Case

A San Diego Superior Court judge today delayed a final decision on the legality of the plan to finance a planned expansion of the downtown convention center.


The deck on the San Diego Convention Center.

Judge Ronald Prager listened to about two hours of oral arguments from lawyers representing the city of San Diego and two opponents of the plan. He then took the matter under submission.

On Monday, Judge Ronald Prager tentatively ruled that it was legal to have hotel land-owners assess themselves a percentage of room rates and use the resulting $30 million annual revenue to pay the bulk of the debt service on the project. The city plans to kick in $3.5 million annually, and the Port of San Diego would add $3 million a year.

The city of San Diego filed suit because, according to City Attorney Jan Goldsmith, the funding mechanism entered a gray area of the law. Lawyers for the city told the judge that they wanted certainty before the bonds were issued.

A citizens group called San Diegans for Open Government and civic activist Mel Shapiro joined in the court action to challenge the plan, contending that the process amounts to a tax, requiring a public vote.

The judge found that the election of hoteliers to assess themselves "conformed with all applicable constitutional provisions, statutes and ordinances.'' His tentative ruling turned aside nearly all of the opponents' arguments, but he agreed to hear more arguments before issuing a final ruling.

During today's oral arguments -- which mostly delved into details about laws that grant and limit the taxing authority of charter cities -- he added that what the city has done "is completely proper under the laws of the state of California.''

He told Cory Briggs, an attorney for the open government group, that his arguments were "off on different tangents.''

Under the plan, downtown hotels would be charged 3 percent of room rates, those in Mission Valley and Mission Bay 2 percent and outlying facilities 1 percent, with the money funding most of the expansion.

The $520 million expansion plan still needs to be approved by the California Coastal Commission. Once construction begins, work should take about 33 months, according to the city.

The center would grow to 2.75 million square feet of floor space, with the most contiguous floor space on the West Coast at 750,000 square feet, project manager Charles Black told the City Council last year.

The city can expect an extra 25 major trade shows per year, bringing 250,000 visitors and their wallets to San Diego, Black said.

He said the annual economic impact of expansion on the region would be $689 million, including a direct bump of $76 million in spending at restaurants and retail outlets. The city will receive an additional $13.5 million in tax revenues, he said.

Area tourism officials say organizers of the biggest trade shows have been bypassing San Diego because the local facility is not big enough. Comic-Con International, which originated in San Diego, had been courted by other cities but chose to remain when an expansion was promised.

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Avatar for user 'laplayaheritage'

laplayaheritage | March 13, 2013 at 3:50 p.m. ― 3 years, 11 months ago

The lame City Council is still putting us in this terrible position. Just let us vote on increasing Hotel Taxes.

Maybe the new Councilman Kersey will champion the public’s Right To Vote issue to finance our public infrastructure needs. For example: A 5 percent increase in TOT for public infrastructure, advertisement, and marketing, that can include a maximum of $520 million in public TOT funds for a contiguous convention center expansion.

Part of the City Council’s giveaway to private Hoteliers also includes any Incremental TOT Increment from the existing 10.5 percent. For Fiscal Year 2013 the existing legal TOT brought in $86.3 million.

Therefore if San Diego adds additional hotel rooms or increase hotel prices in the future, then all of the incremental 10.5 percent TOT revenue above the $86.3 million FY2013 baseline will go towards paying for the Expansion on top of the addition $520 from the Special Tax.

If the Convention Center is not built, the money is split 50-50 with the City, but includes legal loopholes for 100 percent Tourism Authority and zero percent City.

There may also be a way for the proposed 500-room Hilton Bayfront addition to be paid with these new private taxes and any public Tax Increment on existing TOT. The financing issue is murky.

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