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Officials Approve Convention Center Expansion Lease Agreement

The San Diego Convention Center is seen in the background in this photo taken March 4, 2018.
Milan Kovacevic
The San Diego Convention Center is seen in the background in this photo taken March 4, 2018.
Officials Approve Convention Center Expansion Lease Agreement
Officials Approve Convention Center Expansion Lease Agreement GUEST: Andrew Bowen, metro reporter, KPBS News

. The city of San Diego has been trying to expand the downtown convention center on the Bay for years. There are a couple of problems. The city still has to get voters permission to borrow the money to build, and number two the city does not control the land it will be built on. The city Council and the Port agree to enter into a contract for a long-term lease of a site next to the existing convention center a site called the Fifth Avenue Landing. Here to explain to us what is going on is Andrew Bowen our KPBS Metro reporter. First of all, what is this piece of land the Fifth Avenue Landing the city wants? Why is it so important ? >> It is five acres of land next to the convention center on San Diego Bay. This is where the expansion of the convention center will be easiest at this point and time. The expansion already has on this site approval from the city, the coastal commission, if it happened somewhere else, it will take a lot more time, analysis, and probably more money. The two developers who hold the lease on the land who have been working on plans to build the hotel, the deal that was approved yesterday was -- could essentially buy them out of the deal. It would clear one big hurdle for the conventions. >>> Both the city and the port are involved. Explain how that is. >> It is a confusing constellation of government entities. The port of San Diego asked as a landlord. That's why they needed to approve the transaction. They are also fronting some of the money in the deal. The city of San Diego is spending the money on the transaction. They cannot spend the money without approval from the city council. >>> The agreement they reached this week on the lease is complicated. Tell us about the basic terms. >> The port of San Diego will pay $5 million to the fifth Avenue lending development team. You can call that a security deposit or a down payment. If voters this November approve an initiative to find the convention center expansion, the fifth Avenue lending partnership will get another $20 million. $33 million payment to them total. In the return for that they will give up the lease and the plans to build with the hotel and the site. If the initiative in November fails, the city of San Diego forfeits $5 million, the down payment, and Fifth Avenue Landing it's to keep the money and they can proceed with the plans to build a hotel. So it is the citizens initiative that is currently gathering signatures it's called yes for a good better San Diego. There is little doubt that it will qualify for the ballot. We can expect voters will decide on it in November. It will raise the transit occupancy tax which is the taxes paid by guest of hotel rooms to as much as 15.75% in the city. It is currently 12 1/2 %. Most of that money raised by the taxed -- tax will go to the convention center expansion and also programs for the homeless it is defined broadly. It could be used for affordable housing, and other programs to leave homelessness. A smaller allocation would also go to road repair. >>> At the city is placing a $5 million bet that the voters will approve the $5 million tax increase. Speak and it is a gamble. To locate matters it is not clear what the threshold of approval this tax measure will require. In California, tax increases go to a Pacific -- specific purpose. A two thirds majority needs to be approved. The California Supreme Court ruling through ambiguity into bad. If a tax increase comes from us citizens initiative gathering signatures, it may only need a simple majority for approval 50% of the vote +1. If the citizens initiative yes for a better San Diego passes with that simple majority but does not reach a two thirds majority, the city will need some sort of clarity from the courts on whether or not it past. That has to happen before March 15 of next year. That is a tight deadline. >>> The city may end up forfeiting the $5 million either way. Do you think the voters will care about the $33 million cost of the piece of land or maybe they will not be aware of it. City and I would not presume to know what the voters will be thinking in November. It is certainly a hefty chunk of money. >>> Originally it was going to be 13 or $14 million. >>> Yes in 2015 the corporation that operates the convention center could've purchased the lease for about $40 million less than half of what the city will pay for it under this deal. Convention center backed out of the deal because while it did want the land for this expansion, it did not have a way to pay for the expansion at the time. There was a financing plan that was thrown out by the courts. The mayor and supporters for this deal that was approved yesterday say sure hindsight is 20/20, we would've paid less back then if we would've known what was going to happen in the future. But based on what we had at the time information wise, we paid the right amount. We would not have paid money for a plot of land we were unsure we could use. >>> And the mayor is unsure the $33 million deal is a better deal. >> He is saying ultimately what this is for is the expansion of the convention center. It is important for voters to understand why the city wants to expand the convention center. The expansion would lose money. This is important for people to look understand. The cost to operate and maintain the convention center is more than the actual conventions that come to town pay in terms of rent. The rationale is that the secondary economic activity that is generated by the visitors coming into town would be a net gain for the city. New visitors coming in and spending money in hotels, restaurants, shops, [no audio]. >>> It was sent out at around 1200 and approximately 250 people including the children presented themselves. Other individuals have been able to get a Monetary visas and others are still in the process of applying for humanitarian visa. They felt that that perhaps was a safer option than trying to pursue a asylum claim in the U.S. >>> Let me ask you one final question. With the zero tolerance and the children being separated from their parents, and the announcement about wrister being -- restricting the criteria for asylum, what is the mood around people you are working with? >> The mood is one of rage. There are undertones of sadness but there is rage. They are threatening the very right to seek protection. >>> Inc. you for bringing us the perspective of people looking for safety in the country. Thank you. >> Thank you for having me.

The San Diego City Council and Port of San Diego Board of Port Commissioners both voted Tuesday to support a three-party settlement agreement to secure long-term control of the land needed to expand the San Diego Convention Center.

The agreement is contingent upon a November ballot measure that, if approved, would raise the hotel room tax from 12.5 percent to as much as 15.75 percent to fund the proposed $850 million convention center expansion.

RELATED: Citizens Initiative To Expand San Diego Convention Center Starts Collecting Signatures

The settlement agreement between the city, port and Fifth Avenue Landing, which has long held a lease on the waterfront property needed to expand the center, calls for two alternatives depending on the vote.

If it passes, the port will purchase Fifth Avenue Landing's lease on the land for $33.2 million, which requires a nonrefundable $5 million down payment ahead of the November election.

The city would then, using hotel tax proceeds, purchase the lease from the port for $28 million through 2042. Transactions would be made in three installments over the course of 2019.

If the citizens' initiative fails, the port won't purchase Fifth Avenue Landing's lease, and the city will be on the hook to reimburse the port for its $5 million down payments on the land.

RELATED: Report: Convention Center’s Economic Impact Over $1 Billion Last Fiscal Year

San Diego Mayor Kevin Faulconer said Tuesday's vote clears an important hurdle for convention center expansion.

"This project is absolutely essential for growing our regional economy, adding local jobs and generating new revenue that can be used to improve our neighborhoods," he said.