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Sweeping TOT Proposal Met With Caution

Cory Briggs has long been viewed by local government and business leaders as an obstructionist when it comes to anything development-related, especially in downtown San Diego. But the local attorney is now proposing a ballot measure that he contends could help solve at least two long-nagging problems — expanding the convention center, and keeping the San Diego Chargers in town with a new stadium.

Later this month, Briggs and fellow proponents are looking to begin circulating signature petitions, aimed at having voters decide — possibly in June 2016 — on a plan to raise the city’s current hotel room tax from 10.5 percent to 15.5 percent.

Joined by backers including former San Diego Councilmember Donna Frye, Briggs said his 77-page proposal could provide funding for several priority projects, including an off-waterfront convention center annex, a new Chargers stadium, and new parkland and related civic improvements long discussed for Mission Valley.

“The key is that this is going to be in voters’ hands,” Briggs said in a recent interview. “There is nothing here preventing someone else from coming up with something better to place on a future ballot.”

The proposal faces considerable obstacles, including likely opposition from tourism leaders over a provision that would abolish the current San Diego Tourism Marketing District, which collects funds from local hotels to support operations of the San Diego Tourism Authority, college football bowl games and other programs that promote the region to visitors.

There’s also the matter of a local voting public that hasn’t approved tax funding for major noneducation civic venues since the late 1990s — when Petco Park and the last convention center expansion received go-aheads via ballot measures.

Here’s a look at what is in the Briggs proposal, who stands to gain or lose from it, and where battle lines are likely to form if the measure heads for a public vote.

What It Includes

Called “Citizens’ Plan for the Responsible Management of Major Tourism and Entertainment Resources,” the initiative emphasizes the importance of the city’s tourism industry — and the visitors it brings to the region — in helping to raise funding for long-sought projects while lessening the financial burden on local residents.

It calls for raising the city’s current transient occupancy tax (TOT) from 10.5 percent to 15.5 percent, putting it even with the rate charged on hotel bills in Los Angeles, and closer to that charged in competing markets such as Anaheim (17 percent), San Francisco (16.25 percent) and Seattle (16.5 percent).

The local measure would eliminate the current hotelier-approved 2 percent surcharge on room bills — separate from TOT — that specifically funds the Tourism Marketing District (TMD). Hoteliers approved the program several years ago, as a way to carve out funding for tourism marketing while allowing the city to use all proceeds from TOT to go toward other city services.

There is a pending lawsuit filed by Briggs, set for a court hearing later this month, challenging the TMD’s funding mechanism on the grounds that it was not approved by voters. Briggs prevailed on similar grounds in an earlier lawsuit challenging another hotelier-approved assessment that would have funded the bulk of a planned $520 million convention center expansion.

Frye said past formulas used to calculate revenue return indicate that each 1 percent of TOT generates about $18 million in annual revenue for the city. That means a 5 percent rise would generate around $90 million annually in new money.

Under the Briggs plan, local hoteliers would be able to designate up to 2 percent of those new funds for tourism marketing, and another 2 percent to finance tourist-related infrastructure, including possibly an off-waterfront convention center. An additonal 1 percent would go to the city’s general fund for essential services and infrastructure.

Any moves to use tax money for a new Chargers stadium would require a future separate vote by the public. Briggs said an update of his proposal, issued on Oct. 30, gives equal protection from lengthy environmental-related litigation to proposed stadium sites in downtown and Mission Valley. Briggs revised his original proposal, announced about a week earlier, in part to clarify the equal-status issue relative to potential litigation.

Where Others Stand

Starting around 2011, but before the team began planning earlier this year for a Carson stadium that it might share with the Oakland Raiders, the Chargers pushed for a new stadium on a downtown site in East Village, much of which is currently occupied by a city bus yard. How and where to relocate the bus yard, and in a reasonable timeframe, remains among the key stumbling blocks for that location.

The Chargers in late 2013 clashed with hoteliers and other backers of a contiguous convention center expansion, when the team called on the

California Coastal Commission to reject the project and consider the team’s proposal for a multipurpose stadium in East Village that would include convention and event space. The coastal panel instead approved the contiguous expansion with conditions, but the project later ground to a halt when a court invalidated the funding mechanism.

Attorney Mark Fabiani, the outspoken special counsel to the Chargers, said in an email that the Briggs-Frye initiative “would help break the long-time stranglehold that the hotel industry has had over the mayor and much of City Hall, and for that reason alone the initiative would be great for the future of San Diego.”

Fabiani said the Chargers during the past 14 years have found the “hotelier cabal” to be a serious impediment to progress on the stadium issue.

However, there were no early signs that the Briggs proposal by itself was warming the Chargers’ hearts toward staying in San Diego, at least in Mission Valley. Fabiani indicated that the initiative does not fully address concerns that the team has raised related to potential environmental-impact litigation over the city-favored Mission Valley site, even though Gov. Jerry Brown recently approved a measure fast-tracking legal cases if they do arise.

A city-backed proposal, calling for a new stadium on the current Qualcomm Stadium site, involves taking $300 million from the city and county general funds.

“As I understand it, the revised Briggs initiative would give a (California Environmental Quality Act) exemption to Mission Valley provided that no taxpayer money were used to pay for the facility there,” Fabiani said, otherwise environmental clearance relief would not be available to the city.

About a year after it was rebuffed by the coastal commission, the Chargers informally backed a similar downtown proposal put forward behind the scenes in late 2014 by developer JMI Realty, founded by former San Diego Padres owner John Moores, which had four variations including a multipurpose stadium with convention space.

Those plans were never formally reviewed by the city and are currently not being officially pursued by JMI, which developed much of the Ballpark District surrounding Petco Park and is currently the master developer of a nearby mixed-use project known as Ballpark Village.

Whether passage of the Briggs plan would strengthen efforts to build a noncontiguous convention center annex in downtown San Diego — and possibly restore the Chargers’ interest in staying in town — remains to be seen.

JMI Realty, currently led by President and CEO John Kratzer, has recently advised Mayor Kevin Faulconer and supports the mayor’s contention that Mission Valley is the best place to build a new stadium to retain the Chargers. It has also concluded that if the Chargers ultimately don’t play in Mission Valley, the 166 acres might best be put to use as city recreation or parkland, or for new uses by a university or other educational entity.

According to Steve Peace, a special advisor to Moores, the JMI founder favors the idea of using the Mission Valley space as an expansion area for San Diego State University, and is considering providing financial support to the Briggs initiative.

Also, in a letter dated Oct. 27, sent by Kratzer to NFL Commissioner Roger Goodell and Executive Vice President Eric Grubman, JMI suggested that league officials “consider the combined economic and environmental analysis of Mission Valley and Downtown.”

“The synergies accomplished by this approach place the higher density development in downtown where the infrastructure and community plan already contemplated such density and free the Mission Valley site for less impactful university, tourism and parkland uses,” Kratzer said in the letter. “It is our belief that this combined look allows the City to meet multiple objectives at one time and makes both projects easier to finance.”

Grubman and other NFL executives recently held town hall meetings in San Diego, St. Louis and Oakland, to gather fans’ input on the potential moves of their teams to the Los Angeles area. NFL owners are expected to vote in January on whether to allow one or more of the teams — the Chargers, Rams and Raiders —to relocate.

Expected Battle Lines

The drive to get the public behind Briggs’ plan will likely be impacted by whether it draws support or fierce opposition from the business community, particularly the hotel and tourism industry, which continues to favor a contiguous waterfront convention center expansion in order to attract and retain large gatherings like Comic-Con International.

Briggs opposes a contiguous expansion of the current convention center based on issues including environmental approval procedures and the potential impact on public access to the waterfront. In the past decade, he has also filed legal challenges to other downtown waterfront projects, including redevelopment of the Navy Broadway Complex and improvements to the North Embarcadero.

As of press time, the San Diego Tourism Authority — as well as the Tourism Marketing District, which supplies about 70 percent of the tourism authority’s budget — had no official opinion on the Briggs proposal.

“The new version of the ballot initiative has grown from 28 pages to 77 pages,” said Lorin Stewart, executive director of the San Diego Tourism Marketing District Corp., adding that it is a “complicated document” that the district’s executive board will need time to review.

Local hotel consultant Robert Rauch, who also operates hotels but is not currently involved in leadership of industry-specific hotelier organizations, said he has no plans to support the Briggs initiative because of the attorney’s past “obstructionist” positions.

Rauch cautioned against raising the city’s TOT rate to where San Diego might lose its current competitive advantage against cities including Los Angeles, Anaheim and Las Vegas. He said he is also leery of eliminating the TMD, the local tourism industry’s prime source of promotional funding, noting that the city suffered a significant visitor drop-off in 2013 when then-Mayor Bob Filner blocked renewal of the district, creating a funding logjam that curtailed marketing of the region and spurred layoffs at the tourism authority. Officials subsequently negotiated a renewal of the district and restored some of the cut positions.

Rauch said it is unfair to demonize hoteliers as a “cabal” or power lobby, and the ultimate solution to funding both a convention center expansion and a stadium will need to come from a discussion that involves operators of hotels and several other businesses that benefit from visitor traffic, such as rental-car companies, parking facilities and restaurants.

“I would not mind getting everyone into a room to figure out how to do this,” said Rauch, president of R.A. Rauch & Associates Inc. “I would not even be opposed to having Cory Briggs in the room.”

For its part, the Mayor’s Office was withholding judgment on the Briggs’ initiative at press time.

“There is a vast range of issues lumped into this single measure and as a result of its complexity, it needs to be analyzed for flaws and issues,” said Craig Gustafson, Mayor Faulconer’s press secretary, in an email. “We will be carefully reviewing it to determine if it helps or hurts local tourism and San Diego’s ability to continue working with the NFL on our straightforward Mission Valley stadium plan the governor just certified for expedited review.”

San Diego Business Journal staff reporter Michael Lipkin contributed to this report.

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