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Thursday, Mar 28, 2024
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Court Shrinks Options For Convention Center

Civic and tourism leaders were scrambling for a follow-up strategy after a state appeals court recently rejected the funding mechanism for the planned $520 million expansion of San Diego Convention Center.

According to a memo sent to the mayor and City Council by City Attorney Jan Goldsmith, options include establishing an alternative funding mechanism; appealing the court decision to the state Supreme Court; and placing a measure before voters, though a 2014 election is unlikely due to filing deadlines.

One route already being pursued by center operators, likely to offer just partial long-term assistance for maintenance and capital needs of the current facility, is the possibility of obtaining corporate sponsorships and naming-rights deals tied to the convention center.

California’s Fourth District Court of Appeals ruled Aug. 1 that a proposed tax on hotel room bills, designed to finance the bulk of the expansion costs is unconstitutional under state and city charters because it was not approved by voters.

In the wake of the decision, convention center, city government and other civic leaders reaffirmed their support for the long-planned expansion, deemed crucial to keeping the San Diego facility competitive with those in other cities and maintaining the business of high-value gatherings including Comic-Con International.

“The convention center expansion is critically important for our regional economy,” said San Diego Mayor Kevin Faulconer, in a statement. “It would

create thousands of good jobs and ensure that we continue to attract large conventions like Comic-Con.”

Competition Is Circling

Comic-Con, which recently drew 130,000 to the convention center with its 45th annual edition, is booked locally through 2016. But organizers have said for the past several years that the event is outgrowing San Diego Convention Center, and they are being courted by other cities including Anaheim, Los Angeles and Las Vegas.

Faulconer said the Mayor’s Office will be working with the city attorney to review legal options in the wake of the appeals court decision. Convention center operators said officials in the next few weeks will be sharing additional information on potential future financing plans.

“While we are disappointed, our last expansion faced similar legal hurdles, and we were ultimately successful in our effort,” said Carol Wallace, president and CEO of the San Diego Convention Center Corp., referring to the facility’s previous expansion completed in 2001.

At press time, the San Diego Tourism Authority was not commenting beyond a statement issued by the Convention Center Corp., a nonprofit public benefit corporation that operates the facility on behalf of the city.

“It remains a top priority for our community to expand the convention center to accommodate events that have outgrown our current facility; create more space for additional events; and to ensure we remain a world-class meeting and convention destination,” said Tourism Authority President and CEO Joe Terzi.

Among its other duties as the region’s primary tourism marketing agency, the Tourism Authority handles the booking of events at San Diego Convention Center that are scheduled 18 or more months in advance.

“Our team will be reaching out to our clients in the next week to answer any questions they may have about the court ruling,” Terzi said.

‘A Great Loss’ for the City

The appeals court ruling overturning the funding mechanism “is a great loss for our city,” said Jerry Sanders, president and CEO of the San Diego Regional Chamber of Commerce.

“The chamber is hopeful that the city can work to put together a new plan that will meet the necessary legal requirements and allow the expansion project to move forward,” Sanders said in a statement.

The expansion plan, approved by city and port district officials in 2012 and the California Coastal Commission in 2013, calls for adding 225,000 square feet of exhibit space at the current 2.6 million-square-foot downtown waterfront facility, which would make it the largest contiguous exhibit hall on the West Coast.

Plans also call for 101,000 square feet of new meeting space, a new 80,000-square-foot ballroom, and outdoor amenities including a rooftop park.

The Hotel Expansion

Also at stake is a privately funded, $200 million expansion of the next-door Hilton San Diego Bayfront hotel, which would add 500 rooms, contingent on the long-stalled convention center project proceeding.

In 2012, City Council and local hoteliers approved a financing district to fund the bulk of the convention center project, in which San Diego hotels with at least 30 rooms would apply a tax of 1 to 3 percent to guests’ room bills.

The appeals court ruled that the election by hoteliers was invalid under the California Constitution because hotel landowners and lessees are not “qualified electors” for the city — meaning they are not registered voters as defined by the constitution.

Judges also said the election for the funding district was invalid under the San Diego City Charter, since the charter requires the approval of two-thirds of registered voters for a special tax to be enacted.

The city has held off on collecting the hotel tax because of pending litigation. At least two lawsuits were filed challenging the funding mechanism, and the appeals court ruling concerned a lawsuit filed by a group that included local businessman Melvin Shapiro.

The appeals court reversed an earlier decision by the Superior Court, which had ruled the hotel tax legal.

Your (Name) Here

Just a day before the Aug. 1 appeals court ruling, convention center officials announced that they have hired Cleveland-based The Superlative Group to provide consulting work in relation to potential naming-rights and sponsorship programs at the center.

Officials said Superlative Group is the nation’s “foremost expert” on naming rights and sponsorships at ballparks, stadiums, arenas and municipally owned buildings. The center’s board of directors approved the consulting contract, as officials seek to produce new revenue to fund future capital upgrades to the facility.

Convention Center Corp. spokesman Steven Johnson said the consultant will first undertake a valuation study, at a cost of $75,000. If officials decide to go ahead with a naming rights or sponsorship campaign, Superlative Group will conduct the campaign and be paid on a percentage basis for the sponsorships that it brings in.

The consultant would receive 12.5 percent of the value of sponsorship deals up to $1 million, dropping to 10 percent for deals of over $1 million.

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