San Diego Convention Center Expansion: An Update

Artist rendering of the San Diego Convention Center proposed expansion. — *Artist rendering of the San Diego Convention Center proposed expansion, from 2013.*

Is the San Diego Convention Center being expanded?

Right now, that’s still an open-ended question, but it’s important to note that there are three different convention center plans. So let’s break them down that way.

Plan One – Contiguous: The original contiguous expansion plan (meaning that it would be an add-on to the current facility) is currently in limbo. Although it got the okay from the California Coastal Committee all the way back in 2013, the plan was to raise hotel taxes to cover the cost, with an increase of up to 3% for hotels closest to the Convention Center (right now the hotel tax is set at 10.5%, with an additional 2% that goes to the Tourism Marketing Department or TMD — this article from the Voice of San Diego does a great job explaining the complexities). Because this decision was made without a vote of the people of San Diego, attorney Cory Briggs sued and a judge ruled the plan unconstitutional because it wasn’t voted on by the electorate. The San Diego City Council voted to abandon the plan, and it’s been stalled ever since. Mayor Kevin Faulconer is still on board and also has proposed a revamped Mission Valley football stadium for the Chargers, and has said that he intends to put it to a vote, but has also said that he won’t be including it on June’s ballot as previously expected. It’s also still up in the air whether this initiative will even appear on the San Diego ballot in November.

Plan Two – Citizens’ Plan: Attorney Cory Briggs, former City Councilmember Donna Frye, and a group of other proponents (including real estate developer JMI Realty’s John Moores) came together and formed the Citizens’ Plan, to restructure the hotel-room tax and protect and promote San Diego’s bay fronts and the San Diego River Valley. Sounds nice, right? Except that it’s a whole lot more complicated than that. The 77-page initiative basically prohibits the current Convention Center expansion plans along the waterfront, raises the city’s hotel-room tax by 5% (from 10.5% to 15.5%) and then lets hotels deducts 2 percentage points from that tax if they invest in a new TMD (which is the same percentage they’re taxing now, possibly illegally, for the TMD). The remaining money from the tax increase would go into a general fund for the city, to be used how the city decides — theoretically in pursuit of a new stadium and/or convention center. However, this initiative basically outlaws the current plans for a contiguous convention center, which they feel would “wall off” the marina. They aren’t against a convention center expansion — they just want a non-contiguous (unattached) expansion, and they want the money for that to come from the city’s general fund, not from a fund ear-marked for those projects. Still confused? You’re not alone. Hotelier Bill Evans told the Voice of San Diego that he, “feel[s] like a dog watching TV” when trying to make sense of the initiative.

They need 75,000 signatures to be able to make it onto the November ballot — and they’ve been using some interesting tactics, like falsely using San Diego Comic-Con’s name in their signature-gathering methods. Of course, even if they garner enough support to make it onto the ballot, there are questions that the 77-page initiative tries to accomplish too much, and really isn’t signaling to voters that the funds raised from the tax hike wouldn’t go towards specific projects (like a stadium or convention center).

Plan Three – Chargers: And then there were three. The San Diego Union-Tribune announced this week that The Chargers plan to ask San Diego voters on November’s ballot to raise hotel taxes to 16.5% (which would place the city in the top 20 with highest hotel taxes) to fund a $1.8 billion campus-style, off-site hybrid stadium and convention center downtown. They plan to put $650 million towards the project themselves (with $300 million of that coming from the NFL), a city-controlled agency backed by the increase in hotel taxes would contribute $350 million, and the hotel taxes would cover the rest. For the convention center portion, they’re proposing the same 225,000 square feet that the city’s original plan outlined — just this time, unattached to the current convention center. They also have a plan to replace the current TMD tax, so that the hotels still get their 2%.

Here’s where things get sticky (because they weren’t already!). The Voice of San Diego is reporting that, “sources said that the Chargers communicated to the mayor and his allies that if they don’t support the new plan, the team would not pay to collect signatures for it. Instead the team is prepared to throw its full support behind the Citizens’ Plan.” Which may actually be an easier road for The Chargers, because the Citizens’ Plan suggests a general fund rather than funds ear-marked for a specific cause (supposedly, anyway), so it would only need a simple majority rather than 2/3 of the vote to pass. However, it may be even more complicated soon — more on that in a minute.

And to make matters more complicated? JMI Realty, one of the biggest developers in the area and whose owner John Moores is part of the coalition behind the Citizens’ Plan, has threatened that they won’t be building that much needed 1,600-room hotel if the convention center gets a contiguous expansion. Which might have something to do with their hopes of building the $1.8 billion dollar convadium for the Chargers and the San Diego Convention Center.

stadium_r900x493 — *A rendering of a proposed downtown stadium and convention center annex by JMI Realty*

Which one of the proposals is going to pass?

Right now, we don’t even know which plans are going up for a vote — or if they are, when that might happen. Mayor Faulconer has said he won’t be including the contiguous expansion proposal on June’s ballot, which means it could be November or later before we have any kind of resolution on any of this. And then we could theoretically be looking at multiple options on the ballot, with both the Citizens’ Plan and the Chargers plan currently still in play.

Plus, an appellate court ruled this week that a tax hike by initiative only requires a simple majority to pass, rather than 2/3 of voters — a much lower bar to pass for the Chargers, which could completely change things.

No matter which plan succeeds, it seems we’re ultimately heading towards a showdown at the ballot.

Is Comic-Con International Going to Leave San Diego If They Don’t Get An Expansion?

CCI want a contiguous expansion. Plain and simple. Comic-Con International’s David Glanzer even wrote a recent op-ed piece in the U-T, stating in it, “Comic-Con believes that a contiguous convention center expansion (one that is connected to the current facility) would be best for Comic-Con, and most beneficial for any large event San Diego might host in the future.” In the article, he makes several good points for why a non-contiguous expansion wouldn’t be the best option for conventions — including fear of ambush marketing in the second facility, and separating out vendors to the detriment of foot traffic, sales, and more.

However, how important is that expansion to CCI? They re-signed to stay in San Diego through at least 2018, and Glanzer mentioned on a recent podcast with Voice of San Diego that they’re currently working to secure hotel rates for 2019-2021, at least hinting that they’re planning to stay put regardless.

In that same podcast, Glanzer expanded: “Somebody asks us a question, ‘What’s going on?’ Well, we’ll try to lay out what the challenges are that we have. Would we love to stay in San Diego forever? Yeah, we really would, and I think it’s a testament to the fact that we signed our last contract so late that we really wanted to work something out, to hammer something out that could keep us here for at least another couple of years… The truth of the matter is nobody wants to leave. We don’t want to lose San Diego. If we have to, again, that would be dependent upon the negative impacts of any number of scenarios have on our attendees, then of course we would look for another space.”

And of course, as CCI has said multiple times, one of those negative scenarios is hotel rates. CCI works with the hotels to keep rooms locked in at a set rate for attendees, but they have to re-negotiate every two to three years, and it’s a long, drawn-out process.

However, for the first time in our recollection, Glanzer also explained that space is a mitigating factor.

“It’s hard to quantify which is the biggest thing,” Glanzer said, when asked whether hotel rates or space were the biggest challenge, “and I think it depends which cycle you’re in. We knew back in 2006 that we were going to have issues with space. But luckily in working with the convention center, with local hotels, with the mayors and city council, we’ve been able to mitigate some of those problems. So so far, we’re doing what we thought would happen. The negative of that is we’ve had to cap our attendance.”

What it comes down to is basically this: CCI wants San Diego to do what’s best for San Diego, and CCI wants to be able to stay and grow with the city. Right now, there’s still a good chance those two interests align — but that may not always be the case. And what happens when one starts negatively impacting the other is anyone’s guess.