The sugar daddies that could be expected to bankroll the convention center expansion are on the sidelines. But watch out: the backers of the proposed expansion are likely to twist statistics and distort reality to make a fallacious case for the project. San Diego’s “civil servants have shown a remarkable capacity to misstate, misrepresent, control the facts,” says Heywood Sanders, the scholar who has shown that convention centers nationally are grossly overbuilt. “They have done it on pension benefits, city finances, sewage treatment plants, the ballpark, and they are doing it again on the convention center expansion.”
The San Diego Convention Center Corporation would like to add 225,000 square feet of exhibit space, 100,000 square feet of meeting rooms, an 80,000-square-foot ballroom, and perhaps a hotel at a cost that hasn’t yet been determined. A task force appointed by the mayor is now looking into the possible expansion.
The City and the Port say they won’t commit money this time, and Centre City Development Corporation is unlikely to do so. And even some members of the task force — loaded with corporate welfare advocates — are skeptical of the propaganda being shoveled out.
In other cities, convention centers are financed through taxes on restaurant meals, auto rentals, and airport departures; hotel and sales taxes; special tourist development district taxes, and the like. San Diego has an aversion to taxes. So San Diego may well try to build a taxpayer-financed hotel and claim that revenues from it will pay for the expansion, says Sanders. “They will find anything to make it work,” he scoffs. (Denver, Phoenix, Houston, and several other cities have built taxpayer-financed hotels to support sagging convention centers. The fact that downtown San Diego’s posh Hotel W is going into default may not even drown the ludicrous idea.)
At a recent task force meeting, a consultant hired by the City, Steven Spickard of Economics Research Associates, was the skunk at the garden party. A committee member, architect Mark Steele, asked him if revenues from the expanded center would pay off the debt service on bonds floated to build it. The answer: no. The convention center would have to rely on a third party to do the financing.
“The shills for the convention center were pissed that Mark asked the question because [Spickard] gave a straight answer, and they didn’t want to hear a straight answer,” says Don Wood, a longtime waterfront-planning activist.
The center’s previous sugar daddy, the Unified Port of San Diego, can’t pitch in this time, says Stephen Cushman, port chairman and also cochairman of the convention center task force. “The Port wrote a $200 million check for Phase I, and the Port agreed to pay $4.5 million a year for 20 years for Phase II [the first expansion],” says Cushman. (That first expansion was a joint effort of the Port and the City.) The Port also subsidized the Hilton convention center hotel to the tune of $46.5 million. “The Port can’t kick in this time. We’re trying to find where to come up with [funds] for the North Embarcadero project.”
City hall says the bucks can’t come out of the general fund. “There can be no subsidy from the City’s general fund,” says Councilmember Carl DeMaio. “They have to find financing outside of San Diego taxpayers.” The City’s deficit for the 2010 fiscal year is $80 million, he says, and the ailing state could grab local funds, adding another $35 million to that deficit. The 2011 shortfall “is staggering,” says DeMaio, pointing to the monstrous pension obligation.
Fred Maas, chairman of Centre City and a member of the convention center task force, says the ultimate decision lies with the Redevelopment Agency, whose board is the city council. But, says Maas, “We have an enormous list of things on our plate; I personally don’t see how we can [help finance the center expansion]. It will be interesting to see what novel things they [the task force] come up with. Somebody is going to have to take some risk.”
“The people who know the City from the inside know that we are not sustainable economically,” says Norma Damashek, president of the League of Women Voters. Local politicians “are arranging to finish out their terms and go on to the next job before the collapse.”
The task force has brought on the Minneapolis-based municipal financial firm Piper Jaffray to come up with alternatives. This firm specializes in corporate welfare projects such as sports stadiums and taxpayer-backed hotels. Spickard’s statement was “an educated opinion,” allows Cushman. In the task force’s upcoming meetings, devoted to possible financing, “The rubber hits the road,” he says. “There are many options that governmental entities use for large capital improvements. Everything is on the table. If we build it, will they come? Whether it can happen, I honestly don’t know.”
And that is the key question: in this economy, will the public buy into an expansion? After all, many San Diegans haven’t even seen the convention center and don’t believe they get any benefits from it. The jobs it creates are generally low paying: the big hotels make money from it, but that loot often heads out of town to distant corporations that own the hotels. DeMaio would like to see nearby hotels pitch in on the financing of the expansion. Good luck on that.
“This is one of [the mayor’s] stacked committees,” harrumphs Steve Erie, UCSD political scientist. “It’s the downtown rah-rah crowd.” Nonetheless — and astonishingly for San Diego — in late March, the task force admitted that some of its members characterized “the information presented thus far as overly scripted and biased toward a foregone conclusion in favor of expansion.”
So Heywood Sanders, professor of public administration at the University of Texas at San Antonio, author of the seminal Brookings Institution study showing that convention centers are vastly overbuilt, was invited to address the task force on May 5. Using charts and graphs, he showed how centers keep being built and expanded even as attendance drops off. He was treated roughly. One member asked him if he had ever been inside a convention center.
Hopefully,Sanders’s appearance will be an eye-opener for citizens of San Diego. Before arriving, he was supplied with spreadsheets on the convention center’s performance. He found many misleading statistics. For example, the Rock ’n’ Roll Marathon was correctly listed as a community event in 2004. In succeeding years, it was listed as a primary event. “They succeeded in reclassifying it to make performance look better,” says Sanders. In fiscal 2007, attendance at a design automation event was listed at 10,100. The officially audited figure for attendance was 8340, but the center touts the higher figure.
He has found several other examples of statistical distortion. “What the convention center is crying out for is not a task force but a serious independent audit and analysis of the center’s performance,” says Sanders. “The center’s performance needs to be verified independently because, right now, all people have to go on is what the convention center management tells us.”
The task force “has not made the business case, has not justified why we need [the expanded center],” says Erie. Even before it gets financing, San Diego must position itself in the market: Erie thinks midsize conventions are a good target. But those pushing the expansion keep saying that current facilities are not big enough for the very largest gatherings.
San Diego’s tax aversion probably means that the convention task force will revert to the time-worn and thoroughly dishonest argument that the facility will pay for itself. The new ballpark proves that this doesn’t work, notes Erie — but city fathers are using the argument to tout a new city hall. Will San Diegans bite on the disingenuous notion that the convention center expansion will pay for itself?