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San Diego's convention center expansion would build into a glut
Downtown overlords and labor want to rewrite federal, state, and local laws
Even in this concept photo, the proposed convention center expansion looks like a terrible idea.
Can common sense and the legal system keep a bubble from inflating further? And maybe prevent a traumatic bursting? San Diego could be the canary in the coal mine on these critical questions.
The subject is convention centers. All around the country, new centers are being built and old ones expanded and refurbished, even though convention attendance has been dropping for years and centers are slashing prices and losing money. It’s a classic bubble, but San Diego’s power players want to build a half-billion-dollar expansion on the existing center.
To do so, the City has concocted a convoluted trick play to evade the laws. City voters have twice turned down an increase in the hotel tax (called the transient occupancy tax). Under the Constitution, state laws, and the city’s own charter, voters must approve a tax increase. So, fearing a rebuke at the ballot box, the City seeks to unilaterally amend the laws by, in effect, calling the hotel tax an assessment. The city’s hoteliers have supplanted the voters and approved the expansion and taxes to pay for it. A lawsuit challenging that legal legerdemain goes to superior court late this month. In March, the Coastal Commission is tentatively slated to look at the proposed project.
Heywood Sanders
Heywood Sanders, professor of public administration at the University of Texas at San Antonio and the nation’s reigning expert on convention centers, notes that between 2000 and 2011, convention center exhibit hall space ballooned by 35 percent while attendance fell 1.7 percent. Last year, space didn’t increase that much, but “Cleveland and Nashville have new centers opening this year,” he says. San Francisco is expanding the Moscone Center, Los Angeles is planning new space tied to a possible football stadium, and Seattle is planning an expansion.
And all three are cutting rents, as is San Diego. In its 2012 annual report, the San Diego Convention Center Corporation admits that its market “is increasingly being targeted by other western regional convention destinations attempting to lure conventions away by offering free or heavily discounted space and substantially lower hotel rates.” So, San Diego is providing a rent subsidy, too — at the same time it wants to expand into a nationwide glut.
“Almost everybody is discounting and offering free rent,” says Sanders. “Much of the rental incentive hits the bottom line on a center’s operating loss.” The center in Reno, Nevada, is luring conventions with a huge bowling alley for convention-goers, called “the Taj Mahal of bowling.” Las Vegas has its own — er, uh — conventioneer enticements, along with 4 million square feet of convention space, double the second highest, Orlando. The San Diego center admits that the seduction of Sin City “impacts our ability to compete.”
Despite these realities, the bubble keeps expanding. Heywood Sanders, who says the glut will get worse, puts much of the blame on consulting firms that tell every city that a new or expanded center will boost the local economy. “It’s easy enough to build the sucker,” says Sanders. “The question is whether you can get any appreciable increase in business. When the best cases I can find are Las Vegas and Orlando doubling the size of their centers and getting a 10 percent to 15 percent increase in attendance, I don’t think there will be much boost at all for San Diego.” Apparently, says Sanders, “San Diego is building into a perfect storm.”
But local center plans go forward. The villain is a political juggernaut: the establishment corporate welfare machine aligned with organized labor. What politician, Republican or Democrat, can resist such pressure?
Mel Shapiro
Jan Goldsmith
Initially, organized labor joined activist Mel Shapiro and lawyer Cory Briggs in the lawsuit that shows how the City’s maneuver is blatantly illegal. (Technically, the opponents are defendants because the City last year filed a validation lawsuit to permit a judge to rule on the matter.) Even City Attorney Jan Goldsmith has reservations about the City’s case. Chuckles Shapiro, “[The City] said, ‘Do you want to settle?’ and we said, ‘The settlement is to go to the ballot.’”
Bob Filner
In November, organized labor backed out of the case. In return, the contractor for the proposed expansion granted unions a so-called project labor agreement, guaranteeing workers local hiring and union-level wages and benefits. In a word, the deal stinks. So does politics. Mayor Bob Filner, who had campaigned for a public vote on the convention center, now says he will back it if the court and Coastal Commission give it the nod.
Convention centers are “holes in the ground that governments throw money into,” says Briggs. He points out several additional problems: “The City should have done the [environmental] analysis, not the Port. It’s the City’s project,” he says. Any environmental analysis should be done before there is an approval. But, “The City approved this taxpayer scam before the [environmental] document was finished. The mayor [former mayor Jerry Sanders] and council were gung ho, singing its praises before the document was released.”
The Coastal Commission will consider a number of things. The possibility of a rising sea level resulting from climate change should come up. The project further shuts off views of the bay. And, “You don’t need to expand a convention center on the water. It is not water-dependent,” says Briggs. The City claims it will put a park on the roof of the center. Briggs has one word for that: “bullshit.”
That word applies to the propaganda coming from expansion backers. They cite figures showing how the center propels the San Diego economy — for example, purportedly adding $21 billion to regional coffers since it opened more than 20 years ago. But in a Reader article in December of 2011, Heywood Sanders showed how the convention center falsely inflates those numbers. Last year, city auditor Eduardo Luna confirmed it. But in the discussion about the convention center, the book-cooking barely came up, according to sources who followed the discussions.
Briggs sums it up: San Diego politicians “don’t give a damn about false numbers. False numbers, schmaltz numbers.”
Here's something you might be interested in.
San Diego's convention center expansion would build into a glut
Downtown overlords and labor want to rewrite federal, state, and local laws
San Diego's convention center expansion would build into a glut
Downtown overlords and labor want to rewrite federal, state, and local laws
Even in this concept photo, the proposed convention center expansion looks like a terrible idea.
Can common sense and the legal system keep a bubble from inflating further? And maybe prevent a traumatic bursting? San Diego could be the canary in the coal mine on these critical questions.
The subject is convention centers. All around the country, new centers are being built and old ones expanded and refurbished, even though convention attendance has been dropping for years and centers are slashing prices and losing money. It’s a classic bubble, but San Diego’s power players want to build a half-billion-dollar expansion on the existing center.
To do so, the City has concocted a convoluted trick play to evade the laws. City voters have twice turned down an increase in the hotel tax (called the transient occupancy tax). Under the Constitution, state laws, and the city’s own charter, voters must approve a tax increase. So, fearing a rebuke at the ballot box, the City seeks to unilaterally amend the laws by, in effect, calling the hotel tax an assessment. The city’s hoteliers have supplanted the voters and approved the expansion and taxes to pay for it. A lawsuit challenging that legal legerdemain goes to superior court late this month. In March, the Coastal Commission is tentatively slated to look at the proposed project.
Heywood Sanders
Heywood Sanders, professor of public administration at the University of Texas at San Antonio and the nation’s reigning expert on convention centers, notes that between 2000 and 2011, convention center exhibit hall space ballooned by 35 percent while attendance fell 1.7 percent. Last year, space didn’t increase that much, but “Cleveland and Nashville have new centers opening this year,” he says. San Francisco is expanding the Moscone Center, Los Angeles is planning new space tied to a possible football stadium, and Seattle is planning an expansion.
And all three are cutting rents, as is San Diego. In its 2012 annual report, the San Diego Convention Center Corporation admits that its market “is increasingly being targeted by other western regional convention destinations attempting to lure conventions away by offering free or heavily discounted space and substantially lower hotel rates.” So, San Diego is providing a rent subsidy, too — at the same time it wants to expand into a nationwide glut.
“Almost everybody is discounting and offering free rent,” says Sanders. “Much of the rental incentive hits the bottom line on a center’s operating loss.” The center in Reno, Nevada, is luring conventions with a huge bowling alley for convention-goers, called “the Taj Mahal of bowling.” Las Vegas has its own — er, uh — conventioneer enticements, along with 4 million square feet of convention space, double the second highest, Orlando. The San Diego center admits that the seduction of Sin City “impacts our ability to compete.”
Despite these realities, the bubble keeps expanding. Heywood Sanders, who says the glut will get worse, puts much of the blame on consulting firms that tell every city that a new or expanded center will boost the local economy. “It’s easy enough to build the sucker,” says Sanders. “The question is whether you can get any appreciable increase in business. When the best cases I can find are Las Vegas and Orlando doubling the size of their centers and getting a 10 percent to 15 percent increase in attendance, I don’t think there will be much boost at all for San Diego.” Apparently, says Sanders, “San Diego is building into a perfect storm.”
But local center plans go forward. The villain is a political juggernaut: the establishment corporate welfare machine aligned with organized labor. What politician, Republican or Democrat, can resist such pressure?
Mel Shapiro
Jan Goldsmith
Initially, organized labor joined activist Mel Shapiro and lawyer Cory Briggs in the lawsuit that shows how the City’s maneuver is blatantly illegal. (Technically, the opponents are defendants because the City last year filed a validation lawsuit to permit a judge to rule on the matter.) Even City Attorney Jan Goldsmith has reservations about the City’s case. Chuckles Shapiro, “[The City] said, ‘Do you want to settle?’ and we said, ‘The settlement is to go to the ballot.’”
Bob Filner
In November, organized labor backed out of the case. In return, the contractor for the proposed expansion granted unions a so-called project labor agreement, guaranteeing workers local hiring and union-level wages and benefits. In a word, the deal stinks. So does politics. Mayor Bob Filner, who had campaigned for a public vote on the convention center, now says he will back it if the court and Coastal Commission give it the nod.
Convention centers are “holes in the ground that governments throw money into,” says Briggs. He points out several additional problems: “The City should have done the [environmental] analysis, not the Port. It’s the City’s project,” he says. Any environmental analysis should be done before there is an approval. But, “The City approved this taxpayer scam before the [environmental] document was finished. The mayor [former mayor Jerry Sanders] and council were gung ho, singing its praises before the document was released.”
The Coastal Commission will consider a number of things. The possibility of a rising sea level resulting from climate change should come up. The project further shuts off views of the bay. And, “You don’t need to expand a convention center on the water. It is not water-dependent,” says Briggs. The City claims it will put a park on the roof of the center. Briggs has one word for that: “bullshit.”
That word applies to the propaganda coming from expansion backers. They cite figures showing how the center propels the San Diego economy — for example, purportedly adding $21 billion to regional coffers since it opened more than 20 years ago. But in a Reader article in December of 2011, Heywood Sanders showed how the convention center falsely inflates those numbers. Last year, city auditor Eduardo Luna confirmed it. But in the discussion about the convention center, the book-cooking barely came up, according to sources who followed the discussions.
Briggs sums it up: San Diego politicians “don’t give a damn about false numbers. False numbers, schmaltz numbers.”
Comments
Thanks for this summary of where it all stands. The plundering of paradise goes on, and on, and on. Waiting to see how the hairbrained validation lawsuit goes...who is the judge?
HonestGovernment: Unless there has been a recent change, the validation suit is before Judge Ronald Prager. Both the City's suit and the downtown overlords' intentions are worse than harebrained. They represent another attempt to steal money from the neighborhoods and the citizenry. Best, Don Bauder
Thanks. I just tried to look it up...If the case number is 37-2012-00097148-CU-MC-CTL, then it was first assigned to Judge Timothy Taylor, but is now in Judge Jeffrey Barton's court. Don't know if this is correct. No entries have been recorded in that Register of Actions since last August. In any case, I bet Goldsmith doesn't want to see Judge Taylor again too soon!
Honest Government: The case number I have is different -- 37-2012-00094831-CU-MC-CTL. Best, Don Bauder
Thank you. You are right, and it is Judge Prager.
HonestGovernment: I think the date is still Feb. 27. Best, Don Bauder
City Attorney Goldsmith has been commenting on the new Hotel Tax on SDROSTRA. Goldsmith gave himself a legal loophole that moved legal responsibility to the City Council for increasing taxes without the required 2/3 voter approval.
See Page 6.
"Absent clear direction from the courts or legislature, this Office advises that the City should not impose a new business-based assessment without voter approval unless the program of improvements and activities to be funded by the assessment can be limited to benefits or services provided directly to the charged businesses and not to others who are not charged."
http://sdrostra.com/?p=32766
"Please see our July 7, 2012 Memorandum of Law, which is published on our website. Read it carefully, particularly pages 6 and 9.
http://docs.sandiego.gov/memooflaw/MS-2012-21.pdf
Jan Goldsmith
The July 27 memo I cite above summarizes the legal issues and specifically references the TMD. We have more reports and legal opinions published.
The issue before the city council was whether to move forward despite the risks we outline. The hotels point out that other cities competing for tourism dollars have done so and the lawyer hired by the TMD believes strongly that they have structured the TMD to meet the legal standards discussed in our memo.
The TMD and city decided to move forward, but with some protections for the city. The city is protected through an indemnity provision in the TMD operating agreement (which the mayor has not signed). In addition, the funds collected under the new TMD are frozen — not being spent — until expressly authorized by the city council."
laplayaheritage: As always Katheryn Rhodes provides useful documentation. Best, Don Bauder
laplaya heritage: As always Katheryn Rhodes provides useful documentation
I think it is safe to say she is more knowledgeable of these civic issues than the Mayor, the City Attorney and....well.... pretty much anyone else in town.
SP: Agreed. Best, Don Bauder
Will they be passing out vaseline with this proposal ?
Murphyjunk: Absolutely. If the courts decide that hoteliers can impose a tax, rather than voters, as the laws clearly state, all San Diego citizens will be provided a jar of Vaseline, but you will have to wait in line two weeks to get one. Best, Don Bauder
the politicians turn their backs on the voters all the time, but the voters don't dare do the same.
Murphyjunk: That is an observant characterization that belongs in Bartlett's. Best, Don Bauder
Will they be passing out vaseline with this proposal ?
It is going to hurt like the dickens with or W/O the Vaseline.
SP: Yes, and you will be told that it is paying off. But those numbers will be phony as a three dollar bill. Best, Don Bauder
The building expansion design looks like a structure that has collapsed after a major earthquake. Who designed that--Ronald McDonald?
dwbat: No, it wasn't Ronald McDonald. These architectural jobs are usually given to a local firm, even if it is unqualified to do the work. I have seen the name of the architect but don't time to look it up now. Best, Don Bauder
I looked it up. It's Fentress Architects/John Portman & Associates/Civitas Inc. It sure doesn't look that attractive to my eyes. http://www.conventioncenterexpansion.com/portals/0/expansionpresskit.pdf
dwbat: The architecture is every bit as well-designed as the lawsuit the City came up with to steer around the law. Best, Don Bauder
Don, btw Fentress designed the convention center in Denver. I hope it looks better than THIS confusing design.
dwbat: The Denver center has been a source of controversy, but I don't know if the design is the reason. Best, Don Bauder
"Convention centers are holes in the ground that governments throw money into." Sounds quite a bit like the discussion of a new Chargers stadium.
aardvark: You are quite correct: that is exactly what subsidized stadia for billionaire owners are: holes in the ground that governments throw money into." Remember, Mark Twain defined a gold mine as a hole in the ground with a liar on the top. That also describes San Diego plans for a Chargers stadium and convention center expansion. Best, Don Bauder
Convention attendance has been down for the last 4 years due to a RECESSION , perhaps you've heard of it . Will it last forever? Who knows , in 2009 when Obama told America "you can't go to Las Vegas on the tax papers dine" ( he meant to no tax deductions for travel entertainment etc) 360 conventions cancelled in Las Vegas within 60 days . Thousands of service workers lost their jobs. Those who make the beds, check guests in, serve them breakfast, drive them to the event , check their tickets, serve them lunch, dinner , beverages ,sell them souvenirs, check their tickets etc .Those are the folks that get hurt when a convention doesn't come to town. The zoo gets hurt ,Balboa park venues, local restaurants , dish washers , bus boys , taxi drivers ,bartenders , the entire San Diego service work force, from janitors who clean the toilets to pedi cab drivers who pedal them around . So when you're cheering a smaller , less competitive convention center those are the folks you're hurting. 10.5% of every hotel room sold goes into the general fund , one single 10,000 attendee convention lasting 4 days delivers about $700,000 into the city general fund just on room tax alone , not to mention sales tax rebates to the city where collected. Tourism is San Diego's cleanest industry, they come, they spend ,they leave. So before you make up your mind ,know the facts and have an informed opinion
danablasi: I believe the San Diego tourism industry is very important. I have been following it (along with other local industries) for 40 years. But the point of the column is that convention centers are vastly overbuilt, are almost all slashing prices, and are bleeding money. An addition to the current center will almost certainly not bring in significantly more conventions and do all these wonderful things for hospitality industry employees who deserve to make higher wages. The expansion will be a loser, although the figures will certainly be falsified to make voters believe it is doing well. That is going on with the present center, as the column notes. Best, Don Bauder
P.S. an expansion of the existing convention center will require Bed tax from the new hotel proposed next to it to service the bonds. With Bob Filner as mayor it's likely that he would require a new hotel to be UNION , you can not build and operate a union hotel in San Diego and remain competitive, therefore no developer will build that hotel ergo no convention center expansion. We need only to look at Gaylord Hotels and Chula vista to see what happens there . Gaylord's gigantic enclosed hotel would have provided hundreds and hundreds of jobs for 50 years , sales tax ,bed tax ,property tax all out the window because when faced with having to build and operate a union hotel the Gaylord folks said no thanks and took their development to another city. So in the end who lost? Hundreds and hundreds of service workers lost , The city of Chula Vista lost , not one Gaylord tourist rode the Trolley to the Zoo, not one took his family to Sea world, not one picked up the Reader and visited a single advertiser there. Not a single one.
danablasi: That proposed and abandoned Gaylord convention center hotel in Chula Vista would simply have drawn business from downtown San Diego. And I do not agree that a unionized hotel can't be competitive. The low hospitality and restaurant wages are hurting San Diego economically, because too little money is recycled through the local economy because of the low wages. Best, Don Bauder
Gaylord's gigantic enclosed hotel would have provided hundreds and hundreds of jobs for 50 years , sales tax ,bed tax ,property tax all out the window because when faced with having to build and operate a union hotel the Gaylord folks said no thanks and took their development to another city.
Actually the ONLY reason Gaylord pulled out of CV was the PLA agreement, it had nothing to do with a union operated hotel.
SurfPup: Gaylord itself was not doing well financially at the time. Now Marriott runs its convention hotels. Best, Don Bauder
Gaylord got out of Chula Vista because they could not find a financial solution to pay for the subsurface infrastructure for their proposed project on liquefiable State tidelands.
http://blogofsandiego.com/Elections/Prop-G/Gaylord-to-unions.pdf
http://blogofsandiego.com/Elections.htm#06/07/10
Of course local world class luxury Hotels can pay the City of San Diego living wage off $13+ and let everyone share the wealth created by our public lands.
Or be like Manchester Grand Hyatt, and pay worker's minimum wage so that you can get rich off of publically owned land.
laplayaheritage: For the most part, the big hotels pay disgracefully low wages, ballooning profits that flow to out-of-town instead of being recycled in San Diego. Best, Don Bauder
danablasi--"...an expansion of the existing convention center will require Bed tax from the new hotel proposed next to it to service the bonds." Wasn't that the same idea with Petco Park? Of course, that was before the change in the MOU, allowing Moores to build fewer hotels and more condos, and, well what do you know, there was not enough TOT revenue to service the ballpark bonds. That couldn't possibly happen again with the convention center, could it? COULD IT?
aardvark: You are correct. The City's general fund will have to pay off the bonds if the additional TOT tax doesn't do it. That has happened with Petco Park. You may remember that City bureaucrats told the grand jury that they were instructed by the Golding administration to juggle the books to make it look like TOT revenues would pay for the ballpark. A ballpark is NOT going to generate tourism to any significant degree. So, of course, the TOT wasn't sufficient to pay off the bonds, and the City is paying for it (in addition to the $300 million original subsidy). Yes, that is likely to happen with the convention center bonds. You can be sure that the convention center will rig the numbers that are released to the public, and the mainstream media will ignore or play down the story. Best, Don Bauder
"....The City's general fund will have to pay off the bonds if the ... [revenue from TOT is insufficient to pay off the bonds]..."
This is the exact same situation with the Balboa Park underground garage ($17.4 million bond approved by Council) IF [we devoutly hope not] the City is able to go forward with building it.
If revenues from parking don't raise enough to pay the bonds, pay for operation & maintenance & for a short-line tram system (all promised in the plan approved by Council], the cost will fall directly on the General Fund. The General Fund, for anyone reading this who doesn't yet know, pays for public safety, recreation and libraries, just for starters. How well are we doing with that? Just how many more hits can the General Fund take on top of the already projected $40 million deficit?
Nonetheless, Todd Gloria continues searching for some solution that will allow construction of the Plaza de Panama plan. If he pursues some means for re-interpreting or waiving the relevant city ordinance, the legal costs to the city from those of us who oppose this grotesquely over-size solution to removing fewer than 75 parking spaces in the Plaza plus ensuring that no one will be allowed to drive through the Plaza in future, will continue to balloon.
Jelula: Yes, you can add possible insufficient parking revenue from that underground garage to the amount that the City is absorbing every year to pay for Petco Park which, the voters were told, would be economically neutral because TOT tax revenues would be enough to service the bonds. This was another example of a DELIBERATE government lie. Bureaucrats admitted that they were told by the Golding administration to rig the numbers so it would look like the TOT would pay for the bonds. Then, the grand jury report that revealed such shenanigans was deliberately delayed; finally it was released the day before the election. The Union-Tribune chopped up and buried the story. Such is the state of San Diego democracy. Best, Don Bauder
To me, this one seems pretty simple. Here's what I think. The real beneficiaries of more convention business are the hotels on Harbor Drive within walking distance of the convention center. The Marriott, Hyatt, and Hilton. Maybe throw the Omni in there. These hotels will fill up to capacity at $400+/rm/nite during a big convention - vs. less than full occupancy at maybe $250/rm/nite other weeks.
There are some other economic impacts (e.g. bars and restaurants get more business) but I'll bet it's a much smaller impact to those businesses than to the Harbor Drive hotels.
If those 3 hotels on Harbor Drive want to get together and pay for a convention center expansion, let them. If not then, don't expand it.
That's what I think.
ImJustABill: Agreed. Those close-by hotels should pool their own money and put an addition on the convention center. But, unfortunately, that is not how our society operates -- in San Diego or elsewhere. Governments are expected to pay for facilities that benefit only a few hotels based out of town, but it would never occur to the hotels to pay for the facilities themselves. Plus, another point: will those hotels benefit from the expansion, if it goes ahead? I doubt it. They will make money from Comic-Con, but there is so much competition resulting from overbuilding of convention centers that I can't see San Diego gaining many conventions. And you know something? Those big hotels know it, or least suspect it. That's why they would never put their own money behind an expansion. For the same reason, pro sports team owners put little of their own money behind a stadium. It's too risky. Let the dumb taxpayers take the hit. Best, Don Bauder
Building this ugly expansion would be an epic mistake. A wholly unwarranted investment into a declining market...catching a falling knife.
Doing so would prove that the city spends money so unwisely that it cannot be trusted with public funds.
The hotel owners, builders, developers and labor groups who fund political races in San Diego are behind this fraud.
They're also the ones who fund VOSD, and own the UT. So the writers at those two outlets won't take a strong stand against this financial disaster in the making. (Let's all hope to see them prove me wrong on this...)
Fred: A sagacious statement, as always. The only place I would argue with you would be where you say that building the addition would prove that the city spends money so unwisely that it cannot be trusted with public funds. That was proven long before this expansion was proposed. Best, Don Bauder
"Building this ugly expansion would be an epic mistake. A wholly unwarranted investment into a declining market. San Diego is entering the 'Golden Age of Debt' It saves a billion dollars by not repairing its' roads, sidewalks or cleaning the trash from the sides of its' roads. Yet, this surplus is one reason San Diego is deemed a model city.
clockerbob: Good points. Mayor Jerry Sanders told San Diegans he was balancing the budget. All he was doing was delaying critically necessary maintenance and infrastructure projects. Now he has left this pile of deceit for Bob Filner to fix. Best, Don Bauder
Here we are on Feb.18, and yesterday there was a catastrophic water main break on Nimitz Blvd that took over 24 hours to repair and restore. The eruption of pressurized water was blamed on a 70-year old pipe. Now in civil engineering, 70 years should not be considered terribly old. But in SD, there appears to be no effective program to identify pipes that are in danger of failure, and so this wonderful city has these massive water line failures every few weeks. That Point Loma/Sports Arena/Ocean Beach area seems to be particularly plagued by these water line breaks, and has been for the past thirty years.
Visduh: If there is a cogent plan to replace aged infrastructure, I would be very surprised. The City has wasted all that money on giveaways like Qualcomm and Petco, and is planning more corporate welfare (the convention center). At the time of the Petco scam, we argued in vain that propping up billionaires was not the job of government: keeping up with maintenance and infrastructure was. Few listened. Best, Don Bauder