The $20 Million Subsidy of the Visitor Industry
November 13, 2010
by Scott Lewis
Voice of San Diego
The Convention Center Corp. this week released the snazzy new drawings of its proposed expansion, which could be the most expensive facility the city has ever built.
The drawings showed the newest feature, meant to give us all chills: They put grass on top of it to make a five-acre park. It's like a gigantic Chia Pet. The Chia Center!
The Chia Center came with a barrage of stats.
On his Facebook page, for instance, Councilman Kevin Faulconer noted one of them: The city collects $20.2 million a year in sales and hotel taxes directly from the business the Convention Center delivers to pay for "police and fire."
"The San Diego Convention Center is the definition of return on investment," he wrote.
Is the expansion the definition of return on investment, though? In plugging the new expansion, the city's Convention Center Corp. said it would bring in an additional $17.1 million in taxes to the city.
Do a little arithmetic and we get to $37.3 million total coming in to the city's day-to-day budget because of this new building.
There's only one problem. Actually, two.
No. 1: The new convention center is expected to cost $50 million-to-$60 million a year in debt payments on the loan the city would have to get to build it.
N0. 2: The city still pays $8.75 million a year on the last Convention Center expansion.
So let's do that arithmetic. That's at least $58.75 million a year for the facility.
That means it's a loss to the city of more than $20 million a year.
Or, I suppose we could call it not a "loss" but a subsidy of the visitor industry of about $20 million a year.
There are basically four ways to pay for this facility being floated.
• I. Raise some kind of special tax. This would be, most likely, a type of rental car surcharge or maybe a hotel-room tax increase. It would require a vote of the people mdash; perhaps even a two-thirds majority. This is not going to happen. They might alternatively put it through the Hotel Government, aka the Tourism Marketing District. We'll see.
• II. Form a new, special, group — known as a business improvement district — just among the businesses that benefit directly from the Convention Center. This would make them all chip in a bit and pay for it — or a good portion of it.
• III. The port district. The port, a government agency, makes its money from hotels and other lease holders on port land. It could, and should, at least chip in. Port Commissioner Stephen Cushman is the mayor's special designate in charge of all things Convention Center expansion.
• IV. The Downtown Money Tree (aka The Porkfest): Assemblyman Nathan Fletcher has now made it possible for billions of dollars of downtown property taxes to stay sequestered downtown into projects that are supposed to spruce up neighborhoods.
I would be willing to bet that they'll go almost wholly for Option IV. Trust me, they will not take this to the voters, so that eliminates the chance for a new tax. (I know, raising a special tax to pay for a special effort! Absurd! What is this, 12th Century England!?)...