Court Rejects Hotel Tax Plan for San Diego Convention Center Expansion

HIL ANDERSON, SENIOR EDITOR

San Diego, CA – A California state appeals court derailed the funding plan for the hard-fought expansion of the San Diego Convention Center.

The ruling pulled the rug out from a hotel-tax plan, which had been challenged in a lawsuit filed by a citizens group on the grounds the city charter required that all tax increases were required to be approved by two-thirds of the electorate. The room-tax hike was voted on only by a special assessment district made up of the owners of the land where hotels stand or lessees of government-owned land where hotels were located — a number of whom would presumably benefit from the larger convention center.

A San Diego County Superior Court judge agreed in 2013 that state law allowed the hotel owners to band together into a special district since they would be the parties paying the increased room tax.

But the Fourth District Court of Appeal said that even though the hoteliers agreed to the increase and would technically be paying the tax, it was likely the money would actually be footed by the trade show attendees, tourists, and other travelers who stayed at their hotels. That, the court concluded, ran up against California’s landmark Proposition 13, which was enacted to limit the direct and indirect taxation powers of city governments.

Mayor Kevin Faulconer reaffirmed his support of the project, noting the importance of the expansion to the regional economy. “The expansion would create thousands of good jobs and ensure that we continue to attract large conventions like Comic-Con,” he said.   The mayor said he would work with the City Attorney’s Office to review all options in moving forward.

The San Diego Convention Center Corp. (SDCC) said it was not giving up on its expansion plan and would be in contact with show organizers and meeting planners in the coming days to answer any questions about the long-term status of the project. “We are disappointed, but our last expansion faced similar legal hurdles and we were ultimately successful in our effort,” said Carol Wallace, SDCC president & CEO.

City officials and expansion backers said that they would mull over their next move, which might include an appeal to the Supreme Court or holding a special election to approve the increase. San Diego voters rejected an increase in the hotel tax in two separate votes in 2004, the appellate ruling noted.

The Fourth District’s ruling came at the 11th hour with the $520 million expansion plan close to groundbreaking. The plan had received the necessary permits and enjoyed the political support of city hall.

The expansion plan calls for 225,000 square feet (sf) of exhibit space to be added to the current 615,701 sf of prime space. The plan also calls for a new ballroom and 101,000 sf of meeting space. The end result would be the largest contiguous exhibit hall on the West Coast.

The San Diego Convention Center is currently ranked 22nd on the Trade Show Executive World’s Top Convention Centers. Expanding the building to 840,700 sf of prime space would move it to No. 13, slightly behind 12th-ranked George R. Brown Convention Center in Houston and just ahead of the Jacob K. Javits Convention Center in Donald E. Stephens Convention Center in Rosemont, IL.

Meanwhile, the San Diego Union Tribune newspaper recommended taking a new look at previously rejected “Plan B” idea on its editorial page over the weekend. The plan would create the new exhibit space as part of an NFL stadium project on land a short distance from the convention center near the Petco Park baseball stadium, which opened in 2004. The editorial board, which is an active booster of downtown development, noted that while the new building would not be contiguous exhibit space, the walk would be less than the distance from one end of the current center to the other.

Reach Carol Wallace, president & CEO, San Diego Convention Center, at (619) 525-5000 or carol.wallace@visitsandiego.com