How do you get millions of dollars in public money for doing nothing?
Just ask Fifth Avenue Landing, a company that’s been paid $4 million since 2008 by the San Diego Convention Center Corporation to do nothing with a plot of land owned by the public.
It’s state property, overseen by the Port of San Diego. But the company leased it decades ago before the Convention Center was even built. And that decision turned out to be very lucrative.
The company was in line to get $14 million this year under the terms of a lease buyout deal brokered in 2010. But then the Convention Center expansion project fell apart. A judge ruled the plan to pay for the expansion illegal and it was ensnared in yet more litigation. That big May 6 balloon payment was missed and the Convention Center’s rights to the property ended.
With the fate of the expansion unknown, public officials are now grappling with whether they should pay the company more money or just wait for its lease of public land to expire in nine years. The site of the expansion itself has also been thrown back into question by some decision-makers.
A Smart Lease
The story of how Fifth Avenue Landing wound up receiving so much to do so little on public property dates back to 1984, when company executives obtained a 40-year lease from the Port of San Diego to operate a marine dredging facility on state tidelands. The land suddenly became prime real estate when the San Diego Convention Center opened next door five years later.
Help Us Raise $100k By the End of May
It's good to see that at least one VOSD reporter has figured out how local bosses make money off publically owned port tidelands. Please do more of this kind of reporting.
I would let the lease run out in 9 years. Best course of action.
As far as the propensity to strike bad deals (aka stadium) this is pronounced disease in public San Diego in need for an urgent cure.
The Convention Center appears to me to be a subsidy of hotel owners and others in the hospitality industry which they use to turn profits for their businesses. The jobs it produces appear to largely be low-wage jobs. Why not follow the lead of some other communities and turn the Convention Center over (with appropriate costs) to the hotel owners. Let them play with private money rather than public money.
Mr. Briggs: I'm not suggesting they should get it free. They should pay for it. That's what I meant by appropriate costs.
@Cory Briggs @Chris Brewster Mr. Briggs, As someone who has been studying/appealing the convention center funding for a long time, what would be your proposed equitable solution? Can the city operate the convention center in a way that would be beneficial to the city coffers and transparent to taxpayers? If so, how? Should we give up on the convention center, turn it over to the hoteliers, at a profit, and wash our hands of the mess? What can/should be done? I am tired of hearing about the problem, I would like to hear some concrete solutions...
@Sunny Day @Cory Briggs @Chris Brewster I am not qualified to go through all the options. But I can tell you a few that seem to be worth considering (note: "worth considering" now does not mean worthwhile in the end).
I've heard talk of privatization. If you can strike a deal that eliminates the city's annual subsidy (about $3-4 million), ensures the CC is operated in a way that maximizes hotel stays, picks up the ~$40 million deferred-maintenance tab, and doesn't result in lower-paying jobs, I'd seriously think about privatizing the place. This assumes that a private operator could wring out enough savings through increased inefficiencies to cover the aforementioned tab. I hear conflicting reports, which is probably an indication that it's worth considering.
Another option, somewhat indirect, is to get rid of the San Diego Tourism Authority and consolidate all CC bookings in-house. SDTA gets fat subsidies through tourist taxes via the Tourism Marketing District, and they do a bunch of the same stuff that in-house CC folks could do. The money spent on SDTA could be redirected to the CC's operating expenses.
There may be other options, but, as I noted above, CC economics is not my forte.
What I can tell you is that downtown-connected hoteliers are screwing the taxpayers. They do not want to share any of the hotel dollars they reap, even though tourists are coming to San Diego for reasons other than the comfy hotel beds they find here. I think many of those reasons have to do with the public goods that San Diego has to offer as a city, and those public goods are paid for through tourist taxes. Tourist taxes would pay for a new Chargers stadium -- I'm not advocating for a new stadium, just pointing out an option that has been taken off the table through the excessive political influence of hoteliers -- but instead the city and county are talking about using revenues from anything but an increased tourist tax. Hypocritically, the hoteliers had no problem with a new tourist tax to pay for their CC expansion. G-d bless the Court of Appeal for driving a stake through that greedy idea's heart.
If you want to see the CC run efficiently, we need to begin by forcing the hoteliers to pay their own freight downtown and letting the politicians know that it'd be okay -- just once -- to throw the hoteliers under the bus.
@Cory Briggs @Sunny Day @Chris Brewster Who cares whether lower wages are paid, except for public employee unions? We have minimum wage laws for a reason. of course a private entity will want to pay workers less and not run an unsustainable pension system. A privatization attempt would never work if the hotels had to agree to not lower wages or change wages and benefits in any way. That should not be a concern at all for taxpayers.
By the way Corey, can you name a single person who likes to pay taxes? Do you? When you talk about the evil hoteliers who don't want to pay taxes you sound like a whiner. I've never met anyone who enjoys paying taxes or who wouldn't try to change their behavior in order to pay as little as possible in taxes. In fact everyone and every business tends to want to minimize their expenses so that they end up with more expendable income.
A privatization attempt would have to guarantee the possibility of profit otherwise it wouldn't be a very good business now would it? Finally, how would it be possible to strike a deal that guarantees maximum hotel stays? Nothing of the sort could be guaranteed. Your requirements for a privatization are out of this world. As far as debt servicing goes I agree. On the other hand sometimes cutting losses is a good thing. The fact that we owe 100 million and just witnessed a preposterous attempt to go further into debt while expanding it again simply says that the people running it now haven't a clue what they are doing. The best chance of a successful CC is to put it into the hands of people who know how to generate profits without conditions (other than the condition of also assuming the debt).
Shawn, you're missing my point. Any major new project is going to require money. Either that comes from existing revenues (i.e., existing services will be cut in order to pay for the new project) or that comes from new taxes, which can be levied on locals or on tourists. Many cities have subsidized their sports teams and convention centers with tourist taxes. My point is that the hoteliers do not want any revenues from new tourist taxes being spent on anything except their own dictated project. They are not anti-tax. They are anti-taxes if the revenues are spent on anything they have not blessed.
You also might not know that, as a practical matter, the hoteliers have been running the show downtown for quite some time. That's the problem. For far too long they have had far too much control over the CC board and city politicians, and over how tourist taxes are spent. Despite their enormous influence, the CC still loses money and has a huge deferred-maintenance backlog. The problem is not that the hoteliers have too-little say. The problem is that they have too much.
@Cory Briggs @shawn fox @Sunny Day @Chris Brewster I"m just not sure that I buy that, but I appreciate the comment. The city is the entity that seems to have a problem making bad deals and certainly doesn't have a clue how to make money. Every tax payers wants the money to be spent in the way that they think is best. Hoteliers are no different from any other taxpayer in that sense.
Mr. Fox: I care about whether lower wages are paid, as I am concerned about low wages in San Diego generally and believe low wage employees are subsidized by taxpayers through public assistance. I don’t think we should subsidize businesses. I think businesses should pay a living wage that allows people to get by without public assistance. That said, I don’t believe employees at the Convention Center (except the higher ups) are paid much at present.
As for the hotel owners, they are primary beneficiaries of conventions. Realizing this, many convention centers in other cities are unsubsidized and run by the tourism industry in those cities. My suggestion is that if the cost of the convention center is not offset by income to the tourism industry, then the convention center is, by its nature, a failure. Conversely, if the convention center cost is offset by income to the tourism industry then they should run it and take the costs to do so out of the costs of their rooms.
@Chris Brewster The reason we should not turn over the CC to the hoteliers (among other reasons) is that the city's taxpayers still owe, if memory serves me, in excess of $100 million on the debt for the last expansion. Since the city's elected officials must face the voters every four years, politicians have some incentive (to at least pretend) to care about making sure the CC generates enough money to service the debt. The hoteilers are not accountable to the taxpayers or the voters. If they could use the CC to fill their hotel rooms without regard to how well the taxpayers make out in the deal, you can bet they would screw us 100 out of 100 times. I wouldn't let the foxes guard the hens.