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Passing the Mayor's Hotel Tax Proposal – Hard as it Is – Might Be the Easy Part

For the second year in a row, San Diego Mayor Kevin Faulconer pledged to put a plan on the ballot to raise hotel-room taxes to pay for a new expansion of the Convention Center. It will be the fifth attempt to raise the hotel-room tax since 2004.

For the second year in a row, San Diego Mayor Kevin Faulconer pledged to put a plan on the ballot to raise hotel-room taxes to pay for a new expansion of the Convention Center.

Last year would have been attractive, considering the big turnout for the 2016 election.

But the Chargers and their push for a hotel-room tax hike for a convadium downtown thwarted the mayor.

This year, the very day the Chargers announced their move to Los Angeles, Faulconer proposed a much fuller version of his plan.

The proposal will require a two-thirds vote but it’s likely his only option to bankroll a Convention Center expansion hoteliers have coveted for years. To make it more attractive, the mayor is also going to ask the City Council to combine the measure with funding for homeless services and streets.

It will be the fifth attempt to raise the hotel-room tax since 2004. With the Chargers’ failure last year, voters have now shot down three of them and a long-running court battle scuttled a previous plan to increase the tax without a vote of the people to finance the once $520 million Convention Center expansion.

Now, Faulconer wants to try one more time to expand the facility.

Passing the tax, as hard as it is, might be the easy part.

A slew of challenges stand in the way of the project. For one thing, the city is waiting on a ruling about whether the design of the expansion is even legal. Regardless, that design is now not something boosters think they can afford, so they would have to draw up something a bit smaller.

If they get through all of that, there’s one more nagging problem: The city does not control the land it would need to build the expansion.

That’s controlled by businessmen Art Engel and Ray Carpenter. And they are committed to building a separate hotel there.

“We are moving forward, full-steam ahead, with our hotel and marina project, which will deliver a 4-star hotel, low-cost visitor accommodations, as well as significant public amenities and access to the waterfront for San Diegans. We have every reason to believe this project is the best use of this waterfront parcel to support tourism and the local economy,” said Engel and Carpenter in a written statement.

The pair are partners in the firm Fifth Avenue Landing Inc. They own the lease for the land and their plans have initial approval. They have a long way to go to break ground but, in short, the city will have to buy them out (again).

The other hurdle – the one posed by the Chargers and their dream of five years or so to build a stadium that combined as a convention center expansion – is now gone. So maybe things are looking up for boosters of the plan, including Faulconer.

They’re convinced adding homelessness and street repairs to the list of supported causes will help them win over voters next year.

“The mayor has been very clear that from here on, we will have to go in front of the voters. So any financing plan that we come up with will go before the voters,” said Steve Cushman, Faulconer’s appointed point man on the Convention Center expansion, ahead of the mayor’s Thursday State of the City speech.

After months of discussion about the Chargers’ failed convadium proposal, the mayor and hoteliers were ready to move on their own fast-track plan.

“Frankly, we should be opening right about now,” said Bill Evans, who chairs the city’s Tourism Marketing District and owns a handful of hotels. “If we’re not open by 2021, we’re gonna lose a huge amount of market share.”

Next week, an outside consultant hired by the Tourism Market District will begin analyzing what San Diego convention customers need from an expansion given the changes in the market since the project was approved years ago.

Cory Briggs, the attorney who helped kill the last expansion plan, is waiting for a judge to rule on his lawsuit that the plan illegally blocks public access to the coast.

“More specifically, this lawsuit represents an attempt to uphold promises made at nearly every level of government and by the private sector going back to 1996, promises that no more of the South Embarcadero would be ‘walled off’ to sate the appetite of a few greedy, politically connected special interests for prime waterfront real estate – the public’s real estate – to the exclusion of everyone else,” reads the lawsuit’s introduction.

Even if the city pursues a smaller expansion, the lawsuit is significant.

Hoteliers like Evans who will need to rally behind the mayor’s 2018 tax hike measure are increasingly interested in the other items on his wants list, a reality that also happens to be politically convenient.

Late last year, downtown hoteliers started talking publicly about tense daily confrontations between their staffers and homeless San Diegans. In a post-election meeting with Faulconer, several downtown hoteliers told the mayor growing street homelessness could hamper local tourism if he didn’t take more dramatic steps to reduce it. Some tourism leaders hinted they’d be open to a hotel-tax hike that could throw more resources toward San Diego’s homeless population. They also made clear they’d like to be part of the solution.

Faulconer took them up on it.

He said Thursday his plan will create the city’s first dedicated revenue stream to support homeless services, and would more than triple the city’s current operations fund contribution to the cause.

“My plan will start restoring the homeless funding we’ve lost – and put more revenue behind our efforts to house San Diego’s homeless,” Faulconer said.

And Faulconer threw in another cause popular with voters, too: filling potholes.

“We have more than doubled the funding for road repair since I took office but the streets deficit is so deep, and was ignored for so long, that there are still hundreds of miles left to fix,” Faulconer said Thursday. “We San Diegans want road repairs but the fact is that the millions of tourists that come here every year use our streets too. So we are going to use tourism revenue to fix them.”

That wasn’t a tough sell to leaders in the hotel industry, either.

“We need to maintain our city and protect our city so we are effective in the global marketplace right now,” Evans said.

Faulconer staffers said Thursday it’s not yet clear what share of the new money would go to each cause.

Ryan Clumpner, a Republican political consultant, says passing a two-thirds threshold for a voter-approved tax is possible.

” San Diego is very different than it was 10 years ago. Voters want more out of local government, infrastructure investment, services, more law enforcement. They want the homeless problem to be dealt with and they want resources to do it, especially if those resources come from tourists or anyone but themselves,” Clumpner said.

The updated cost estimate for the Convention Center expansion will play significantly in that equation, Faulconer spokesman Craig Gustafson said.

The mayor’s office also still has to hash out exactly how it’ll spend any new money on homeless services though it’s likely to try to allow for significant flexibility in that area.

Gustafson said the mayor’s office will share more details when it sends its proposal to City Council later this year.

Lisa Halverstadt contributed to this story.

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