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Failure of Measures C, D Means More of the Same

This post has been updated.

The beat goes on.

The failure of Measures C and D ensure debates over a new stadium for the Chargers, a potential Convention Center expansion and the future use of city hotel taxes to bankroll tourism marketing will continue.

Now we may wait months for the Chargers to decide their next steps. Meanwhile, some tourism leaders are pledging to redouble efforts to expand the existing Convention Center – and they’re already talking about a new hotel room tax hike measure, perhaps as soon as next year. And the future of that controversial tourism marketing charge appears fraught with legal attacks.

Measures C and D were efforts to force decisions. But voters made clear they weren’t pleased with the answers those initiatives offered. Measure C earned 43 percent of the vote, while Measure D garnered 40 percent.

Measure C would have increased city hotel taxes by 6 percentage points, siphoning off some of the new haul for tourism marketing but throwing the lion’s share at an East Village convadium.

Measure D aimed to hike hotel taxes by up to 5 percentage points and, among other goals, to pressure hoteliers to get behind a new tourism marketing arrangement and a Convention Center expansion that’s not on the waterfront and to keep the city from dipping into operating funds for a new stadium or Convention Center.

While raising the city tax, both would have eliminated an existing 2 percent levy that was enacted by hotels without a vote.

The defeat of the initiatives brings us back where we’ve been for years: tussling over what to do about the Chargers, the Convention Center and tourism marketing.

Now the Chargers, hoteliers, boosters and politicos are forced to consider next steps. And there’s already talk of at least one other campaign.

Here’s where things stand on a stadium, the Convention Center expansion and tourism marketing.

The Chargers Stadium

For months, the Chargers have said a loss on Election Day could force them to leave San Diego. After all, the NFL granted the Chargers until just mid-January to decide whether to join the Rams at a new Inglewood stadium with an option to buy another year if San Diego voters approve a stadium measure – in this case, Measure C – by Nov. 15.

But there are reasons to believe this saga is far from over.

The Oakland Raiders, the second team in line for that Los Angeles option, wants to move to Las Vegas [1]. The NFL’s decision-making process [2], the Las Vegas pitch and Oakland’s efforts to piece together its own stadium deal could all buy the Chargers more time.

Chargers Chairman Dean Spanos’ recent comments on Measure C’s chances are telling too.

In an interview with Mighty 1090 last week, Spanos acknowledged [3] Measure C was unlikely to pull in the needed two-thirds margin at the polls and suggested the level of voter support rather than an outright win or loss would dictate next steps.

“If we were to get only 35 or 40 percent, I think that’s very compelling but by the same token if we get 55 or 60 percent that tells me a lot, so there’s no plan B,” Spanos said. “Everyone keeps asking, ‘What’s the plan if it doesn’t pass?’ I really wanna wait and see what the voter support is.”

Next came word that attorneys for the team filed a supportive brief [4] in a state Supreme Court case expected to decide whether citizen initiatives can win with more than 50 percent of the vote, a change that could throw a (likely much-delayed) win to the Chargers.

Well, now voters have spoken. So we wait for Spanos’ – and the NFL’s – next move.

The Chargers could push another downtown stadium plan or look elsewhere in the county, as they have before [5].

Spanos has said the team’s not interested [6] in a new Mission Valley stadium, though many civic leaders have pushed that option and appear likely to only reiterate it given Measure C’s poor showing at the polls.

Mayor Kevin Faulconer, who endorsed Measure C [7] in October after months of silence, will likely be game to negotiate with the Chargers if they decide to pursue a stadium within city limits.

If the team relents and does opt to pursue a new Mission Valley stadium, they’ll likely seek more than the $350 million Faulconer and County Supervisor Ron Roberts pledged during last year’s stadium talks.

Those talks ended, Roberts has said [8], with the Chargers’ demand that city and county taxpayers chip in at least $200 million more.

Roberts said Tuesday night he’s ready to restart negotiations with the Chargers but he’ll be pushing them to refocus on Mission Valley and a voter-approved financing arrangement that relies on multiple funding streams. He considers another downtown stadium proposal a nonstarter. He thinks it’d be too costly.

“We’d like them to stay,” Roberts said. “My feeling is there’s a limit on what we should be kicking in and they have to invest in themselves to a greater extent.”

The Convention Center

Against seemingly all odds [9], the push for a Convention Center expansion along the waterfront continues, and counterintuitively, the two ballot measures that would have forced another option only reinforced some boosters’ resolve to pursue a waterfront expansion.

In fact, at least some of those boosters are already talking about a new ballot measure to pay for it.

Tourism Authority CEO Joe Terzi said he expects the industry to back another tourism tax hike measure, perhaps even in a special election next year. He hopes the mayor will take the lead in pushing it. (Indeed, Faulconer’s long been cool to tax hikes but he previously got behind [10] a hotel-tax hike for a Convention Center expansion.)

“I would be very, very shocked if that wasn’t moved forward,” Terzi said.

He and others believe San Diego needs more convention space along the waterfront so it can compete with rival cities already investing in expansions.

They concede they’ll need approval from two-thirds of voters– and that’s just one of a series of roadblocks that prospect faces. (Indeed, the city no longer even controls the land [9] needed to make that contiguous expansion happen.)

Measures C and D, on the other hand, would have forced the city to pursue a convadium or another non-contiguous expansion, options the tourism industry has repeatedly argued wouldn’t appease customers.

Attorney Cory Briggs, whose lawsuit effectively killed past expansion plans, is already on the case. He helped write Measure D with the goal of preventing the waterfront expansion, among many other aims. He’s also already restarted the legal process [11] to prevent another attempt at a contiguous expansion, adding yet another wrinkle to the quest for a waterfront expansion that Terzi and others refuse to abandon.

In coming months, Terzi said hoteliers will confer with city officials and consider what other causes might be supported with a tax hike, including aid for San Diego’s homeless population. (Terzi said growing street homelessness is the industry’s “No. 1 discussion point” outside the convention center expansion.)

Bill Evans, who owns a trio of hotels and chairs the Tourism Marketing District board, is convinced the industry’s got a better shot at an expansion than it had before the Measure C campaign.

He argued the convadium debate helped elevate the conversation about the need for more convention space along the waterfront.

“I think it’s gonna be much easier now to get a contiguous Convention Center approved by the electorate because they’ve been educated on the need for it,” Evans said. “A year ago, they weren’t.”

Briggs finds all these plans preposterous and pans tourism leaders like Evans who he said refused to stand by a compromise plan in Measure D that offered a plausible path to a Convention Center expansion, even if it wasn’t the contiguous one they’ve long coveted.

“There’s never gonna be a Convention Center expansion. Period,” Briggs said.

Yet backers like Terzi, Evans and Steve Cushman, who serves as Faulconer’s point man on the expansion, are undeterred.

“After two in-depth studies [12] of our clients, we continue to do our best to carry out their overwhelming desires for a contiguous expansion of our convention center,” Cushman recently wrote in a statement to Voice of San Diego.

Tourism Marketing

For years, legal questions have ensnared the city’s Tourism Marketing District, a hotelier-run operation that effectively voted almost a decade ago to increase hotel taxes without a public vote.

Hoteliers voted to assess themselves a 2 percent fee and then tacked that fee onto customers’ bills, often labeling it a tax. Then they tried to use the same approach to pay for the Convention Center expansion and hit a series of a challenges. That arrangement fell apart thanks to Briggs, who sued over the marketing assessment that he argued was an illegal tax. (That suit was later dismissed [13].)

Measures C and D each sought to reshape the tourism marketing deal, giving voters a chance to sign off on the way the city pays for tourism promotions and thus shielding it from lawsuits. Hoteliers opposed both measures, fearing less cash with Measure C and many more strings attached [14] with Measure D.

Now they face two new legal challenges.

Irvine-based attorney John McClendon filed suit against the city in September, claiming the city should have let the public vote on the 2 percent tax.

And the Union-Tribune reported [15] that San Diego class-action attorney Ronald Marron filed a notice against the city this fall, seeking at least $100 million for visitors who paid the 2 percent charge on similar grounds.

Those follow a City Council vote to exempt smaller hotels and Airbnbs from the tourism marketing fee, a move that rendered Briggs’ lawsuit moot.

Terzi said the industry isn’t worried about these new threats.

“The industry position is that this is a valid and sustainable funding source to promote tourism,” he said.

But former state lawmaker Steve Peace, a Measure D supporter and senior adviser to former Padres owner John Moores, said large hoteliers have reason to be fearful.

Peace has some insight into those hoteliers’ concerns. Moores’ company, JMI Realty, owns San Diego’s Omni Hotel. And Peace fears the city’s getting bad legal advice and that hotels could be forced to shell out hundreds of millions of dollars.

In his mind, Measure D was a viable compromise that could have quelled legal threats. (Hoteliers disagree [14].)

Now, Peace said, taxpayers are left to wait and hope the city and hotels don’t lose.

“What will happen is two or three years from now, we’ll know who was right – and I hope they’re right,” he said.