The San Diego Unified Port District has given conditional approval to help fund the $550 million cost for the proposed San Diego Convention Center expansion.
Based on the action that was taken at a special meeting on Tuesday, Nov. 29, 2011, the Port District may contribute up to $3 million a year for up to 20 years.
The Board of Port Commissioners unanimously agreed to support the funding request with conditions.
In addition, Port Commissioners directed the Port District staff to begin negotiations with the city on the terms and conditions of support agreements. The staff also was directed to “develop alternatives to address balancing the needs and benefits” in the Port District’s five member cities of San Diego, National City, Chula Vista, Coronado and Imperial Beach.
Details on numerous issues, such as when the Port District will begin making its financial contributions, will be worked out in future negotiations between the Port and city.
“There is a lot of work left to do,” said Scott Peters, the Board of Port Commissioners Chairman. “We do some things to make money and we do some things to make community. This should provide a return on investment to the port.”
The action is in response to a request that San Diego Mayor Jerry Sanders made before the Port District Board on Nov. 8, 2011. He suggested a contribution of $3 million a year, or $60 million over a 20-year period.
The mayor returned to the Board at the Nov. 29 meeting and once again asked for the Port District’s financial commitment.
“The Port District will share in the $698 million in economic benefit to the region,” Sanders said.
Even before the mayor made his request, the Port District staff was analyzing the revenue expected to be generated from the proposed expansion and a proposed 500-room expansion of the Hilton San Diego Bayfront Hotel.
Based on the financial projections, the staff concluded that the positive economic impact to the region, the increase in the sustainability of revenues to the Port District, and the opportunity to develop 500 new hotel rooms to support the Convention Center is a good investment and is likely to result in increased revenues to the Port District.
These additional revenues are needed to support Port District operations and important projects throughout the five Port member cities, the staff concluded.
Related Gallery: San Diego Convention Center Expansion Renderings
Studies by consultants indicate that the Port District could derive revenues ranging from a low of $3.5 million a year to a high of $6.2 million a year, depending on whether the Convention Center expansion and the Hilton addition are developed at the same time.
Port Commissioner Dan Malcolm, who represents the City of Imperial Beach, expressed concern about two financial reports that forecast the revenue. He asked that additional studies be conducted to include a “worst-case scenario,” which other Commissioners agreed to.
Commissioners also expressed reluctance to dip into any Port District reserve funds to help fund the proposed expansion.
Beyond the economic benefits, the Port District staff said the Convention Center expansion will add more public spaces, including a signature rooftop park. It also will improve the sustainability of the Convention Center by using brackish water to irrigate landscaping.
The Board has directed staff to negotiate agreements with the city that address financial and legal impacts to the Port District, cost management, quality of public spaces and support for Port District projects with regional benefits.
In addition, the Port District has said several potential issues may need to be addressed to ensure that any commitment does not compromise its ability to implement other important regional projects in its five member cities. The issues include the return on investment, the timing of payments, the city’s contribution and the impact on the Port District’s credit.
Aside from the Port District’s proposed contribution, the city is proposing funding sources for the expansion that include $33 million a year in tax revenues from a proposed Convention Center Facilities District. The facilities district would levy taxes on hotels in the city, and produce revenue that would cover up to 75 percent of the expansion cost, according to the city.
Revenue also would be generated through the city’s transient occupancy tax on hotel rooms.
The expansion project is currently in the environmental review phase. The Environmental Impact Report is scheduled for completion in Feb. 2012. Construction is anticipated to begin a year later. The city expects the expanded Convention Center to be completed in early 2016.
The Port of San Diego was created by the state legislature in 1962 and is responsible for $1.7 billion in public improvements in its five member cities: Imperial Beach, San Diego, Coronado, Chula Vista and National City.
The Port oversees two maritime cargo terminals, two cruise ship terminals, 17 public parks, the Harbor Police Department and the leases of more than 600 tenant and sub tenant businesses around San Diego Bay.
[Via Port of San Diego, Photos Courtesy of John Gilmore]