The Chargers will ask San Diego voters in November to raise taxes on hotel stays to 16.5 percent from today’s 12.5 percent rate to help build a $1.8 billion hybrid stadium and convention center next to Petco Park downtown, said sources close to the team’s negotiations with lawyers, bankers and the hotel industry.

Paying for the project would fall solely upon hotel guests, the Chargers and the National Football League, unlike previous proposals that tapped general taxpayer funds for part of the financing.

“The city’s full faith and credit is not put at risk,” a source said Tuesday. A spokesman for Mayor Kevin Faulconer said he wouldn’t comment until the plan was released publicly.

At 16.5 percent, San Diego’s tax on hotel stays contemplated by the initiative would become one of the nation’s highest. Among regional competitors, Anaheim adds 17 percent to room rates, while San Francisco’s tax is as high as 16.25 percent.


Chargers consultants are pushing to complete initiative language this week so they can start gathering signatures next month. As of Tuesday night, the team was proceeding on the assumption that passage would require a two-thirds majority vote, the sources said.

Political analysts say that winning a super-majority is exceedingly difficult in California, and particularly in tax-averse San Diego. In 2004, city voters rejected a hotel tax hike of 2.5 percentage points that would have raised money for public safety.

However, the bar in November may prove to be lower: On March 18 a state appellate court ruled in a suit against the city of Upland that tax hikes by initiative require merely a simple majority.

Under the financing plan taking shape, the Chargers would deposit $650 million —including $300 million from the National Football League and $350 million from the team — into a trust fund toward the stadium portion’s projected cost of $1 billion.


A new, city-controlled agency would contribute $350 million, using sales of tax-exempt bonds backed by the increase in hotel taxes. The Chargers would be responsible for any cost overruns for the stadium piece of the project beyond $1 billion, the sources said.

As for the convention center, hotel taxes would back its $600 million construction cost, along with $200 million for land acquisition.

The initiative would have the city retain ownership of the land and “convadium” structures, and it contemplates that the city may form a joint-powers authority or other entity to finance and operate the project.

The Chargers would be responsible for game-day expenses and keep naming rights and other stadium-specific licensing revenues, while the city would maintain the convention center and keep any advertising or other revenues specific to that portion of the project. Any non-NFL revenue would go to the stadium authority.


Instead of traditional rent, the Chargers would pay $15 million a year (in 2017 dollars) toward an operating and maintenance fund. At Qualcomm Stadium, the team effectively pays no rent.

Downtown, the stadium authority would contribute $15 million annually for the stadium maintenance portion to the fund and $10 million for the convention center. Two percent of the total would go into a capital fund to keep the buildings up to date.

Less clear is how the hybrid convadium would look. The Chargers haven’t decided on a final architectural plan. Sources said two choices are contemplated: A stadium on top of convention space, or a stadium alongside a convention center.

The project would be situated at the city-owned Tailgate Park, and extend onto private parcels and a block used as a bus yard by the Metropolitan Transit System. Sources said they simply don’t know where to move the MTS bus yard, but they are hopeful the $200 million set aside for land acquisition will defray much of the cost, along with buying the private parcels.


Chargers consultants also plan to include at least 1,300 parking spaces beneath the convadium structure. This would replace the 1,100 spaces at Tailgate Park the city has leased to the Padres.

The stadium portion would include about 65,000 seats — expandable to 75,000 during Super Bowls — as well as luxury suites and other amenities considered essential by team owners for modern NFL venues.

The new convention center would stick to the 225,000 square feet envisioned in the city’s plan to expand its convention center toward San Diego Bay, a project that’s been blocked in court by activist attorney Cory Briggs.

Briggs, who authored a citizen initiative that’s also seeking to qualify for the November ballot, has likewise sued to invalidate a tourism marketing district funded by a charge of 2 percent on hotel stays.


The Chargers initiative would replace this fee, and guarantee 1 cent of each dollar for a tourism marketing trust fund, with a second 1 percentage point of the 16.5 percent hotel tax going to tourism after a reserve for debt service has been satisfied.

Sources close to the Chargers’ financial advisers say the hotel industry will end up with a full 2 percent for tourism marketing, solving the industry’s legal problem with Briggs on the issue. However, some hotel industry operators said privately that they aren’t convinced the full amount will materialize.

Some worry about diminishing their competitive position with tourists.

An increase in the tax on hotel stays to 16.5 percent would place San Diego among the top 20 cities in the nation with the highest tax rates, according to a 2015 survey conducted by HVS, a hotel consulting and research firm. The analysis included basic hotel-tax rates, plus special-district levies applied to room rates.


The average rate among the 150 largest cities was 13.45 percent, with rates ranging from a low of 8 percent to 18.35 percent.

San Diego Tourism Authority CEO Joe Terzi said he was concerned that a hotel tax rate as high as 16.5 percent could place San Diego at a distinct disadvantage with its competitors.

“It’s alarming, because it’s an increase that would come at a time when we already have a significant challenge for group meeting business from every other one of our competitors who are expanding their centers and are more aggressive on pricing from both a hotel and convention-center standpoint,” Terzi said.

Hotel owner Bill Evans was equally concerned about the effect a dramatic increase in the hotel room tax could have on meeting and convention business. Still, Evans said that he, like others in the industry, are reserving final judgment on the Chargers plan until they have seen the financing proposal.


“When large (convention) groups compare cities, it’s not just the hotel tax they’re judging us on,” said Evans, executive board member of Evans Hotels. “It’s also the transportation cost to get people to San Diego and we’re the most expensive city to get us to.

“I don’t support raising the hotel tax to that level unless I understand how tourism is protected, but until we see the language of how this works, I don’t think any hotel person can make the decision yet of whether we support it or don’t support it.”

dan.mcswain@sduniontribune.com (619) 293-1280 Twitter: @McSwainUT