Nothing could go wrong.

For months, a robust coalition of business, labor and community leaders had been raising hundreds of thousands of dollars to get a measure on the ballot that would not only bankroll a long-sought expansion of San Diego’s convention center, but also raise money to help the homeless and repair roads.

Then everything did go wrong.

The measure, which called for an increase in the city’s hotel tax, fell short of the signatures needed to make the November 2018 ballot, and Mayor Kevin Faulconer’s urgent pleas to advance the initiative anyway were rebuffed by the City Council. Momentum eroded, and backers fretted that their pressing civic priorities were doomed.


Or so it seemed. Come March 3, voters will finally weigh in on the proposed room tax hike, which, if approved, would generate nearly $7 billion over more than four decades — enough money, its supporters say, to enlarge the convention center by 50 percent, help get homeless families and individuals off the streets, and repave 150 miles of roads every year.

The threshold for approval of Measure C is high — a two-thirds majority vote in a city long averse to tax hikes. But backers are taking no chances, having mounted since last year a nearly $3 million campaign in hopes of persuading the electorate to say yes to what they point out is a tax on visitors, not locals.

“Voters have never had a chance to weigh in on this before, and we are seeing tremendous momentum as people see that tourists will pay for this and that it will go for our biggest priorities,” said Faulconer, who has been pushing for an expansion of the convention center since his days as a city councilman.


Supporters had hoped for no organized opposition, but longtime homeless advocate Michael McConnell has so far spent more than $370,000 of his own money to defeat the tax hike initiative, flooding mailboxes with his No on Measure C fliers. He contends that the initiative has too many loopholes, is too vague and raises too little money to have a meaningful impact.

“Who knows how much money can go into more plans and studies and consultants’ pockets instead of solving these problems?” he said. “This measure doesn’t say what goes toward reducing homelessness, and the definition of homeless people is so broad that they can siphon the money off to almost anything.”

What follows is a thorough look at the initiative — what it does and does not do, its financial underpinnings, and the arguments being made both for and against passage of Measure C.



How did we get here?

The roots of the ballot measure date back to the administration of former Mayor Jerry Sanders. A decade ago, he pushed for a larger convention center, arguing that the city was losing bigger conventions — and by extension, millions of dollars in spending by out-of-towners — to other cities, an argument that persists today.


Sanders’ mistake, though, was believing that a tax increase approved by hoteliers in 2012 to finance the expansion eliminated the need to go to the voters. A court ruling two years later found that the tax hike was unconstitutional, forcing city and business leaders to return to the drawing board.

Faulconer faced some miscalculations of his own three years ago when he thought he could persuade the council to approve a special election for a ballot proposal that at the time did not have the wide support of the labor unions and homeless advocates. By then, the notion of combining the expansion project with funding for homeless services and road repairs in a single hotel-tax-hike measure had taken hold and was the basis for the citizens’ initiative effort launched in early 2018.

“If we had just said we want to expand the convention center, I don’t believe that’s enough of a compelling argument to get 66 percent of the citizens to say we should do it,” said Joe Terzi, who will soon be retiring as CEO of the San Diego Tourism Authority. “That’s because many of them don’t understand the value of the center, and it doesn’t affect them directly. But it’s not fair to say it was just a political stunt to include the homeless funding because the industry has been saying for years we need to figure out this homeless issue, and it was starting to have a real impact on tourism.”



How much will hotel room taxes go up?

Measure C calls for boosting the city’s existing hotel room tax of 10.5 percent by 1.25 to 3.25 percentage points, depending on the proximity of hotels to the downtown convention center. If approved, it would mark the first time the tax has been raised in nearly 26 years.


San Diego hotels of 70 or more rooms already levy an additional 2 percent surcharge on guests’ bills to pay for tourism marketing, so the tax increase would end up boosting the city’s effective room rate of 12.5 percent to 15.75 percent for downtown hotels; 14.75 percent for properties in a larger area generally bounded by State Route 56 on the north and State Route 54 on the south; and 13.75 percent for hotels in the northern and southern peripheries of the city.

The tax increase, if approved, would likely become effective May 1 and would be collected for 42 years once long-term bonds are issued for the convention center expansion project. Because that is unlikely to happen right away, the duration of the tax hike could be closer to 45 years.



How will the tax revenue be divvied up?

The majority of the estimated $6.8 billion in revenue generated by the tax hike — 59 percent, or $4 billion — would be dedicated to an expansion of the convention center, plus ongoing expenses for modernization, promotion and operations, according to the city’s Department of Finance. In a move to jump-start spending on homelessness, the measure would allocate some 41 percent of the tax revenue, or $147 million, during the first five years for homeless programs. After that, the percentage drops to 31 percent, yielding an estimated $2.1 billion over the expected 45-year life of the tax hike.

Homeless funds, defined in broad parameters within the measure, can be spent on a number of initiatives, from the creation of affordable and transitional housing to temporary, beds, homelessness prevention and job training.


Money dedicated for road repairs would be zero during the first five years that the measure is in place but would rise to 10 percent thereafter, yielding more than $650 million.

A cap of $850 million is authorized for convention center bonds, although the initiative allows the City Council to increase the bond indebtedness following a public hearing. The most recent cost estimate for expanding the center’s ballroom, exhibit hall and meeting space was $685 million, not including land acquisition costs, but that was three years ago. An analysis in December by the city’s Independent Budget Analyst pointed out that if the funds designated for the convention center fall short of the actual cost, “design elements would need to be scaled back to make expansion feasible.”



Who decides how the homeless money will be spent?

While some opponents of the measure have criticized it for not providing any guarantees on how the homeless money would be spent, its supporters point to language in the initiative that calls for creating a seven-member Citizens Oversight Committee appointed by the mayor to advise city leaders on five-year spending plans drafted by future city councils. Annual independent audits would also be required.

“That was an intentional decision to not create that kind of rigidity in this measure,” said Carol Kim, political director for the San Diego County Building and Construction Trades Council and also a board member of the San Diego Convention Center Corp. “For example, there was no way we could have known in 2002 that in 2016 we’d have a Hep A crisis. So we wanted to make sure there was a lot of flexibility so the experts and policymakers could be responsive.”


Would the added tax revenue solve homelessness in San Diego?

The city’s Community Action Plan on Homelessness, created last year by the New York-based Corporation for Supportive Housing, calls for spending about $2 billion over 10 years. By contrast, it would take at least 42 years for Measure C to raise the same amount.

According to a recent report from the Office of the City Auditor, San Diego spent $102 million on homeless-related programs and services in 2019. Measure C would generate an average of $29.4 million annually in its first five years. To meet the cost outlined in its action plan, the city would have to increase its spending on homeless programs by $194 million annually for 10 years, a sum far greater than what would be generated by Measure C, McConnell argues.

“Measure C is a massive tax and bond measure that mainly funds a Convention Center expansion,” he said. “But it is being sold to voters as a solution to homelessness even though it does not guarantee even one unit of housing or services for homeless veterans, seniors or even families.”

Admittedly, some of the items in the homeless plan are quite expensive, such as the proposed 2,800 units of supportive housing that would cost about $963 million over 10 years, quickly eroding any revenues generated by the hotel tax hike. Other items, though, are far less costly, such as the annual $2.5 million called for in the plan that would help 767 individuals and families avoid homelessness. Another $18 million annually would provide rapid rehousing rental assistance with services for 802 individuals and families.


Deacon Jim Vargas, president and CEO of Father Joe’s Villages, agrees that Measure C won’t raise enough to meet all the city’s needs to solve homelessness, but points out that it would augment other funding sources that together could have a substantial impact.

Key among those is a $900 million housing bond that has been proposed for the November ballot to help create 7,500 new affordable housing units. And at the state level, Gov. Gavin Newsom is proposing $750 million in homeless services in next year’s budget on top of the $650 million in this year’s budget, and San Diego will vie for a share of the money.

“To say Measure C doesn’t solve the issue may be true, but that doesn’t mean it’s not a good measure,” he said. “It’s additional dollars (that are) severely needed in this community.”

Why does the convention center need to be expanded for a second time?

Last enlarged in 2001, the 30-year-old bayfront center would grow from more than 818,000 square feet to 1.2 million, including 220,150 square feet of additional exhibit hall space.


For years, tourism and convention center officials have argued that they have had to turn away larger, more lucrative meetings because the center is not large enough to accommodate their space needs. They also have raised the specter of losing San Diego’s single largest convention — Comic-Con — to a rival city with a larger venue.

Among top U.S. convention centers, San Diego, they say, is ranked 22nd in terms of exhibit hall space, lagging behind competitors from San Francisco to Orlando that have either already expanded or are planning expansions.

Pro-Measure C ads airing repeatedly on television claim that the convention center has already lost seven conventions because the center isn’t large enough. While the Tourism Authority was unable to produce letters confirming all seven lost bookings, it did offer a sampling of cancellation letters over the last five years from groups saying they were backing out because the planned expansion would not be happening soon enough.

The American Association for Cancer Research will hold its annual meeting in San Diego in April, but it notified the city in 2018 that it was terminating its agreement to return in 2023. Meanwhile, it has booked conventions for 2025 and 2027 in Los Angeles, banking on the completion by then of a planned expansion of its downtown center, said Pamela Ballinger, senior director of meetings and exhibits for the association.


“We were in San Diego in 2014 and we had about 18,000 people and 450 exhibitors, and this year we are anticipating 23,000 attendees, and our exhibitors are up to 505 and we have a waiting list for the first time,” she said. “If we have to relocate this meeting, it hurts us because we always see a jump in registration here, but it also hurts San Diego,” Ballinger added. “We’ll do well because it’s cancer research but we’d like to stay in San Diego.”



If San Diego builds it, will they come?

The city’s longtime push for a larger center comes amid a growing arms race among cities investing heavily in bigger, better convention centers in hopes of filling more hotel rooms. Skeptics, like longtime convention center industry researcher Heywood Sanders, point out that the boom in convention center space is far outstripping the much slower growth in meeting attendance.

Data provided by the Center for Exhibition Industry Research shows overall attendance rising about 14 percent since 2000. Contrast that with the nearly 40 percent increase in exhibit hall space during that same period, says Sanders.

“You’re competing in an environment that is overbuilt,” said Sanders, a professor at the University of Texas at San Antonio and author of the book, “Convention Center Follies.” “Having more room doesn’t necessarily yield more business, although that’s precisely the argument made in every city. We just need something more. More space, more hotel rooms.”


To a degree, it’s irrelevant how much more convention space there is nationally, because San Diego, says Terzi of the Tourism Authority, is one of the most sought-after convention destinations in the U.S.

“Do you want to be in Chicago in March or San Diego in March,” said Terzi. “Our occupancy right now is over 80 percent for citywide conventions, and the benchmark in the industry for what is considered maximum occupancy is 70 percent.”

In the years since the convention center was last expanded in 2001 — nearly doubling the building size — the average number of attendees per year grew from 737,000 pre-expansion to 839,000, according to the Convention Center Corp. Those figures, though, include consumer shows like the Bridal Bazaar that typically don’t result in overnight hotel stays. Officials instead prefer to look at attendance for just those conventions that do draw out-of-town visitors. That growth has been more robust, increasing from an annual average of 291,000 attendees pre-expansion to 532,000 since 2001.

San Diego is still on the hook for debt from that last expansion, owing more than $90 million that should be paid off by 2028, city officials say.


Can the city regain control of the bayfront expansion site?

Still an open question is control of the 5-acre leasehold where the expansion would be built. Longtime port tenants Ray Carpenter and Art Engel, who currently control what is known as the Fifth Avenue Landing property, intended to build a $300 million hotel complex there, but had consented to back away from their project and turn over their leasehold in return for a $33 million payment should voters approve the hotel tax increase. When the timing for the ballot measure was delayed until this year, that deal largely fell apart.

Said Carpenter in a recent interview, “If the city wants to buy it, they’d have to reopen negotiations. We plan to be in front of the Port District before the summer for approval of our (environmental impact report) for the hotel.”



Who opposes Measure C?

While the Republican Party has officially taken a stand against Measure C, McConnell has been the most active opponent and the only one who has raised substantial funds in an effort to defeat it. He has said he has nothing to gain from his campaign, and only wants to educate voters about what he sees as a deeply flawed initiative that could put the city on the hook of paying millions in a bond debt.

“The measure specifically states that the city can use other funds to pay off the bonds,” he said. “They put that in there because they probably know there’s not enough money. There’s all sorts of loopholes that they don’t want to talk about.”


Former San Diego City Councilwoman Donna Frye also opposes Measure C. She says that if the average voter were asked what to do with $2 billion, that person would not say most of the money should be tied up for 42 years on the expansion of the convention center.

Frye also said the ballot does not tell voters about how much the debt service will be on the potential bonds, which she estimates could be as high as $1.4 billion.

“The thing for me and a lot of folks who actually read this stuff is how offensive it is to use homelessness as a means to expand and modernize the convention center, because really, that’s what this ballot measure is about,” she said.



Who supports Measure C?

The initiative has support from a broad array of groups, ranging from members of the tourism industry to homeless service providers. Among the supporters are the San Diego and Imperial Counties Labor Council, San Diego County’s building trades unions, The San Diego County Democratic Party, San Diego County Hotel-Motel Association, San Diego Police Officers Association, San Diego County Taxpayers Association, and the San Diego Regional Chamber of Commerce.