May 13 2015 01:01 PM

Convention Center expansion woes prompt privatization talk

5th Avenue Landing
Photo by John R. Lamb

The politics of surprise leads through the Gates of Astonishment into the Kingdom of Hope.

—Max Lerner

Public officials who claim to be "shocked" at anything these days should come equipped with a large grain of salt.

The most recent example? Last week's City Council review of next year's proposed budget for the San Diego Convention Center Corp. had everything: intrigue, raised eyebrows and indignant pronouncements of shock and horror.

The city's months-long obsession with keeping the San Diego Chargers in town may be proving a distraction from San Diego's other financial worries, including how—and whether—to proceed with an expansion of a convention center that now finds itself competing with neighboring hotels that are rapidly building their own mega-conference spaces.

A City Council whose hopes were set on a contiguous center expansion instead reacted last Thursday as if their favorite pony had been sold to a glue factory in the dead of night.

Convention center officials had arrived at the hearing ready to make the case for $3.9 million in additional funding from city coffers for needed repairs and upkeep for the coming fiscal year, but council members instead took aim at the status of a 7-acre hunk of property that separates the convention center from the waterfront. 

Known as the Fifth Avenue Landing, the parcel is now home to a sizable parking lot and docking facilities for fancy yachts that go by such names as My Way and Guru. As part of the recommendation from a 2009 task force established by then-Mayor Jerry Sanders, the convention corporation agreed to use reserve funds to, in essence, sublease the property from its leaseholders, longtime tidelands wheeler-dealers Ray Carpenter and Art Engel.

The pair at one time envisioned building a hotel on the property, but the Coastal Commission eventually ruled that the project should be smaller, raising concerns that the project wouldn't pencil out financially.

Annual payments of $500,000 have been made, but on May 6 a balloon payment of more than $13 million came due. But without a financing plan for the center expansion—ruled invalid last year in court—there was no money for that balloon payment.

On Thursday, council members bemoaned the decision to default on the so-called "non-recourse promissory note," which, as described to Spin Cycle, won't result in any effect to credit ratings or cost the city or convention center any additional funds. As one observer noted, "It's simply a transfer of the property back to the original leaseholder."

But hearing the council members react, one might have thought the end of the world was approaching.

"We've just found out we will not have a contiguous convention center, and it disturbs me greatly," Council President Sherri Lightner said, "because the first we knew of this was three days before the defaultI think a head's up sooner would have been great."

Councilmember Lorie Zapf echoed the bewilderment. "I think, like everybody, I literally just found out sitting up here about what was going on," she said. "Anybody picked up a phone and talked to anybody? Not me."

Rabbi Laurie Coskey, vice chairwoman of the convention center board, told the council that board chairman Steve Cushman "has worked hand in glove with the mayor's office, so there's been a great deal of back and forthcertainly since the first of the year."

Zapf asked Brian Pepin, the mayor's council affairs director, about that. "I haven't been personally involved in those conversations," Pepin said. "But yes, there is constant communication between the mayor's office and parties like this. So moving forward I will try to do a better job of making sure everyone is fully in the loop."

Spin reached out several times to Mayor Kevin Faulconer's office for an assessment of the situation, to no avail.

Carlos Cota, business manager for Local 122 of the International Alliance of Theatrical Stage Employees, a key convention-center trade union, found the council bewilderment "sickening."

"I've been dreading this decision [the default] for a year," Cota told Spin. "The council has discussed it at least twice. It disgusted me."

Chairman Cushman, in a brief interview Tuesday, agreed that communication with the council could be improved. "We do our best, but I can do a better job," he said.

"Look," Cushman added, "council members are well meaning. They have a lot on their plate, including some 30-alarm fires. This just kind of flew under the radar, I guess."

He noted that a "head's up" letter was hand-delivered to the mayor and council offices on April 30, prior to a May 4 letter confirming the default and a follow-up May 6 letter from Fifth Avenue Landing asking how the center board wanted to handle the lease transfer.

Spin checked with all nine council offices regarding receipt of the April 30 letter. Of the six that responded, two—David Alvarez and Mark Kersey—said they never received the letter. Two— Scott Sherman and Chris Cate— received the letter "the week of the meeting." Zapf's office confirmed receipt but was unsure when it arrived. Councilman Todd Gloria's office would only say it had received the letter from another office.

Despite much media pontification, Cushman would not say a contiguous convention center expansion is officially dead. "All options are still on the table," he said, adding a study due in August should shed light on what center customers want: contiguous or a "campus setting" across Harbor Drive.

For the much-prized Comic- Con International convention, spokesperson David Glanzer said securing hotel rooms is now the bigger challenge. "The truth is, without affordable housing we could lose our attendees, which would have a dire impact on our ability to remain in San Diego for future years," he said.

One option might be privatizing the center, which both Sherman and Kersey mentioned during last week's hearing. Los Angeles has found success doing so, Sherman reasoned, and did it with the support of labor. Why not here?

Cushman wouldn't rule out the possibility, but Cota had a different take: "It's a quick fix that doesn't fix anything. Labor is not behind privatization here."

Center spokesperson Steven Johnson agreed: "There's no private entity that's going to take on the $30 million in deferred maintenance as well. Why would they?" That, indeed, would be shocking.

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