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Council mulls over Convention Center ruling

On the last day before its summer break, the San Diego City Council on Thursday handled an unusually wide array of items, ranging from providing the Illumina biotech firm with $1.5 million in tax rebates -- for keeping its factory in the city -- to offering cash rewards to public employees who come up with money-saving ideas.

But perhaps the most important subject the council tackled was handled behind closed doors: how to respond to an appellate court decision that quashed the city's plan for funding its proposed $520 million plan to expand the Convention Center.

Because the council's discussion involved the legal strategies in an active lawsuit, the meeting was not open to the public.

But in a memo to the council, City Attorney Jan Goldsmith warned that there are only three options if the city intends to go forward on the Convention Center: ask the California Supreme Court to overturn the appellate court's decision; find new funding sources for the project or put a public referendum onto the ballot.

"As in 2012, the most reliable way to impose this tax is to place it on the general ballot for approval," Goldsmith said. "That was true two and a half years ago [when the City Council passed the funding plan] and it is true today."

In 2012, then-Mayor Jerry Sanders and the City Council devised a plan to fund the project through assessments imposed on local hotels.

At the time, assessments were described as fees, which meant they would not be subject to the state's requirement for two-thirds approval by voters.

But even then, Goldsmith's office warned that the courts could view it as a tax. In 2013, a San Diego Superior Court judge upheld the funding mechanism.

But last week, an Appeals Court panel declared that it was indeed a tax, and was therefore unconstitutional without being backed by a two-thirds majority of voters.

No matter how the City Council decides to respond to the ruling, it will add time to the expansion project.

Because the deadline for introducing a new proposition on the November ballot has already passed, any vote on the measure will likely not incur until next year.

If the city instead decides to take the matter to the Supreme Court, it must file its appeal by Sept. 10.

"It is unknown how long it would take for Supreme Court review, if the court decides to review it," Goldsmith warned.

The council's closed-door session also dealt with responses to lawsuits over open government as well as sexual harassment claims involving the San Diego Police Department.

During the open session that followed, the council's actions included unanimous decisions to:

* Provide a $1.5 million tax rebate for Illumina (Nasdaq: ILMN) keep its manufacturing plant in San Diego. With Illumina's lease on its manufacturing facility on Kearny Mesa, it was considering options to move the factory to Poway or Memphis, Tenn. The tax rebate, which is tied to Illumina increasing its tax payments above current levels by increasing its sales and payrolls, encouraged the company to remain. Although the vote for the rebate was unanimous, Councilmember David Alvarez raised concern over what would happen if too many companies asked for rebates, or if the rebates were disproportionately distributed throughout the city. For instance, he said that Cubic Corp. (NYSE CUB) may soon be seeking a rebate for remaining in its plant in Otay Mesa and that he wanted to make sure it would have the same priority as companies located in other areas of the city.

* Set up an incentive plan for city employees to submit suggestions for improving city operations. The incentives could add up to 10 percent of the value on cost savings achieved through a suggestion, with a maximum of $5,000 or $100,000 for a team of workers. Councilmembers Scott Sherman and Lorie Zapf praised the program for bringing private sector-style incentives into city operations. But Council President Todd Gloria and Council members David Alvarez and Sheryl Cole praised the plan as an alternative to managed competition, which puts city functions in direct competition with the private sector. "I'm confident that these incentives will be more effective and efficient than managed competition would ever be," Cole said.

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