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Panel: Funding an issue for possible Convention Center expansion

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There appears to be little argument over a second expansion of the San Diego Convention Center, but finding a way to pay for the $750 million-plus project is elusive.

The waterfront Convention Center's future, with a planned 435,000 square feet of additional exhibit and meeting space, was brought up during a Citizens Coordinate for Century III-sponsored session at the Holiday Inn at the Embarcadero on Thursday.

The session included Bill Evans, Evans Hotel Group executive vice president; Mike McDowell, CEO of the Lodging Industry Association and Atlas Hotels executive; and Bob Nelson, vice chair of the San Diego Convention Center Corp. Board of Directors.

Mark Steele, founder of the MW Steele Grouparchitectural firm, moderated the program.

The Fifth Avenue site has been proposed for an additional 435,000 square feet, including 197,667 square feet of exhibit hall space on the expansion's second level, 108,000 square feet of new meeting rooms, 80,000 square feet of ballroom space.

When additional parking and outdoor areas are considered it brings the total expansion to about 1.2 million square feet.

Since opening in 1989, the Convention Center has hosted more than 4,000 events and generated an estimated economic impact of more than $17 billion ($1.8 billion last year) and generated more than 10 million room nights since that time, according to a Mayor's Task Force report.

"Now is not the time to hunker down," said Nelson, noting that several venues in the West are also considering expansions or already have them under way in cities such as Las Vegas (planning a 500,000-square-foot expansion) and San Francisco with its 133,000 square feet and Anaheim, which is planning about 200,000 square feet of additional space as well.

"Most want to come to San Diego," McDowell said. "This is one of the six or seven top destinations in the country, but we don't have the space. We will do a lot more business with 30 percent more capacity."

"Currently more than 12,000 local jobs are directly connected to or indirectly supported by events held in the current facility," the task force reported. "In addition, the Convention Center has been a catalyst for substantial change within our community, helping to transform downtown into a vibrant urban setting complete with hundreds of restaurants, shops, entertainment venues and attractions that not only serve visitors, but local residents as well."

Although the Convention Center -- which currently has about 1.7 million square feet of meeting and exhibit space, was expanded in the mid-1990s -- it wasn't long before officials from the Convention Center Corp. and the San Diego Convention & Visitors Bureau complained the facility was still too small and tens of millions of dollars in business was being turned away.

About 1.5 million room nights were lost between the beginning of 2006 and the end of 2008, because of the small venue, according to the task force report.

The report said there are more than 100 trade shows annually that need between 600,000 and 800,000 gross square feet of exhibit space (expanded size) that average more than 20,000 attendees.

"Annually booking only three to five of these types of new events alone would make the expansion successful in terms of economic impact," the report continued.

ComiCon, which brings as many as 125,000 to the Convention Center annually has threatened to leave as early as 2012, because the center is lacking.

Another issue was the location of the expansion. At one point it appeared it could be constructed across Harbor Drive, but that left space behind the existing center.

If the expansion were built on that preferred site, it might have left Fifth Avenue Landing LLC in limbo.

For many years it appeared Fifth Avenue Landing would be building a 250-room, spinnaker-shaped hotel immediately south of the first expansion. Then, unable to obtain financing, Fifth Avenue partners Art Engel and Ray Carpenter tried to sell the lease to a partnership controlled by developers Todd Sabin and Brian Ross. That option was allowed to expire, however.

Engle and Carpenter have since agreed to sell their lease on the Fifth Avenue Landing property for $13.5 million so the Convention Center expansion may go forward.

As for how to pay for it, Mark Steele said there will not be a single answer. One possible source would be an adjacent new convention center hotel.

A hotel business improvement assessment might be possible, but the lodging market would likely battle that if they aren't filling their rooms.

Other ideas include a bond measure, parking district fees, rental car surcharges and increased Convention Center parking fees -- all of which would have their detractors, as well as their champions.

Evans said "the beauty of the expansion is it would allow land, that has been fallow for a very long time, to be developed."

He said he is a realist about financing the project, however.

"Right now, the best-case scenario is the city is in a $179 million hole or 17 percent of the general fund, and the worst case is that hole is $230 million," Evans said. "This report turns over every possible rock and you still get a $55 million to $65 million annual debt coverage. Should we have it? Yes. Do we need it? Yes, but where is the money going to come from?"

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