Judge Ronald Prager listened to about two hours of oral arguments from lawyers representing the city of San Diego and two opponents of the plan. He then took the matter under submission.
On Monday, Judge Ronald Prager tentatively ruled that it was legal to have hotel land-owners assess themselves a percentage of room rates and use the resulting $30 million annual revenue to pay the bulk of the debt service on the project. The city plans to kick in $3.5 million annually, and the Port of San Diego would add $3 million a year.
The city of San Diego filed suit because, according to City Attorney Jan Goldsmith, the funding mechanism entered a gray area of the law. Lawyers for the city told the judge that they wanted certainty before the bonds were issued.
A citizens group called San Diegans for Open Government and civic activist Mel Shapiro joined in the court action to challenge the plan, contending that the process amounts to a tax, requiring a public vote.
“I think that’s just silly,” Shapiro said. “It’s a transient occupancy tax and everybody knows it because it’s on their bill.”
The judge found that the election of hoteliers to assess themselves “conformed with all applicable constitutional provisions, statutes and ordinances.” His tentative ruling turned aside nearly all of the opponents’ arguments, but he agreed to hear more arguments before issuing a final ruling.
This case is also getting a lot of attention around the state. It’s the first time a city has made an agreement like this with a business association.
During Wednesday’s oral arguments — which mostly delved into details about laws that grant and limit the taxing authority of charter cities — he added that what the city has done “is completely proper under the laws of the state of California.”
He told Cory Briggs, an attorney for the open government group, that his arguments were “off on different tangents.”
Under the plan, downtown hotels would be charged 3 percent of room rates, those in Mission Valley and Mission Bay 2 percent and outlying facilities 1 percent, with the money funding most of the expansion.
The $520 million expansion plan still needs to be approved by the California Coastal Commission. Once construction begins, work should take about 33 months, according to the city.
The center would grow to 2.75 million square feet of floor space, with the most contiguous floor space on the West Coast at 750,000 square feet, project manager Charles Black told the City Council last year.
The city can expect an extra 25 major trade shows per year, bringing 250,000 visitors and their wallets to San Diego, Black said.
He said the annual economic impact of expansion on the region would be $689 million, including a direct bump of $76 million in spending at restaurants and retail outlets. The city will receive an additional $13.5 million in tax revenues, he said.
Area tourism officials say organizers of the biggest trade shows have been bypassing San Diego because the local facility is not big enough. Comic- Con International, which originated in San Diego, had been courted by other cities but chose to remain when an expansion was promised.
“This is a very narrowly focused, limited special tax that one body is paying and it doesn’t signal or authorize any watershed brake in the damn that people are talking about,” said Mike Weed who is private council for the city.
“The only reason we were here, is to validate a potential funding plan for a potential expansion,” Weed said.