My Take on the Citizens' Plan Initiative

With the recent news that the Chargers may be sticking around San Diego after all, combined with the mayor mentioning the Convention Center expansion in his State of the City address, it seemed to me that a key piece of the puzzle that San Diego faces in the near future is the Citizens' Plan Initiative (CPI) proposed by Cory Briggs, his SANDOG friends, Donna Frye, and others.  I hate to admit it, but I hadn't studied the CPI yet and didn't have a real grasp of what it was actually proposing.  I've seen some of the media coverage, but it seems that a lot of people were perplexed.  For a good general overview, look here or here.

In very broad strokes, the plan (1) raises the Transient Occupancy Tax (TOT) and kills the current 2% Tourism Marketing District "Assessment" so all TOT revenue goes into the City's General Fund, (2) allows hoteliers to deduct 2% from the TOT for any assessments paid to a "Tourism-Financed Infrastructure District," or TFID, and another 2% for a newly-formed Tourism Marketing District, (3) allows the hoteliers to spend their TFID assessments to build a new convention center expansion on Tailgate Park, (4) allows for a stadium to be added onto the Convention Center expansion so long as it is not funded by the City or the hotels, (5) provides CEQA exemptions for such a project or a new stadium in Mission Valley (if no public funds are used), (6) allows for the formation of a new corporation to manage the convention center, and (7) prohibits a waterfront Convention Center expansion and, if the Chargers leave, requires the current stadium site in Mission Valley to be used only for a public university campus and a park.  Simple, right?

Once you get past those broad strokes, there are a lot of details.  I decided to get into the weeds of the CPI, see what I could figure out, and share what I took away from it.  Before I do that, I want to give a HUGE warning:  I am still not sure I understand it, I can almost guarantee I am getting something wrong, and I don't have a firm grasp on some of these legal issues.  Take everything I say with a huge grain of salt and defer to any experts that disagree with me.  That being said, here are my thoughts (and that's all they are: opinions).

TFIDs and PBIDs

The critical question that I came away with was how this potential Convention Center could be funded.  The CPI allows for the creation of TFIDs, but doesn't explain how it works.  Here's my best guess.

The CPI incorporates a bit of state law called the Property and Business Improvement District (or PBID) Act.  Because the PBID Act is incorporated into the CPI, any TFID formed under the CPI has to comply with the PBID law and, by extension, the California Constitution concerning taxes.  The PBID Act poses several problems, including potentially short terms of only 5 years before renewal is required, a requirement that ALL benefitted businesses or ALL property be assessed, and a requirement that only special benefits can be funded, meaning that the assessments have to be spent on things that only benefit the assessed businesses, NOT the general population.  I'm also not sure that a PBID can directly issue bonds, I think they have to go through the City.  

It seems unlikely that the City could claim that a convention center benefits only hotels and not other businesses, like bars, restaurants, or even local residents.  Any TFID it seems, or new TMD, could probably not be limited to just hotel owners.  If all businesses are thrown in, this makes passage a whole lot harder and results in complicated assessments.

This is especially true under the CPI.  To get the necessary CEQA exemption, anyone who builds a Convention Center expansion also has to fund (1) a science center in Mission Valley and (2) help fund the Phase 2 of the North Embarcadero Plan, meaning a nice promenade and other improvements along the bay.  Try and explain how those two things benefit only hotel owners and no one else.

I thought I was not quite understanding things, but then I found a memo from the City Attorney from back in 2012.  Mr. Goldsmith seemed to reach the same thought and advised the City against approving any more business improvement districts that did not provide only special benefits to the businesses.  That memo explains that assessments on all properties could be ok, but the City would be required to chip in for the share of the improvements that could be considered "general" benefits to the public.  For that to succeed here, the TFID would likely have to include all residents of San Diego.   The City Attorney hasn't changed his mind, and somewhat recently again cautioned against forming and renewing PBIDs.  Also, if the City is required to pay its share for "general" benefits, this would be illegal under the CPI, which prohibits the City from spending any money on a Convention Center expansion.

My conclusion is that the CPI makes it very unlikely that a TFID to finance a convention center expansion or a new TMD could be formed, at least in the near future.  And if a TFID never forms to expand the Convention Center, that means the joint stadium also fails. The end result would be tens of millions of dollars more for the City's General Fund because the hotels could never utilize the deductions.  

The next question is why haven't the hotel owners expressed these concerns in they are true?  They like the current TMD and they want a Convention Center expansion so, if my conclusion is correct, they would hate the CPI.

The problem is that a lot of the arguments I am making are the same ones that Cory Briggs and SANDOG are making in the pending TMD lawsuit that is getting closer to trial.  If you look at the allegations, they are saying that the TMD falls under this PBID law and the State Constitution and violates them for the reasons I mention above: the terms are way too long, the benefits are general, etc.  So for the hotels to come out and say the CPI is bad, they would have to essentially admit that their arguments in the TMD lawsuit are wrong.

I don't think Cory Briggs is being sneaky here.  All he is doing is holding hoteliers and the City to their argument that the TMD is fine as it is currently structured.  If they think what they are doing is legal, then they should be fine with the CPI.  But if they are wrong, and Briggs is right, the Convention Center expansion and joint stadium is dead unless new financing is found in a future public vote.  And until the TMD lawsuit is final, I don't know if they will, or can, risk coming out against the CPI.  For these same reasons, I think it is unlikely that the Chargers buy into this CPI plan for a future stadium.  Even if the CPI is approved in November, it would take several months, if not years, to form this TFID, possibly requiring a city-wide vote.  I'm not sure the Chargers would be on board with so much uncertainty.

Other Stuff

Reading through the CPI, my main problem is with the section about Mission Valley, which purports to authorize a sale of the site but only if used for a restored river area, a large public park, and a public university campus.  All other uses are forbidden.  Everyone is entitled to their own opinion, but I'm not convinced that a 166-acre college campus with no new residential units (other than dorms) is the best use of this site.  We need more housing!  Also, this section seems to contemplate an all or nothing approach: it only permits a sale of the entire 166-acre site.  What it the City wants to keep a small portion and sell 120 acres?  It seems like this would not be allowed.

I'm not so sure, however, that this part is even binding.  The City Charter currently allows the City to sell any land to anyone so long as it is under 80 acres and permits any sale of a larger parcel to any governmental entity. Based on this part of the City Charter, I don't think the City needs to rely on the CPI's "authorization" to sell the 166-acre site.  But I'm not sure on this part. 

The other problem with Section 61.2806: it requires building a park, but the park would still be owned by the University or another non-profit.  This means that although the park must be public, the city would have no control over its design or future maintenance.  This seems like it could cause problems.

Defending the Plan

If this CPI is challenged in any way, the plan itself limits the ability to defend it.  In Part 8, only the City or the Proponents, that is, Cory Briggs, can defend the ordinance.  This means the hotel owners or any new Convention Center contractor cannot defend the project.  I'm not sure they will like this.

Also, although the CPI purports to hold the proponents accountable if it fails, the mechanism for doing so is pretty weak.  The CPI suggests that the proponents should be liable if the CPI fails and "must be held accountable."  The only way to do this, however, is to assess a $5,000 penalty.  This is nothing.  A Convention Center/Stadium could fall apart, the City may have to refund paid assessments, and the City could spend millions in court, and all they would get back is a measly $5,000.

 

So What Happens if the CPI Passes? 

Just because I don't think a convention center expansion will happen doesn't mean that passage will have no effect on our City.  My bottom line conclusion: if the CPI passes, I think the mostly likely outcome is (1) no convention center expansion (with our without a joint stadium) in the near future, (2) Chargers leave, (3) tens of millions in extra revenue for the City that can be spent on infrastructure and other needed things, (4) and a weakened hotel lobby.  I'm not opposed to any of these things, so I'll probably support it.  But who knows, I may be wrong on all of this.

Also, passage of the CPI would provide a CEQA exemption for any stadium downtown so long as the City doesn't spend any public funds to support it.  I think an NFL stadium would cost too much for the Chargers to pay for alone, but that doesn't mean there couldn't be a different type of stadium downtown.  John Moores, who owns a large lot where this stadium could go, is a supporter of SDSU and has shown interest in bringing a Major League Soccer team to San Diego.  Perhaps Moores uses the CPI to clear the way for a joint MLS/SDSU stadium downtown without any environmental review.  Nothing would prohibit SDSU from chipping in some money for a stadium (or the County) and it may be possible for Moores to build a smaller stadium downtown without money from the City.  That's just speculation, but it's possible.