Hotel Surtax for Convention Center Goes to Courtroom Arguments

Opponents of the controversial funding scheme behind the proposed expansion of San Diego's convention center pleaded their case in court Wednesday.
           
But Judge Ronald Prager gave them little hope he'd declare it illegal.
           
The issues in the litigation, filed nearly a year ago, are acknowledged to be untested at the highest judicial levels.
           
A final decision in the case isn't expected until week's end.
           
But Prager’s tentative ruling, issued Monday, supports the premise that a special surtax on hotel rooms is a legitimate method of generating money to cover construction costs for community facilities.

The financing mechanism in question allows San Diego's hotel industry to impose  room-tax surcharges of one to three percent, to raise more than half a billion dollars to expand the convention center for a second time since it opened in 1989.
           
That agreement came about through a private election among the hoteliers, with the biggest properties casting an overwhelming number of weighted votes.
           
The city and port district are kicking in another $165 million over 30 years.
           
Prager's tentative ruling has already attracted statewide attention because of its potential to inspire private taxation efforts by other industry groups.

"There's no doubt that local agencies are looking for new ways to raise taxes, because of the reticence of local voters -- and this is one of them," says attorney Craig Sherman, representing civic activist Mel Shapiro, who’s challenging the so-called “validation” lawsuit filed by the city in the absence of high-court precedents.  “And I think  the sky's the limit as far as where local agencies can start to impose these special taxes."

Said Shapiro, answering questions from a media scrum following the court hearing: "Now it's hotels.  Next, how about restaurants -- putting in taxes for their benefit?  Or, I don't know, grocery stores?  Gas stations?  This has wide implications."

Lawyers for the city dismissed those concerns as overblown.

"The judge said it's rhetoric, it's speculation,” said attorney Michael Weed, one of several private counsel hired to press the city’s case.  "There needs to be a public purpose behind whatever it is you're trying to build … this is a very narrowly focused, limited special tax that one body is paying, and it doesn't signal or authorize any watershed break in the dam that people are talking about."[

If the judge's tentative ruling is finalized, there'll be appeals that could tie up the financing scheme for quite a while.
           
The project is on track to reach the state Coastal Commission in June.
           
The hotels have settled issues with organized labor, to smooth out that review process.

Meantime, in another court action involving the hotel industry, the city is being dropped as a defendant in a case filed by the Tourism Marketing District.
           
That leaves Mayor Bob Filner on his own, to defend his refusal to sign documents releasing room-surcharge money to the district.
           
The City Council has agreed to underwrite a private attorney for the mayor – although it’s on record as preferring that Filner cease withholding the funds.