Citizens Group Urges $758M to Expand San Diego Convention Center

SAN FRANCISCO - A citizen task force recommended expansion of the San Diego Convention Center that would be financed by up to $758 million of municipal bonds.

The task force, created by Mayor Jerry Sanders, voted 15 to 1 Monday evening to move the project forward. The proposed 1.2-million-square-foot expansion would expand the nation's 24th-largest convention center by almost 50%. The task force did not make a recommendation on a $278 million convention center hotel proposal.

While financial advisers from Piper Jaffray & Co. presented the task force with a range of hotel, rental car, tourism and sales taxes that could support debt service on the project, the task force chose not to recommend a particular approach.

A spokesman for Sanders said the Republican mayor would begin to meet with stakeholders to figure how to finance the project and hoped to agree to a general framework within the next three or four months.

"It's probably going to require a wide range of funding sources," said mayoral spokesman Darren Pudgil.

The city wants to expand the waterfront convention center as it's losing business because the current center is not big enough for large conventions, Pudgil said. Its biggest show - the Comic-Con comic book show, which had 126,000 participants last year - has outgrown the current facility, he said.

The center estimates that 30% of its customers will outgrow the current facility by 2016. The current facility was occupied 71.6% of the time in fiscal 2008, which is above the 60% occupancy rate that the center's management considers full usage. Convention centers are typically empty during holidays and as major shows set up and tear down their exhibits.

The San Diego Convention Center, which hosted the 1996 Republican National Convention, was built in 1987 and expanded in 2001 with $205 million of voter-approved lease revenue bonds. The city and the San Diego Unified Port District have another 5 years of payments on that debt.

San Diego is betting that it can draw business to support the big convention center expansion because of its desirable West Coast location. The city benefits from moderate temperatures and sunny weather almost year round, and it is a major tourist destination for its beaches, the San Diego Zoo, SeaWorld and cruise ship departures.

But California's second-biggest city faces many competitors for conventions. Western cities such as San Francisco, Las Vegas, Phoenix, San Jose, Los Angeles and Anaheim are all expanding their convention centers. Over the past 20 years, the amount of U.S. convention space has expanded by 95%, according to Tradeshow Week, an industry publication.

But trade show attendance has not kept pace. Spending on conventions has increased just 14% over the past 18 years, according to data from HVS Consulting and Valuation Services, and attendance at big trade shows has been flat over the past decade, according to Tradeshow Week.

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