LOS ANGELES — An adverse court ruling on the hotel sales tax that would have funded the majority of San Diego's planned convention center expansion sent city leaders back to the drawing board after almost two years of preparation.

The proposed $520 million convention center expansion had cleared its final regulatory hurdle in October 2013 when it was unanimously approved by the California Coastal Commission.

The city had hoped to begin construction on the expansion later this year.

The only remaining hold up was the validation lawsuit filed by City Attorney Jan Goldsmith on the hotel sales tax. It was that suit that received the adverse ruling from a state appellate court on Monday.

The hotel sales tax, the major revenue source for bonds to fund construction, was approved by more than two-thirds of hoteliers in a 2012 vote.

City Attorney Jan Goldsmith had filed a lawsuit asking a judge to rule on the legality of putting the tax to a two-thirds vote of the city's hotel owners, as opposed to the entire electorate. The hotel owners approved a hotel tax jump from one percent to three percent in 2012.

The state appellate court ruled the hotel tax was unconstitutional, because it was not put before all San Diego voters.

"We will be working with the City Attorney's Office to review all options in moving forward," San Diego Mayor Kevin Faulconer said in an emailed statement. "The convention center expansion is critically important for our regional economy. It would create thousands of good jobs and ensure that we continue to attract large conventions like Comic-Con."

The city now has two options for funding the expansion. It can take no action on the court case and look for others funding sources or appeal the court ruling to the State Supreme Court with a September 10 deadline.

The City Council will meet with Faulconer Thursday to discuss the matter.

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