Convention Center Costs Escalating; Lawsuits on Appeal Await Hearing

Its original budget is being swamped by anticipated cost overruns as legal challenges drag on

 The City of San Diego's financial experts are sounding alarms about the $520 million Convention Center expansion project.

Its original budget is being swamped by anticipated cost overruns as legal challenges drag on.

Just over a year ago, the city got a Superior Court judge's okay for the controversial funding scheme behind the expansion project, approved by the City Council in 2012.

Now that's on appeal, with no date set for oral arguments.

The opposition says the city knew a final decision – perhaps from the California Supreme Court -- would take some time, but rolled the financial dice anyway on cost projections that now seem to have been unrealistic.

"They forged ahead,” says Cory Briggs, who represents San Diegans for Open Government in the court action. "Here we are a couple years later. There's no end in sight. The only thing we do know is that now the financial people at the city are acknowledging, 'Yeah, we're way over budget.’

"Where's that money going to come from? This is basically a blank check that the city, the politicians, have written for themselves," Briggs added.

In a hand-delivered letter to the 4th District State Court of Appeal late last month, Mayor Kevin Faulconer made an urgent plea for a speedy decision on the appellate cases.

He said the expansion project's cost calculations are going up by more than a million dollars a month -- with a potential, regional economic impact of $58 million a month.

The mayor's chief financial officer and deputy Public Works CEO are proposing stepped-up issuance of long-term bonds to "lock in" interest rates that are rising.

The financing rests largely on 1 to 3 percent room-surtaxes approved by the city's hotel owners in a disputed "weighted"- ballot election, with lesser contributions from the city and Port District.

Critics say the project instead should have been put to the voters, and they predict its total construction and bond interest costs will go as high as $1 billion.

"This thing is now five years away from breaking ground at the earliest,” Briggs said in an interview Thursday, “because the city has botched the financial projections."

Says attorney Craig Sherman, who represents longtime civic activist Mel Shapiro in the litigation: "And they actually enacted in the provisions that no money would be issued on any bonds until it passed muster through all levels of the courts. So that's the holdup."

City attorney Jan Goldsmith tells NBC 7 that he doesn't fault the Council's decision to test a novel application of law that's being watched by other cities nationwide.

In an interview Thursday, he said postponing long-term bond measures was meant to protect the city and investors.

"They need to be sure, certain, that what they have is a real 'security'. The city would be in a mess if we had issued these bonds, and they maybe became illegal down the road," said Goldsmith.

In a 2012 memo about the policy decision, he warned: “Legally, there is nothing wrong with going forward as long as a validation lawsuit is filed. But, we should do some with our eyes open. Expectations should be tempered.”

On Thursday, he offered this observation: "We won at the trial level. So we're gladiators, and we're going to fight it. But it's still the same untested law."

Goldsmith also said he’s been told that the appellate cases somehow dropped off the 4th District Court’s "priority" calendar “by mistake."

According Court Clerk Kevin Lane, the appellate justices are expected to hear oral arguments "sometime this summer."

Meanwhile, Attorney Briggs is promoting a ballot measure to cap costs on the project -- unless voters ratify overrun spending decisions within 90 days.

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