Just weeks before the start of Comic-Con’s annual gathering, where more than 135,000 people would soon be filling the city’s convention center, the unthinkable happened. A key chiller needed to cool the building in the peak of summer had failed, setting off a frantic, nationwide search for a replacement.
Five days and more than $200,000 later, a chiller the size of an RV was located, and Comic-Con 2023 was saved.
If only that were an isolated incident, say those who run the waterfront facility.
Building failures, from malfunctioning boilers and coolers to plumbing and roof leaks, are increasingly occurring, some of them during high-profile medical and tech conventions, the most recent just a couple of months ago. A plumbing leak triggered by a rainstorm led to water flowing onto the center’s crowded exhibit floor where thousands were attending a meeting of orthopedic surgeons from around the world.
San Diego’s aging bayfront center, a portion of which dates to the late 1980s, is approaching the point of no return.
While long regarded as one of the top venues in the country for major conventions, that stellar reputation is now at risk, the center’s operator warned elected leaders at a recent budget hearing. Over the next five years, the San Diego center is facing a stunning $200 million in deferred repair work, plus $200 million more over the next 20 years.
Without clear consensus yet on a funding source, the facility’s future remains in limbo, and hundreds of millions of dollars that flow into the regional economy from citywide conventions are in jeopardy, fear convention officials.
“We continue to experience service disruptions, safety hazards and escalating repair costs,” Convention Center Corp. Chief Operating Officer Corey Albright told City Council . “These failures required immediate emergency intervention, and we’re fortunate that they could be managed, but there are certainly scenarios where they wouldn’t be able to be managed, where these failures would cost us and the city millions of dollars in tax revenue and economic impact.”
Among the center’s more immediate needs is replacement of a generator and the roof in the original part of the building expected to cost $10.3 million. But the single most expensive near-term project is replacement of the central plant that houses the facility’s entire cooling and heating system. The price tag: $66 million.
So far, the most obvious choice for financing the costly repair work is a hotel tax hike approved by voters in 2020 that is still in litigation, although the city began levying the higher room tax this month. Trouble is, Measure C, as it is known, was promoted, first and foremost, as a way to finance a major expansion of the center, a project that today would cost far more than what could be financed with the additional room tax revenue.
How to come up with $400 million
The Convention Center Corp.’s appeal earlier this month for financial assistance comes at a particularly inconvenient time for the city of San Diego, which is trying to plug a gaping $350 million hole in its own budget that will require both deep cuts to municipal services and new revenue, from trash collection fees to higher parking rates.
Officials with the corporation, which operates the center for the city, sought to underscore the urgency by pointing to four recent building failures that occurred during major conventions. In jeopardy, officials said, was $9 million in tax revenue that the events generate for the city.
And as word spreads about the building’s deteriorating condition, bookings could slow, they warned.
For the coming year, 90 events are scheduled that are estimated to have a $1.5 billion ripple effect on the local economy, including $31.3 million in hotel and sales tax revenue.
“The No. 1 thing that I get asked by clients is, what assurance can I give them that the destination is investing in its convention center?” Albright said. “It is weighing on booking decisions choosing San Diego as a destination. The answer simply cannot be, year over year, no significant capital investment.”
San Diego is always a favorite destination for the American Academy of Orthopaedic Surgeons and its more than 16,000 attendees, but water leaks that persisted during its recent gathering in March did give the group some pause, said Paul Zemaitis, director of live events for the academy. The group is scheduled to return in 2028 and 2029.
“The center did all they could to get receptacles to collect water, put in fans to dry things, but it was not only our attendees it affected,” he said. “We had a significant contingent of 600 companies exhibiting at the show and they’re seeing that, too, and that could impact their decision as to how big their space would be in the future.
“We sat down with the leadership of the center to talk though what their plans are for the future for these needed capital improvements and plans for a possible expansion, and we’ve also said we’d be willing to get a coalition of clients together to plead to the council. We’re not at the point where we’d make a big decision (to change future bookings) because we love the city so much. But we certainly hope the council makes a good decision around this because these improvements are needed.”
Council have offered up various options for providing critical funding for the convention center, some more realistic than others. The city could launch another bond issue once it finishes in a couple of years making its annual payments of $12 million for the last expansion, completed in 2001. Or it could apply to the state of California for a loan, as it did several years ago, to fix the rooftop Sails Pavilion.
Councilmember Sean Elo-Rivera suggested that the city ask the major companies that own local hotels to step up and invest in the center themselves.
“They’ve treated this like a free ride for way too long,” Elo-Rivera said during the budget hearing. “Every booked hotel room, every packed restaurant, every sold event depends on a functioning, attractive convention center, but when it comes time to pay for basic upkeep, capital renewal, the costs are falling squarely on the city and its residents.”
While the convention center currently has relatively healthy reserves totaling $25.4 million, those will be rapidly depleted as more emergency and critical repairs become necessary. By the end of fiscal year 2027, the balance will have dropped to a little over $5 million, convention center officials estimate.
Is Measure C still an option?
The city’s Office of the Independent Budget Analyst has recommended eventually using money raised through the Measure C hotel tax increase, but in the coming year, it said the center could rely on its reserves. It’s estimated that the measure would generate next year roughly $48.6 million for “convention center modernization and expansion.”
In addition to paying for a long-sought expansion of the convention center, the ballot measure also calls for using a proportion of the hotel tax increase for funding homeless services and road repairs.
Councilmember Raul Campillo, who favors looking at the hotel tax hike as a funding option, said he’s worried about the consequences of further postponing urgent repairs.
“It puts the safety of attendees and staff at risk, and the long-term ramification is it becomes a part of the reputation of San Diego and the convention center throughout the industry that hurts us long term,” Campillo said. “So delaying these repairs isn’t just expensive in the short term, it’s expensive in the long term.
“As those Measure C dollars are being set aside for the year, I hope that the conversations are already happening between the city and Convention Center (Corp.) to coordinate how that funding can be expended towards eligible uses.”
What remains a gray area, though, is how the city can legally — and politically — tap the money in the absence of an expansion project. So far there has been no revised plan for enlarging the center.
Attorney Michael Colantuono, who represents the backers of Measure C, believes there is some wiggle room in how the hotel tax money can be used — to a point.
“The measure provides a list of allowed expenditures, and the council gets to choose within that list and establish priorities in an annual budget, but it needs to be in service of the voters’ intent,” cautioned Colantuono, whose specialty is municipal law.
“The ballot argument promised the voters they would get an expanded convention center. Using the money without providing for at least something that amounts to an expanded center involves political risk and may involve legal risk too because the court will interpret the legal language in light of the voters’ intent.”
While it’s still unknown what sort of expansion, if any, will emerge, Mayor Todd Gloria’s office said it will be pursuing discussions with the Convention Center Corp. about how to eventually proceed.
“The rise in costs over the years this measure spent in the courts — and the changes to the convention business since the pandemic — warrant a close examination of how to move forward to modernize the center and ensure it can accommodate the conventions San Diego competes for,” spokesperson Rachel Laing said Friday. “The city and Convention Center Corp. will work with experts in the tourism industry to develop a design and financial plan to upgrade the center so that it will continue to be a vital economic engine for our region.”
Is Comic-Con here to stay?
San Diego is frequently an easy sell for groups seeking a meeting venue, given the city’s temperate climate, the close proximity of the airport to downtown, and the center’s bayfront location. But when social media posts circulate showing water leaks in the building, that can make the sales job considerably harder, officials acknowledge.
“We have a group that’s looking to book an event with us in 2030 and it’s a significant event,” said Andy Mikschl, who oversees sales and revenue for the center. “They’re ready. They want to return, but before they commit, they’re asking us to share specifics on renovation improvements that will take place before that event five years from now. If we aren’t able to provide something for them relatively soon, we’re at risk of losing that event for the destination.”
Comic-Con International and Esri, a global mapping conference, are regulars at the center year after year and aren’t expecting to bail anytime soon. Comic-Con is contracted to stay in San Diego through 2027 and Esri through 2031. But that doesn’t mean they don’t have lingering concerns about the consequences of building breakdowns during their events.
“Our position is that San Diego is a top-of-the-line convention center globally and we are very happy there,” said Michele Cole, head of events for Esri. “Our expectation, though, is that the city and the Convention Center (Corp.) upgrades as needed because we don’t want 20,000 people without an air conditioner. I’m confident that the center is an economic engine that s the city of San Diego, and with that economic engine, you have to make hard decisions.”
Like Esri, Comic-Con has no plans to leave San Diego, although it has pushed for years for a bigger center, having outgrown the existing facility years ago. From time to time, aging elevators and escalators have malfunctioned but it’s not anything they’ve been unable to overcome, said Comic-Con spokesperson David Glanzer.
“We’d certainly be disappointed if there were no expansion,” he said. “Asking whether you prefer an expansion or repairs to the facility is like having both your kids drowning in the ocean. Who do you save first? There is no answer to that question.
“We would love the building operating at an optimal condition. Having something go down, especially if it’s for the duration of our event, would be catastrophic.”
