Economic Development and Intergovernmental Relations Committee Meeting - April 28, 2016

The Economic Development and Intergovernmental Relations Committee met on April 28, 2016, to discuss four agenda items: the FY17 budget for the Tourism Marketing District (TMD) and a proposed amendment to the litigation reserve, a report from the International Affairs Board, an overview of Enhanced Infrastructure Financing Districts (EIFDs) and Community Revitalization and Investment Authorities (CRIAs), and an update on binational affairs. Committee members present were Chairwoman Cole, Councilmember Kate, and Councilmember Alvarez. Vice Chair Kersey was absent on official city business. The meeting included public testimony from Martha Welch and a unanimous decision to forward the TMD item to the full council without a recommendation, pending a closed session update on related litigation.

Public Comments & Testimony

• Martha Welch spoke twice during the meeting. First, she expressed concerns about the city’s handling of property tax allocations, stating that the city only receives about 3-4% of county property tax revenue when it should receive 40%, and that the TMD assessment (2% on lodging) is not separate from property tax. She also questioned the legality of the TMD and the city’s vacancy rate. Later, she spoke in opposition to binational trade, alleging that the 1994 trade agreement with Mexico led to pollution and that the city of Tijuana has failed to build a required sewage treatment plant, causing monthly emergencies on the U.S. side due to pollution from Mexican manufacturers.

Discussion Items

Tourism Marketing District (TMD) FY17 Budget and Third Amendment

• Meredith Dipton Brown (Community Development Coordinator) and Brian Hughes (new Executive Director of TMD Corporation) presented the FY17 report of activities. The TMD covers all lodging businesses in San Diego: those with 30+ rooms pay 2% (1.45% for category A and 0.55% for category B), and smaller businesses pay only 0.55%. The FY17 assessment projection is $38.4 million, based on 6% year-over-year growth. Combined with carryover and litigation reserve, total available funds are estimated at $66.3 million.
• Proposed allocations: $30.2 million for San Diego Tourism Authority, $150,000 for California State Games, $74,900 for San Diego Brewers Guild (Beer Week), $450,000 for San Diego Bowl Game Association, and $200,000 for San Diego Crew Classic. These are based on an open application process and ROI evaluations.
• Brian Hughes requested a third amendment to defer $1 million of the required $10.5 million contribution to the litigation reserve (target: $30 million) from FY17 to FY18. Reason: Seaworld’s $1.6 million cooperative marketing payment will not continue, and the litigation (filed 3+ years ago) is not expected to conclude until 2018-2019, so the delay poses minimal risk.
• Councilmember Kate expressed support for continued marketing investments, noting that competitors spend $200+ million annually (San Diego’s TMD is the largest in CA among 97 TMDs statewide). He moved to approve staff recommendations. Councilmember Alvarez raised concerns: City Attorney Adam Wander clarified that the claim year would be the year a claim is filed, not the year the reserve was set. Since FY17 assessments are $38.4 million, the reserve of $29 million (after deferral) would be ~$9 million short of one year’s exposure. Alvarez insisted on a closed session update before supporting the item, pointing to the need for confidentiality. He moved to send the item to full council without recommendation, pending a closed session briefing.
• Vote: Motion carried unanimously.

International Affairs Board Annual Report

• Chair Bruce Abrams presented board accomplishments. The board assists the mayor’s protocol office with international visitors, speaks 10 languages, and has traveled to 90+ countries. Highlights: Hosted French Polynesia delegation (HEVA event), resulting in increased tourism; established an internship program with local law schools; initiated a Friendship Cities program with cities in Israel (Sharnegev), Bora Bora, and Peru. Board also reached out to the Nigerian community after the Chibok kidnapping and is working on border issues. Abrams noted a need for more staff support.
• Councilmembers thanked the board and expressed interest in the Friendship Cities and community outreach. No action required.

EIFD and CRIA Overview (Informational)

• Chief Deputy City Attorney Kevin Reich and Deputy City Attorney Daphne Skulgin provided a detailed comparison of Enhanced Infrastructure Financing Districts (EIFDs) and Community Revitalization and Investment Authorities (CRIAs). Both are tools to replace redevelopment tax increment financing, but differ in eligibility, voter approval, affordable housing requirements, and use of eminent domain.
• EIFDs can be formed in any area, need 55% voter approval for bonds, and have no mandatory affordable housing set-aside. CRIAs require blight criteria, can issue bonds without voter approval, and must set aside 25% of tax increment for affordable housing. CRIAs are subject to more stringent oversight and protest proceedings.
• Councilmember Alvarez strongly advocated for using CRIAs in distressed communities, noting that redevelopment dissolution has left areas like his district without resources. He urged immediate action rather than waiting for a study (budgeted at $150,000). Committee agreed to work with city attorney and mayor’s office to bring a future action item.
• Councilmember Kate asked about SB 533’s impact on incentive agreements and relocation versus expansion; the city attorney noted that new restrictions apply to agreements that shift sales tax from another jurisdiction unless the business shuts down in that jurisdiction. This may affect future deals.

Binational Affairs Update

• Denise Garcia, Director of Binational Affairs, reported on recent binational activities. Key projects: Otay Mesa East Port of Entry (completion 2019), Crossborder Express bridge to Tijuana airport (opened December 2015), and plans for a binational railroad. She highlighted events like the first binational TEDx, first Maker Faire, and the 2015 celebration of Tijuana’s 126th anniversary at Balboa Park. The MOU between San Diego and Tijuana (signed November 2014) focuses on economic development, infrastructure, public safety, environment, and arts & culture. Directors from both cities hold biannual meetings. Upcoming: transition to a new Tijuana mayor (elected June 5, 2016), hosting the US-Mexico Border Mayors Association in early 2017.
• Councilmember Kate noted the importance of continued collaboration. No action required.

Key Outcomes

• TMD Budget and Third Amendment: The committee voted unanimously to forward the item to the full City Council without a recommendation, pending an update in closed session regarding the TMD-related litigation. The motion was made by Councilmember Alvarez and seconded by Councilmember Kate. (Note: The motion passed, but the item is not yet approved; it will go to council without a recommendation.)
• International Affairs Board: Item was informational; no action taken.
• EIFD/CRIA Overview: Informational. The committee directed the city attorney’s office, mayor’s office, and IBA to work with Councilmember Alvarez to develop an action item for forming a CRIA in the near future.
• Binational Affairs: Informational; no action required. The next committee meeting is scheduled for June 16, 2016.

Note: The meeting adjourned shortly after 4:00 PM as quorum was lost due to Councilmember Ralph's departure.