Economic Development and Intergovernmental Relations Committee Meeting - December 6, 2018

The Economic Development and Intergovernmental Relations Committee met on December 6, 2018, at 10:15 AM. Present were Chair Ward, Vice Chair Kercy, and Councilmember Bree. Councilmember Alvarez was absent. Also in attendance were Deputy City Attorney Daphne Scogan, Adrian Grande from the Mayor's Office, Angela Colton from the Independent Budget Analyst's Office, and Committee Consultant Lucas O'Connor. The committee approved minutes, heard non-agenda public comments, and took action on two lobbying contract items before receiving an informational report on the San Diego Convention Center's FY2018 performance.

Consent Calendar

• Approval of Minutes – The committee approved the committee record of actions from October 25, 2018, by a motion from Vice Chair Kercy, seconded by Councilmember Bree. The vote was unanimous with Councilmember Alvarez absent.

Public Comments & Testimony

• Martha Welch – Criticized the Metropolitan Transit System (MTS), stating that bus route changes (e.g., the #7 bus no longer going to Mesa, stopping at College) make it hard for residents to ride the bus. She also faulted trolley routes (orange line to court, blue line to the mayor; green line not going everywhere) and argued that property taxes are not legal because residents did not vote on certain taxes (like TransNet), which she said drive up rents. She called for a better transit system and noted that county supervisors are term-limited and will soon be gone.
• Rob Gordon – Provided an update on the Strategic Growth Council planning grant opportunity ($200,000). He stated that SanDAG was "a little bit snobbish" but the San Diego Housing Commission was helpful, while the city was unresponsive. He also reported that his group, Beach Area Self-employed, is expanding to become San Diego Independent Business Professionals, and that the Small Business Development Centers addressed some of his concerns. Lastly, he attended an Open San Diego meeting and noted concerns that the city, especially economic development groups, is closed to input; he mentioned a STEM proposal that limited areas for startups and highlighted low-hanging fruit in business data sharing, noting the county's release of fictitious name data.

Discussion Items

Approval of Lobbying Contracts (Items 1 and 2)

• Presentation – Patrick Batteller, Director of Government Affairs, and Adrian Gronda, Government Affairs Public Policy Manager, presented a combined proposal for two contracts:
  • Item 1: Agreement with Squire Patton Boggs, LLP for federal legislative and executive branch consulting services and representation.
  • Item 2: Agreement with Platinum Advisors LLC for state legislative and executive branch consulting services and representation.
• Both contracts are for 36 months with two optional 12-month extensions, aligned to end with a calendar year to avoid disruption during legislative sessions. The state contract cost is $1,000 more per month than the previous contract; the federal contract is $500 more per month, and these rates are locked for the duration.
• Batteller explained that the firms were selected through an RFP process and provide on-the-ground presence in Washington, D.C., and Sacramento to implement the council-approved legislative platform, build relationships, and maximize federal and state funding.
• Accountability measures include semi-annual presentations to the committee, availability to council members, and monthly or as-needed reports during legislative sessions.
• Committee comments: Vice Chair Kercy expressed support, recalling a previous mayor who thought he could act as the city's own lobbyist—which did not work out. Councilmember Bree asked for examples of accomplishments: at the state level, the HEAT program ($500 million for homelessness) including a $14 million direct allocation to San Diego, and a carve-out of $30 million from Prop 68; at the federal level, UASC (Unaccompanied Alien Children) funding secured even when the city dropped on the priority list. Chair Ward added appreciation for the firms' work and noted the inclusion of an EEO plan for the federal contract; he requested more frequent written updates (quarterly summaries) on legislative tracking.
• Motions: On Item 1, Vice Chair Kercy moved to recommend council approval; Councilmember Bree seconded. The vote was unanimous (3-0). On Item 2, the same motion was made and seconded, also passing unanimously.

San Diego Convention Center Corporation FY2018 Year-End Sales and Marketing Report (Item 3)

• Presentation – Gil Cabrera (Chair of the Convention Center Board), Ripper Bateau (President & CEO), and Joe Terzi (President & CEO, San Diego Tourism Authority) provided an informational update.
• FY2018 Performance Statistics:
  • Regional economic impact: $1.1 billion
  • Direct attendee spending: $652 million
  • Room nights: 694,000
  • Hotel sales tax revenue to the city: $24.7 million
  • Attendance: 785,460
  • Events: 133 total (56 primary citywide events, 77 secondary/short-term events)
  • 13 citywide medical conventions, each with a per-attendee spend of $1,759
  • Top six events by combined sales tax and hotel (TOT) revenue: Comic-Con International ($3.267M), American Association of Clinical Chemistry, ESRI, American Academy of Dermatology, CEDIA, and Rheumatology.
• Bookings: Fourth consecutive year exceeding one million room nights booked. Joe Terzi showed a slide with future room nights booked by year (e.g., 2019: 28,900 rooms booked; concern about 2023 due to cancellations). Lost business analysis shows 60-70% lost due to lack of availability/space/dates.
• Building Occupancy: 71.7%, above the practical maximum occupancy of 70% (per PricewaterhouseCoopers). National average is 50-54%. At 60%, facilities begin turning away business. Chair Cabrera noted that the Convention Center operates above full and has done so for 3-4 years.
• Revenues: FY2018 total revenues $39.1 million (down from FY2017 due to cyclical nature of events – American Society of Hematology was not in FY2018). Food & beverage is the largest revenue line ($10M+). Rental revenue is $9.2M (23% of total). Expenditures were $35.1 million, with over 60% going to salaries, wages, and benefits. Capital projects from an infrastructure bank loan ($25.5M) included roof replacement, fire alarms, escalator/elevator renovations; annual loan repayment of $1.7M begins now.
• Challenges and Strategies:
  • The building is aging and undersized compared to competitors (e.g., Anaheim, Orlando, Atlanta). Joe Terzi noted that many large medical conventions outgrow San Diego; Hematology required a tent outside the building. Chair Cabrera said the city is "leaving money on the table" by not expanding.
  • Strategies include focusing on short-term bookings (40,666 room nights exceeded goal of 40,000), developing new accounts (12 new accounts), targeting medical citywide conventions, leveraging sales team synergies, and pursuing non-traditional revenue (e.g., co-owned events, a digital network system expected to generate six-figure income).
• City Help: Rip Bateau asked the committee to help promote the convention center as the "People's Convention Center" and consider reducing costs for local non-profits through bundling and labor agreements.
• Economic Concerns: In response to a question from Councilmember Bree, the presenters stated that food & beverage spend is the first to decline in a downturn, but medical conventions rarely cancel due to their educational/credentialing mission.
• Chair Change: Gil Cabrera noted this was his last meeting as board chair; Zima Jacobson will succeed him. The committee thanked him for his service.
• This item was received as information; no motion was required.

Key Outcomes

• Item 1 (Squire Patton Boggs federal contract): Approved unanimously (3-0) and recommended for City Council approval.
• Item 2 (Platinum Advisors state contract): Approved unanimously (3-0) and recommended for City Council approval.
• Item 3 (Convention Center report): Received as information; no action taken.
• The committee concluded its 2018 meetings. Chair Ward thanked members and staff, noting upcoming work in 2019 on the business cooperation program, veterans contracting, inclusive economic development, binational ties, and the small business advisory board. The next meeting will be sometime in 2019.