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Outdated revenue formula trips up San Diego Convention Center staff

sdcc_picUsing a calculation based on a 10-year-old study, officials for the San Diego Convention Center Corp. (SDCCC) received a mild rebuke for unintentionally misstating the true economic impact special events have on the local economy.

“The misstatements do not appear to be made with the intention of falsification of hotel or sales tax revenue but rather [were] caused by unaudited and/or unverified figures from the SDCCC’s clients,” said Eduardo Luna, San Diego city auditor, in an Aug. 21 letter to SDCCC officials.

Specifically, auditors determined the SDCCC provided only estimates of the potential economic impact of conventions and other events held at the center based on tradeshow attendance and average spending per attendee instead of using actual hotel occupancy figures. When those estimates came up short, the San Diego City Auditor office in December received a complaint alleging SDCCC officials committed fraud by presenting false numbers while trying to win support for a proposed $550 million facility expansion.

A subsequent investigation revealed officials for the SDCCC used a nearly 10-year-old formula to determine the potential transient occupancy tax and total tax revenues generated for the local economy when convention-center visitors come to San Diego. Researchers for CIC Research of San Diego in 2002 determined visitors to the local convention center have a direct attendee spending impact of about 2.4 times the amount they actually spend. For every $100 an attendee spent, the local economy obtained about $240 in direct economic impact, based on the 2002 formula as determined by CIC Research.

Although reported in good faith and with no intention to mislead anyone, the old formula resulted in unreliable reporting of potential economic impacts, according to the report by the San Diego city auditor. Although estimates of attendance figures for events at the convention center generally were accurate, actual hotel room nights booked were about 30 percent lower than estimated, resulting in significant differences between SDCCC estimates and actual revenues generated.

To prevent further occurrences, the SDCCC is researching recent tradeshows at the convention center to come up with a more accurate formula for projecting the economic impact visitors have on San Diego’s economy. The city auditor also suggested the organization clearly describe the information used to determine visitor projections and their economic impact as well as clearly declare the visitor projections are only estimates when there are no supporting documents to verify them.

Officials for the SDCCC have agreed to enact the suggestions to avoid potential future misunderstandings and accusations of fraud, particularly in light of the proposed $550 million facility expansion.

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