Updated at 10:17 p.m. Aug. 26, 2014.

The City Council declined Tuesday to appeal an adverse ruling on the financing plan for the San Diego Convention Center expansion project to the state Supreme Court.

Earlier this month, a three-justice panel of the Fourth District Court of Appeal struck down a levy on area hotels, which was designed to pay the bulk of the project’s $520 million cost. The justices sided with civic watchdog Melvin Shapiro, who called it a tax that should have been approved in a public vote. San Diegans for Open Government (SanDOG) was also part of the lawsuit against the City over the financing plan.

The owners of the hotel properties had agreed to increased the room tax charged on guests to pay the major share of the cost, because they’d be the ones to benefit from the projected increase in business.

City Attorney Jan Goldsmith had said that the city was venturing into an untested area of the law with the funding mechanism, which was previously upheld by San Diego Superior Court Judge Ronald Prager.

The City Council deliberated for about a half-hour before voting unanimously against proceeding with an appeal, with members Myrtle Cole and Ed Harris absent.

The financing for the project is now “up in the air,” council President Todd Gloria told City News Service.

“It means we’re going to have to spend some time figuring out a way to pay for this project or find a new one,” Gloria said.

The city’s options include putting the funding mechanism before voters, or trying to come up with a new plan to pay for the project. If it goes to a citywide vote, the delay could be two years.

“We’re glad that city is going to look at other alternatives,” said Cory Briggs, the attorney representing SanDOG. “It’s the right move and SanDOG is looking to be a part of that conversation.”

Tourism officials are eager to expand the center out of concern that the largest of the trade shows are bypassing San Diego for larger facilities. Comic-Con International, the pop culture confab that draws 130,000 attendees to San Diego each year, has been courted by other cities for years.

Councilman David Alvarez, who voted against the financing plan two years ago, said he was pleased that his colleagues decided against pursuing an appeal.

“We have a new opportunity to move forward with a better project, including a potential stadium site, and engage San Diegans in a citywide dialogue about how to build the best facility possible,” Alvarez said. “The people of San Diego should get a say on whether to fund a convention center expansion, and discuss the size, scope and location of the project that best serves the needs of our city.”

The current design would give San Diego the largest amount of contiguous floor space on the West Coast — which tourism officials say is essential to attracting the biggest conventions. If those plans fall by the wayside, however, some of the alternatives being floated include the construction of nearby annexes, and possible joint use of a future football stadium for the Chargers.

Mayor Kevin Faulconer, a major supporter of the expansion project when he served on the council, said the decision will put the litigation behind the city and move forward with another plan.

“Over the past several weeks, my office has been meeting with stakeholders, including the lodging and convention industry, the Chargers, JMI Realty and various experts to discuss options for moving forward,” Faulconer said. “My review of these proposals, many of which have been covered by local media outlets, is preliminary.”

The mayor said he remained open to all options, including those that would result in a non-contiguous expansion, and incorporate a new stadium for the Chargers.

The convention expansion, however, still has a few other hurdles to clear before the city can start building, Briggs said. San Diego Navy Broadway Complex Coalition is challenging the Coastal Commission’s approval the expansion plan. The lawsuit is still ongoing and even if the City were to find private funding for the expansion today, it will have to wait until 2017 to break ground, he said.

Comic-Con’s contract with Convention Center expires in 2016. It is unclear right now if the pop-culture convention will stay in San Diego past 2016 if the expansion does not happen.

— City News Service contributed to this report.

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