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The engine is the city of San Diego's tax on hotel rooms.

Predictions of steady annual growth of this revenue source are the basis of the city's confidence that it can take on up to $299 million in new debt for the ballpark -- and do so without cutting municipal services or arts and culture funding.

This year the city is taking in more hotel tax money than it did last year. But it is taking in less than officials predicted when they drafted the city's current budget, which went into effect July 1.

The city's ballpark financing is premised on 8 percent annual growth, over 30 years, in hotel tax revenue. But based on revenue collected so far, the total will be just 5.3 percent higher this fiscal year than last.

Some observers take this as evidence that Mayor Susan Golding and the City Council have overextended the city by relying too heavily on a finite revenue source.

Scott Barnett, executive director of the San Diego County Taxpayers Association, said the situation is no surprise.

"We raised this concern when the (City Council) approved the budget," Barnett said. "We said in writing that the (hotel-tax projections) were overly aggressive, and facts seem to be bearing that out."

But officials of the city, the Padres and the tourism industry say they are monitoring the situation and not overly concerned.

"I don't make a big deal about it," said Fred Sainz, vice president for communications and community relations for the San Diego Convention Center Corp. "It's an unfortunate set of circumstances, but there are factors that account for this momentary dip."

The 1999-2000 city budget anticipated the treasury would receive $99.5 million from the hotel tax, officially known as the transient occupancy tax, this year.

But in an update published this month, the city manager's office warned that current projections are for $96.7 million by the time the fiscal year's books close June 30.

The lower room-tax collection is likely to be offset by higher-than-expected revenue from other tax sources, city budget officials said. Total municipal revenue is expected to be about 1 percent higher than anticipated in the current budget, said Ernie Anderson, the city's financial management director.

"It's not unusual to see fluctuations in the different revenues," he said.

Officials cite several reasons for the underperformance of the hotel tax, often called the TOT. The main reason they cite is litigation that delayed the Convention Center expansion, forcing cancellations of conventions.

But Richard Rider, the lead plaintiff in the Convention Center lawsuit, scoffs at that.

"Yes," he conceded, "they've lost some business because the Convention Center wasn't completed."

But officials knew of the delays when they made their budget predictions last year.

"So that's no excuse. It really isn't," he said.

In 1996, Rider and other Libertarians filed a lawsuit challenging public financing of the $216 million Convention Center expansion. That put construction on hold until the California Supreme Court ruled in August 1998 that the financing was legal.

The expanded center, originally set for opening by January 1998, is now scheduled to open by September 2001. Delays led to cancellation of 14 conventions scheduled for this year, accounting for 47,300 fewer visitors, officials said.

"We're missing about $3 million in TOT this year that is attributable to a lesser level of meetings from the Convention Center -- completely due to the delay of the expansion," said Reint Reinders, president of the San Diego Convention and Visitors Bureau, or CONVIS.

In fiscal 1999, hotel business attributable to the convention center generated $10.1 million in room-tax revenue, according to the San Diego Convention Center Corp. This year the agency predicts just under $7.6 million will be generated by convention business.

City officials also cite delays in the opening of some new downtown hotels and a dip in December and January hotel business, attributable to Y2K fears.

But the dip around the end of the year was marginal, according to figures compiled by CONVIS. The agency reported the December hotel occupancy in the county was 51.4 percent, down from 54.1 percent the previous December. January occupancy this year was 60.6 percent, compared with 62.5 the previous year.

Meanwhile, two downtown hotels the city expected to be up, running and generating tax revenue fell behind schedule this year.

The Courtyard by Marriott, on Broadway, was expected to open over the summer, but did not until October. The other, a hotel being built in the Bridgeworks project in the Gaslamp Quarter, is slated to open in June, about a year behind city expectations, said Deputy City Manager Pat Frazier.

Frazier was the architect of the city's ballpark projections, which say San Diego can afford its new ballpark debt.

"These are long-term projections, and over time projections are going to be above or below (the 8 percent target)," Frazier said. "But on average, over the term, they would meet or exceed the projection. This has been proven by history."

Officials are banking on other new hotels to help fuel repayment of the city's ballpark debt. In particular, officials point to three new hotels, totaling 850 rooms, associated with the ballpark project itself. Also factored into their calculations are the 750-room expansion of the Hyatt Regency San Diego, which recently started, and a 1,200-room hotel at the Campbell Industries shipyard, a project now slated to open by 2004 at the earliest.

San Diego's reliance on hotel taxes dates to 1964. That year, the council enacted the tax for one stated purpose: To promote tourism.

But over the years the City Council has come to rely on this source of cash for things far afield from tourism promotion. Today, 52 percent of the transient occupancy tax revenue goes into the general fund, which pays for day-to-day city services. The remaining 48 percent goes to roughly 200 civic and arts organizations.

The tax has been raised several times over the years and now stands at 10.5 percent of hotel room rates.

Now the city is banking on this source to pay for its $225 million contribution to ballpark financing.

Plans call for funding the city's ballpark commitment by selling up to $299 million in municipal bonds, which would be paid off over 30 years with money expected to come from the room tax. More than $225 million must be raised in the bond sale to pay costs associated with issuing the bonds, officials said.

Annual debt service, to be paid out of the city's general fund, could be $23 million to $25 million. A precise figure will not be known until the city is ready to issue bonds, possibly this spring.

Critics such as Barnett said revenue dips will lead to cuts in services and arts and culture funding.

Hotel tax revenue is not declining, he said.

"But it's not growing at the level the city needs to meet all the mouths it has to feed," he said.

Reinders, of CONVIS, disagreed.

"I think we'll be OK, but the next couple of years will be tougher."

Long-term, Reinders is bullish on room-tax growth, as are city officials.

Meantime, the current revenue dip is not a big concern to the Padres, said team Executive Vice President Jack McGrory.

McGrory, San Diego's former city manager, said city officials need to give conservative partial-year projections to the council, or council members "will think they have a big surplus" that is not there.

McGrory added that midyear fiscal snapshots tend to be fuzzy.

"I'd rather see an annual picture before we get alarmed," he said.