ESCONDIDO -- In 2006, Escondido city leaders found themselves caught between the prosperous city of their dreams and the vibrant but complicated city of the present.

The City Council placed itself at the forefront of a noisy national debate over illegal immigration by passing an ordinance that would penalize landlords for renting to illegal immigrants.

Facing a costly battle to defend the measure in court, the council shelved the ordinance in December, while its proponent, Councilwoman Marie Waldron, vowed to bring back a modified version.

But also in 2006, city leaders made progress on building a police and fire headquarters and a downtown luxury hotel. The council unanimously agreed to allow Palomar Pomerado Health's new hospital to rise in a business park west of Interstate 15.

New condominiums and stores appeared across the city. San Diego Gas & Electric Co.'s state-of-the-art power plant started operations, adding a sometimes vaporous look to the Escondido skyline.

City finances stayed firm. The council pledged to spend more than $1 million, part of an unexpected surplus, on fighting graffiti and trash.

An election season in which discussion of the immigration rental ordinance played a prominent role returned Waldron to her seat and brought Dick Daniels, known well in Escondido's business community, to the council.

"For the issues and projects that will affect Escondido for a long time, we've made great progress," said Mayor Lori Holt Pfeiler, who was re-elected by a wide margin over former Councilman Tom D'Agosta despite her opposition to the immigration measure.

Other council candidates such as coffee entrepreneur Olga Diaz and resort manager Erik Richard emerged as voices to keep track of in the future.

Immigration ordinance brings tumult

In adopting the immigration rental ordinance in October, a three-person council majority was attempting to address long-standing concerns about overcrowding in Escondido's poorer neighborhoods, such as the much-studied Mission Park area.

Council members Waldron, Ed Gallo and Sam Abed said at the time that the federal government was not enforcing immigration violations adequately, and that thousands of illegal immigrants were putting a burden on local government services.

Mayor Pfeiler, and Councilman Ron Newman who chose not to seek re-election in November, voted against it.

The city became the target of protests by Latino activists and the focus of cheers by people across the country who oppose illegal immigration. The American Civil Liberties Union, together with other civil rights groups, sued to stop the measure.

Critics, including landlord business groups, pointed out that the quickest way for landlords to avoid scrutiny would be to discriminate racially by not renting to people they suspected could be illegal immigrants.

Stung by the legal costs, the council voted to withdraw, perhaps to try again later.

Growth downtown

After years of preparation, the City Council in August approved plans for a 196-room Marriott hotel between City Hall and the California Center for the Arts, Escondido. City officials have been seeking a way to both bolster the center's conference capability and give visitors a classy place to stay downtown.

Developer C.W. Clark dropped plans for an eight-story condominium/parking building across Valley Parkway for the hotel after downtown business and property owners complained about its height and a temporary impact on parking availability.

The project became part of a larger debate on how to stimulate growth in Escondido's walkable, friendly downtown area while keeping its character.

"We're an older city," Waldron told the North County Times in August. "We're older than Carlsbad and Poway, and all the ones getting new, master-planned communities. So we have to go back and say, 'What do we want to be?' "

Other condominium and town-home projects sprouted around town from Washington Avenue all the way to South Escondido Boulevard, although real estate experts said the softening market will probably limit the extent of the current wave of building in Escondido. A new Lowe's home-improvement store is expected to open soon on Mission Avenue.

In addition, the city broke ground on a new police and fire headquarters on Center City Parkway and Decatur Way. The police facility is expected to give Escondido's roughly 240 police officers and civilian employees, now severely cramped, more space to do their jobs.

It is being paid for by an $84 million bond measure passed in 2004, which will also pay for three new fire stations.

PPH hospital issue settled

In February, the City Council ended local debate over the future location of Palomar Pomerado Health's flagship hospital, paving the way for a new health care campus west of Interstate 15 and accompanying renovation to a part of downtown.

After voters passed the $496 million bond measure, Proposition BB in 2004, Palomar Pomerado had been eyeing a site in the Escondido Research and Technology Center, a business park planned near Vineyard Avenue.

Some council members resisted, reluctant to give up their vision of the business park as a high-tech job center and wanting to make sure the hospital district contributed to necessary road construction. Residents worried that moving the hospital from downtown could leave a gaping hole.

Frustrated, district officials began to flirt with alternative locations, such as San Marcos.

Eventually, Palomar Pomerado persuaded the council to unanimously approve rezoning the business park for the hospital after the hospital district pledged to contribute to the Citracado Parkway expansion and a renovation of the area around the current hospital.

The hospital's plans are expected to undergo detailed review by state officials over the next year, while preliminary grading could begin in a few months.

Contact staff writer Quinn Eastman at (760) 740-5412 or qeastman@nctimes.com.