Stadium Thoughts and Musings: Revenue Sources

East Village

Now that a CBA has been agreed to, we can get back to watching football, dreaming about free-agency, planning our fantasy football rosters, planning our Sunday barbeques and tailgates, and of course arguing about A.J. and Norv, as opposed to endlessly rehashing the politics and business of football, with one exception...

New stadiums for multiple teams, including the Chargers.

In an article in Friday's San Diego Union-Tribune, Chargers' Special Counsel Mark Fabiani discussed the current disposition of the proposed football stadium in East Village.  Also, today, Fabiani briefly discussed what potential impact a new Collective Bargaining Agreement (CBA) will have on stadium construction efforts.

More below the jump...

The Revenue Question

In Friday's article, and in today's article, Fabiani mentions two potential revenue sources for a new Chargers stadium.  These two items are:

  • Potential Use of redevelopment dollars.
  • The NFL re-starting it's loan program for new stadium construction.

The completion of the new CBA immediately raises the possibility of a loan from the NFL, potentially up to $100-150 million.  Such a loan lowers the estimated cost of a new facility (according to Fabiani, about $800 million) down to around $700 million.  I think we could also expect the Chargers to pay about $200 million towards the cost of the stadium.  That gets us to $500 million.

As I said in a previous post, a Naming Rights Deal should net about $175 million - based on a 1/4th estimate of the AEG deal with Farmers Insurance, and/or adding inflation to the $154.5 million deal made in 2006 that provided naming rights to University of Phoenix Stadium in Glendale, AZ.  And yes, I know this money isn't paid up front - It would come in payments that could then be applied to paying off bond debt.

That leaves about $375 million dollars.  Then we get to redevelopment money, and...

due to changes made by California government, redevelopment money not already earmarked for use is slated to go to the state of California, instead of locally selected city and county projects.  This means the most likely possibility of major revenue is all but gone.  As Fabiani said on Friday:

It is still possible that the California Supreme Court will strike down the recent state redevelopment law changes. A lawsuit challenging the changes was just filed. But assuming that the changes remain intact, the San Diego City Council's decision effectively means that there will be no available redevelopment funding downtown until some time into the next decade -- 2024 is a date that I have heard used by knowledgeable people in City Hall. What would this mean for the downtown stadium idea? Three things, for sure:
(1) In the short term, any hope of using redevelopment funding is dashed, to use your word.
(2) We need to find other funding sources, possibly by reconfiguring the project so that it functions as a powerful complement to the Convention Center and as the anchor of a new Sports and Entertainment District and
(3) We also need to find a way to bridge the financing gap between now and 2024 -- possibly with the help of other government agencies in the region that may see long-term benefits from this kind of multi-faceted downtown project.

 

Given the state of the economy, and the current political movement towards austerity, I think we can safely rule out any kind of direct tax increase.  Therefore, I would like to toss out a few ideas on how a new stadium could be funded.  As in the past, I'm not relying on any facts, and any figures I come up with are pure speculation.

  • Increases in sales taxes, or other direct revenue generation.  Hahahaha!  See the paragraph above.
  • Tourism related tax increases.  I'm referring here to an increase in taxes on things like hotel rooms and rental cars.  The idea seems simple and sellable enough: "Let the tourists pay for our new stadium."  In fact, this was the route taken by the citizens of Maricopa County (Arizona) when building University of Phoenix Stadium.  However, in San Diego, you could count on staunch opposition from the local Chamber of Commerce, as well as other local businesses counting on the tourism and convention industry.  I can also imagine how much the Comic-Con folks would loathe that kind of increase - and I don't think San Diego wants to further risk losing Comic Con.
  • Personal Seat Licenses (PSLs).  The old chestnut first used by Al Davis, and probably the most unpopular method for generating revenue, the PSL requires that a potential season ticket holder purchase a PSL, just to have the right to purchase season tickets.  While this may not trouble the club and luxury box crowd too badly, it also means that season tickets become well-nigh unaffordable for most all lower and middle income families.  Further, Fabiani has already stated (paraphrasing) "that San Diego's economy doesn't support that kind of revenue generation."
  • Selling of public assets.  In this case, I'm referring to selling the Qualcomm and/or Sports Arena sites.  I'm not sure how much the land value of the Qualcomm site is valued at (and contamination issues caused by the Murphy Canyon tank farm doesn't help), but this might be the best possibility for the city of San Diego to raise the money needed to cover the public portion of the project, without raising revenues or depleting the general fund.  Fabiani has tossed this idea out before, and I still think it's the most plausible option.

In any case, this is the question that has to be answered, and the sooner the better.  Especially considering that Anschutz Entertainment Group (AEG) completed and submitted it's Memorandum of Understanding with the city of Los Angeles today, in regards to the proposed Farmers Field.

As always, as developments warrant, I will keep you posted.

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