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Can a mixed-use stadium and convention center work in San Diego?

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According to an article released Saturday afternoon by the UT San Diego, the possibility exists again for San Diego to combine a new stadium downtown with a convention center expansion. Also, what's going on with the Raiders and Los Angeles?

Stephen Dunn

On August 1st, an Appellate Court ruled against a proposed tax increase of 1% - 3% to applied by San Diego hotels on occupants. This increased tax would have been used to fund a $520 million expansion of the San Diego Convention Center. In their (unanimous) ruling, the judges said:

"While we understand the City would like to expand the convention center, we are duty bound to uphold the provisions of the California Constitution and the City Charter that require that the City’s registered voters approve the special tax at issue in this case."

Source

In this particular case, the California Constitution requires (thanks to Proposition 13) a two-thirds majority vote in order to increase taxes. Since that vote never took place, the tax increase is unconstitutional.

While this leaves the convention center expansion on very shaky footing, it has re-opened the door for the Chargers to pitch the city on a new stadium downtown which would include additional convention space. Apparently, according to an article written by Roger Showley for the UT San Diego, JMI realty - the development group which was primarily responsible for the construction of Petco Park - has been pitching both the city and the Chargers on some ideas for a shared stadium and convention center space.

In the interests of brevity, I will only discuss the JMI proposals which would entail a new stadium for the Chargers.

A Separate Stadium and Expanded Convention Center downtown

The first proposal would be to continue to the convention center expansion as planned, although with a higher estimated cost of $680 million ($160 million above the original estimate of $520 million), and then build a Chargers stadium east of Petco Park, at an estimated cost of $1.15 billion (and some other items) for a grand total of just over $1.8 billion.

The upside of this plan would be an expanded convention center, which would remain contiguous - the preferred option for large conventions such as Comic-Con. There's also no problem with schedule conflicts, as conventions scheduled in January (i.e. during the playoffs) would not be faced with potential relocations. The downside - the cost. I can't see any way voters would approve any plan which requires a $1.8 billion outlay, especially since it would likely require some sort of tax increase.

A Shared Use Stadium and Convention Center downtown

JMI Realty's other proposal would be to create additional convention space in the area next to Petco Park and including convention space beneath a new Chargers stadium. According to JMI Realty, this option would be less expensive, with an estimated total cost of about $1.4 billion.

The upside of this plan is an estimated savings of about $400 million dollars, which has the added benefit of being an easier sell to voters. Frankly, it's also more likely to generate revenue over the long-term, as using a stadium for additional convention space increases the number of events, which in turn solves the problem of how a facility which would otherwise only be used 20-30 times a year can generate extra revenue and help justify public support.

The downside to this plan is that large conventions have previously implied that they have little-to-no interest in an expansion which splits the available convention space into separate buildings located several blocks away from each other. As stated above - and even with the lower cost - I can't see San Diego voters signing off on any plan which requires a tax increase.

Who will pay for it, and how?

In either case, the problem still comes down to money. In previous discussions about a smaller stadium costing about $1 billion, I figure the city could generate about $300 million by selling the Qualcomm and Sports Arena sites, with about another $400 million coming from the Chargers and the NFL (via the G4 stadium loan program), and maybe another $175 million coming from selling the naming rights. This totals $875 million, which leaves a shortfall of $1 billion for the separate locations concept, and a shortfall of over $500 million for the shared location.

The only possibility is drafting a Memorandum of Understanding, with the city issuing bonds to cover the remaining costs, as a way to get around the two-thrirds voting requirement. The potential problem is San Diego voters remembering the last time a project like this got voted on.

Other news

Before closing, I'd be remiss in mentioning two other recent stories which could have impact on a new Chargers stadium.

First is the story regarding a potential move of the Oakland Raiders to South Texas. The Raiders' lease in Oakland expires following the 2014 season. Personally, I think this idea shouldn't be dismissed.  Firstly, the Raiders would have a temporary (possibly permanent) home in the Alamodome. Secondly, the San Antonio + Austin TX combined statistical area encompasses over 4.1 million residents, which provides an ample fan base for ticket sales. Thirdly, a team based in South Texas has enough distance from Houston and Dallas to establish it's own identity - the distances are comparable to those in the Rust Belt - such as Chicago-Indianapolis-Cincinnati, or Cleveland-Pittsburgh-Buffalo.

Meanwhile, in the NFL's blackmail mistress 130 miles to the north of San Diego, Sam Farmer of the LA Times reported the NFL possibly considering undertaking construction of its own football stadium in Los Angeles. The upside would be obvious - a current owner doesn't have to worry about  construction costs, land purchase, permits, and the like.

Also, the NFL would have little difficulty in generating year round business in their own facility, and the NFL would have the luxury of selling Personal Seat Licenses for non-regular season events - such as a Super Bowl. The downside for a potential relocating team is that it loses a significant amount of the revenue generated by the facility. For what it's worth, the Chargers were not impressed with the idea.

In Closing

I'm not sold on the concept of a shared-use stadium and convention center. It makes sense for the Chargers, as a multi-use facility would generate additional revenue. For taxpayers, a shared convention and stadium solution saves money, but the proposal is anathema to large conventions and San Diego's business community.

Most importantly, I don't see any way this could be paid for without either issuing hundreds of millions of dollars in bonds, or hoping for two-thrids of voters to approve a tax increase. However, maybe this idea spurs other ideas which may some day actually get to the voters.