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San Diego Chargers Stadium Update: Hoteliers vs. Spanos

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In his inaugural State of the City address, Kevin Faulconer explicitly (and correctly) states that the risk of the Chargers moving to Los Angeles has never been greater. In response, he unveils... a plan for a task force! In response, the Chargers have sulked on the corner, and told everyone who to blame if/when they leave San Diego.

Jake Roth-USA TODAY Sports

Faulconer's plan is to basically do the following:

  • Announce the formation of a task force (done 1/14/15).
  • Identify the members of the task force by the end of January.
  • Study the Qualcomm site, as well as a downtown site, and determine which site is more feasible.
  • Study the financing options for both sites, and determine which is more likely to provide the maximum return on investment and the minimum impact on taxpayers.
  • Announce a completed plan in Fall 2015.

Task forces are awesome for politicians, for one main reason; as Scott Lewis' article in Voice of San Diego points out - it allows the politician to present the illusion of taking action on an important issue without actually doing anything about it.

I can't convey how disappointing this announcement is. The city of San Diego has known the Chargers wanted a new stadium since 1995. The lease was renegotiated in 2003, which is when the last Task Force on Chargers' Issues took place. The maintenance issues with Qualcomm were documented then. The Chargers have floated several ideas (but nothing serious) since 2004. There's nothing this task force is going to discover that we don't already know:

  • Qualcomm is antiquated and falling apart. In fact, the Chargers have played more consecutive home games in Qualcomm than any other team in the NFL (yes, including the Packers).
  • Qualcomm Stadium (following the 1995-1997 expansion) is too big, by about 8,000 - 9,000 seats.
  • A new stadium is going to be very expensive, about $1 billion.
  • San Diego doesn't have the corporate or media base that Los Angeles does, which means full private financing is extraordinarily unlikely.
  • The Spanos family doesn't have the wealth to take on a majority of construction costs, which why the only way they can get a privately funded stadium is to move to Los Angeles.
  • San Diego can't afford to build its own stadium.
  • San Diego wants to have a public vote.

Now, a few key points.

First, the city may not be able to wait until November 2016, or even the June 2016 primaries, for a public vote. The Chargers have an out in their lease every year, which can be activated anytime between February 1st and May 1st. If the Chargers decide they have to take their shot at Los Angeles during this window in 2016, that means the city will have to hold a special election during that timeframe - as pointed out by XX 1090's Marty Caswell in this post. This means the plan has to be delivered on-time and sold hard. If this scenario plays out, nothing the Chargers say or do could help this as much as making a deep playoff run next season.

Second, everyone is talking about increasing taxes to cover any public contribution. The most likely target is the Transient Occupancy Tax (TOT), which is paid by people who stay at hotels in the city. Unfortunately, as San Diego's hoteliers were re-educated recently, you must have a public vote and a 2/3rds supermajority in favor to increase any taxes for specific purposes (such as convention center expansions, or new stadiums).

I can't stress this point enough - any proposal requiring a 2/3rds supermajority of voters is dead on arrival.

Third (and this shouldn't be surprising), as soon as Faulconer's comments went public, Chargers' Special Counsel Mark Fabiani dismissed the mayor's comments virtually out of hand. I find Fabiani's comments amusing, as the Chargers have thrown a lot at the wall over the last 12 years, with very little sticking because they haven't made a proposal which can be taken seriously either. If anything, Fabiani's comments only serve to make a bad situation worse, and could well be interpreted as coming from a team which has already made its decision and is playing out the string. People living in glass houses shouldn't throw stones. But, in the Chargers' case, it got even worse...

Chargers Obstinance?

Furthermore, in the day following Faulconer's speech, Fabiani made no bones that the Chargers were dubious regarding the Task Force's prospects for success, both in an interview on Darren Smith's XX1090 radio show, and later in a Q & A on the Chargers' stadium site.

"So hopefully the community will understand our disappointment when the one and only specific stadium initiative the Mayor announced in his State of the City speech was the appointment of Steve Cushman to be in charge of devising a financing plan"

Mark Fabiani, in an article on Chargers.com from 1/15/15

Steve Cushman happens to be the main guy working on the Convention Center expansion in San Diego. Now, here's the part of Faulconer's speech which mentions Cushman:

"The convention center is critical to our region's success. Events like Comic-Con bring millions of visitors to our city, and showcase San Diego to the world. Expanding the convention center will create thousands of jobs and bring millions of dollars in additional revenue for our neighborhoods. During this year of action, my Convention Center Expansion Special Advisor, Steve Cushman, will continue to lead on this effort"

Kevin Faulconer's State of the City Address 1/14/15.

Notice anything funny here?

Fabiani is implying that Cushman is devising a financing plan for the stadium, whereas Faulconer's speech mentions Cushman in connection with the Convention Center.

In interviews with both Faulconer and Cushman on Scott & BR's XX1090 radio show Thursday afternoon, both Faulconer and Cushman explicitly denied that Cushman was part of the stadium team now, or that he will be part of the stadium task force to be announced soon.

This makes no sense - until you remember that the Chargers are working on a stadium with additional convention center space, which is not connected to the Convention Center. The people (i.e. hoteliers) who support the convention center expansion want a contiguous expansion.

It means that, at the moment, Faulconer views the Chargers' new stadium and the Convention Center as separate projects, which is not how the Chargers wish to proceed.

Furthermore, Fabiani characterized Cushman as one of the primary opponent's to the team's efforts to get a stadium built in San Diego, whether in Chula Vista, at the 10th Avenue Marine Terminal, and now as there are competing Convention Center plans. While it may (or may not) be true that Cushman has been a foil to rank with Bruce Henderson and Mike Aguirre - Cushman did concede that he opposed any stadium efforts at the Marine terminal during his interview on the Scott and BR show - it's also the set-up for a convenient scapegoat in the event things don't work out.

This is about one thing. This is a competition for public money, and it's pretty clear the Chargers believe there's only enough money for one project - and right now, it's not theirs.

This, in a nutshell, is why San Diego can't ever get the hell out of its own way.

Paying for a New Stadium

As we've done before, and as we'll continue to, let's take a look at how a stadium might be paid for. As always, these are my estimates.

  • Chargers contribute $200 million.
  • NFL contributes $200 million from the G4 Stadium Loan Program.
  • Naming Rights - $150-200 million. I'll use $150 as my estimate, although I think it's extremely conservative. However, no one seems to mention naming rights in cost discussions - and my guess is that the Chargers are hoping to get that money to pay back their initial investment. If the Chargers insist on getting the naming rights for themselves, there's no way this can be done without raising taxes.

Assuming they don't insist on the money for the naming rights, the total so far: $550 million. $450 million more needed. This is unfortunately where public money / assets come into play.

  • Selling the Qualcomm and Sports Arena sites for $300 million OR leasing the land at low cost to a private developer who then contributes $300 million to the stadium project.

As you can see, we're sitting at about a $150 million shortfall. This is where I'm going to propose a few different ideas to raise the remaining money, maybe even a combination of the ideas below:

  • NFL provides additional money for the project in exchange for the Chargers agreeing to forfeit claims on the Los Angeles market.
  • Use of Personal Seat Licenses (I know Fabiani has said this idea wont work, but hear me out anyway). I'd suggest a $5,000 PSL for all luxury box and club seats (around 10,000 seats total - $50 million from those who can afford it and probably don't care about paying it). Then a $2,000 PSL for the most valuable 25,000 General Admission seats (also likely to be affordable to those who'd buy those seats anyway).This example would generate $100 million in revenue alone and at least partially satisfy the "let the fans pay for it" segment of the population. Secondly, those fans without money up front could always finance their PSLs - check out the pricing map for Levi's Stadium.
  • A Memorandum of Understanding (MOU) bond proposal for general redevelopment, with the city and county paying equally, and thereby avoiding the 2/3rds supermajority requirement. This is how Proposition C (Petco Park) passed with about 60% of the vote.
  • Raising the TOT by a sufficient percentage to cover the additional costs of building a stadium, with the taxes going to the General Fund, then simply paying for the stadium from the city's General Fund. Tax increases for the General Fund do not require a 2/3rds supermajority.

In Closing

Clearly, San Diego is nowhere close to being ready to make a competitive stadium offer to keep the Chargers. The soonest we can expect such an offer is anytime in the next 9-12 months. There's also considerable discord among the people who have to work together in order for any reasonable plan to come together, and not much time to work it out.

This is about greed. The battle is currently being waged between San Diego's hoteliers and the Chargers. Who wins this battle will largely determine whether professional football remains in San Diego.