First of all, hats off to the Citzens' Stadium Advisory Group (CSAG). I can't imagine how hard it was for them to perform the research needed within 4 months to both select and site and figure out how to pay for it.
Secondly, they figured out a way to make it work without raising taxes, and thereby avoiding the 2/3rds affirmative vote requirement which would come with it.
Hell, despite what had been said previously, they even managed to give us an idea of what it might look like.
So, let's take a closer look at some of the numbers. I will be relying on the 42 page report produced by CSAG. Where alternative information presents itself, links are provided. Otherwise, I am engaging in speculation.
Meanwhile, the Chargers issued a brief statement regarding the completion of CSAG's work.
Overall, I think there's more to like than not.
Overview of the Plan
CSAG's Stadium Plan Estimates a Total Cost of $1.15 billion dollars. Here's where the money comes from (in millions). Please note that all money excepting the first two items are adjusted for future inflation (i.e. Net Present Value based upon a 4% discount rate over 30 years).
- $300 from the Chargers.
- $200 from the NFL, via the G4 Stadium Loan program.
- $60 in Personal Seat Licenses (PSLs). The Chargers receive another $60 in PSL revenue.
- $173 in rent from the Chargers over 30 years.
- $242 from the City and County of San Diego (evenly split at $121 each).
- $225 from the sale of 75 acres at the Qualcomm site.
- $21.6 in rent from SDSU over 30 years.
- $21.6 rent from Bowl Games over 30 years.
- $84.7 in ticket surcharges.
- $26 in parking surcharges.
- $50 in additional revenues (e.g. private donations, selling Qualcomm Stadium memorabilia, bricks, faux-stock sales, etc.).
Total Revenues of $1.4 billion.
Sounds good. Enough to potentially cover $250 million worth of cost overruns or unexpected problems.
In addition, the plan projects 31 acres to be used on development of a San Diego River Park.
Here's what I think works:
It's easy for me to say that I think the Chargers should be contributing more than their promised $200 million. However, as the report points out, that offer from the Chargers has not changed over the last 12 years, back when new stadiums cost less than $500 million. Considering the cost of stadiums have double or tripled over that time, asking the team to increase their contribution was absolutely necessary - even if it doesn't ultimately happen.
However, the sweetening of the deal in exchange for asking the Chargers for an additional $100 million comes in the form of giving the Chargers 100% of the Naming Rights, 100% of the Sponsorship Rights, and $60 million worth of PSLs. When you combine the $60 million in PSL revenue with an estimated $150 million in Naming Rights, another $15 million in Naming Rights when the Qualcomm deal expires, and another $250 million in Sponsorship Rights (estimated as 26% of the value of these
deals in New York - from 5 years ago). Those three items combined equals $475 million, and completely offsets the Chargers' contribution and adjusted rent payments.
Adding additional revenues totaling $1.4 billion doesn't merely create wiggle room in the event of cost overruns, but also allows for some give-and-take when the City's hired negotiators (Citigroup and Nixon Peabody) start their work with the Chargers.
It was essential to see CSAG's plan ask the County of San Diego to put some skin in the game. To be honest, the idea of a "bridge loan" floated by County Supervisor Ron Roberts was viewed by many as a non-starter, as the City would never sign on for all of the financial risk associated with constructing a stadium.
As much as it will agitate many people, I think the event and parking surcharges are smart ideas, in much the same way that
PSLs are smart ideas. One of the primary objections to using public money is that people who have no interest in sports are being asked to pitch in on the costs for a stadium. By shifting the costs more directly onto the persons who will be attending the games, it makes the plan an easier sell for the general public.
Lastly, it was essential for CSAG to indicate that the additional development at the Qualcomm Site was not needed to contribute to construction costs, and could be tackled as a separate project once a decision is reached on what type of development should take place.
Here's what I'm questioning:
How can CSAG guarantee they will receive at least $225 million in exchange for selling 75 acres of the Qualcomm site? That estimate indicates a cost of $3 million per acre. However, according to the
document CSAG cited to produce that estimate, the average ranged from $2 million to $3 million an acre, and that was with the assumption that there would be no problems with the site. According to that document, the estimate for 75 acres should be $150 - $225 million, with $187.5 million being the middle ground.
Furthermore, any high estimate requires the land to be properly entitled for development. That means the 75 acres to be purchased would need to be zoned for some sort of mixed commercial or residential use, as well as the required Environmental Impact Report (EIR). Otherwise, this element of the plan requires some sort of assistance from the state legislature, or a bypass via initiative process.
Very little attention is paid to how much the annual operation of the stadium will cost. According to CSAG Chairman Adam Day,
in this interview on Mighty 1090 AM's Scott and BR Show, Qualcomm currently costs between $11 - $14 million annually to operate. Normally, rent would be used to offset maintenance, but in this case, it's being bonded against to raise construction revenue. The private firm hired to operate the stadium will have to do an outstanding job of booking events in order to make up the lost revenue from the Chargers' rent.
In the final recommendations, it's assumed the Chargers will be responsible for construction overages and premium add-ons. Now, this might be a much easier element for the City / County to insist on in negotiations if they hadn't already asked for an additional monetary contribution from the Chargers.
Where will the County come up with their $121 million share of the cost? No specific source is mentioned anywhere in the report.
A Brief Carson Update
The Chargers announced the hiring of former 49ers and Browns executive Carmen Policy to spearhead their proposed stadium in Carson. When you combine this news with the news that Dean Spanos turned daily operation of the franchise over to his his sons A.G. and John, I think these are the takeaways:
- Spanos and Fabiani are pivoting towards the negotiation process in San Diego.
- Carmen Policy is still well-respected in NFL circles. He allows the Chargers to maintain a daily media presence in Los Angeles while Spanos and Fabiani are negotiating in San Diego. In fact, Policy's already got his "silver bullet" talking point (i.e. Carson solves the 2 biggest stadium problems in the NFL while keeping 2 California teams in California) deployed, and you'll hear it ad nauseam over the next few months.
- Policy's hiring is another brilliant tactical move by Fabiani to reverse what had been a shaky couple of weeks of news regarding the Carson Stadium project.
- Lastly, Fabiani found a way to steal some of CSAG's spotlight, without trashing the plan in the media.
In Closing
As it was promised, CSAG's Financing Plan is not intended to be the final take-it-or-leave it offer. It's designed to offer a framework from which the City and County of San Diego can work to negotiate a final agreement with the Chargers.
The next steps will be taken by Citigroup and Nixon Peabody, who will take CSAG's recommendations and forge an actual proposal.
San Diego now has a map to follow.
But as we all know, the journey is never as easy as it looks on paper.
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