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San Diego's $2.1 Million Dollar Stadium Bet

Yesterday afternoon, the San Diego City Council voted 6-3 to approve $2.1 million for an expedited Environmental Impact Report for a new stadium in Mission Valley. Was it a good gamble, or a waste of money?

The proposed Mission Valley Stadium from CSAG's proposal
The proposed Mission Valley Stadium from CSAG's proposal

I said 2 weeks ago that the City and County of San Diego needed to stop trying to put a deal together in 2015, and focus on making the best possible offers they could for 2016.

This is because of the following factors:

  • A full Environmental Impact Report (EIR) usually takes at least 12 months.
  • No financing plan is in place, from either the Public's side, or from the Chargers' side.
  • Even if these plans and reports are produced, there will be an extremely limited time to review them before a vote takes place.

In spite of those facts, the San Diego City Council decided Tuesday to spend $2.1 million dollars on an expedited EIR, on a 6-3 vote.

Reactions ranged rom "great" to "awful." Proponents of the idea claim that it was necessary for San Diego to approve the vote, without which the NFL would have abandoned San Diego as a market. Opponents declared it was a waste of money and offered no guarantee that the Chargers would resume negotiations with the Public.

So, let's round up the usual suspects and get some opinions.

Of Course the Chargers Hate It

It didn't take Chargers' Special Counsel Mark Fabiani long to speak against the decision.

Again, in an interview Wednesday with Darren Smith of Mighty 1090.

"(Latham & Watkins) just disagree with the City Attorney on (the expedited EIR). They think his first opinion, the one he put in writing in February was right, that it takes 12-18 months to do a proper EIR, one that will survive scrutiny in court. And that opinion is bolstered by taking a look at what AEG did with Farmers' Field - their EIR took 17 months to complete. Look at what Ed Roski did in the City of Industry - his took 14 months to complete."

Chargers Special Counsel Mark Fabiani to Darren Smith on 7/15/15.

Now, before everyone dismisses Fabiani out-of-hand, his point about an expedited EIR is 100% legitimate.

What the City of San Diego is attempting to do has never been done successfully. Furthermore, as Fabiani pointed out, if proceeding in this fashion was possible, wouldn't it have been done by other developers long ago?

Of Course the Mayor Likes It

Mayor Faulconer made no bones about his feeling that passing this vote and proceeding with the expedited EIR was critical to San Diego's hopes of retaining the Chargers:

"San Diego's stadium effort hinge on this vote."

Mayor Kevin Faulconer to the San Diego City Council, 7/14/15

He was buttressed in his opinion by Christopher Melvin of the firm Nixon Peabody, lead negotiator for the Public in the stadium process.

"The one (strategy) that the NFL seemed highly focused on was an accelerated process that would allow us to be in the position to have a special election - if we came to agreement with the Chargers - in mid-January. (The NFL) encouraged us to move the ball forward."

Christopher Melvin to the San Diego City Council, 7/14/15

Furthermore, in a direct rebuttal to Fabiani's skepticism. City Attorney Jan Goldsmith joined Darren Smith of Mighty 1090 and explained why he felt the city wasn't taking a major risk by proceeding forward with an expedited EIR. Aside from the fact the EIR will only cover a stadium-for-stadium swap, Goldsmith said this:

"The question that Mark (Fabiani) keeps raising, which is a logical question, is if you shorten the timeframe to do it - here we're talking about completing the EIR process by mid-October, when it normally takes 12 to 18 months. If we're shortening it that much, won't we jeopardize the quality? And that's where the engineers and the biologists and the folks who do all the testing and (compile) the data, and then write the report - that's where their opinions count more than lawyer's opinions, because they're the ones who have to ensure that's it's thorough."

City Attorney Jan Goldsmith to Darren Smith, 7/15/15

As I've said before, shortening a 12-18 month process by a factor of 4 to 6 is a Herculean task. It's not to say it can't be done. But if it were possible, I'd imagine it would have been done by now.

So, What The Hell Is Going On?

All of this back-and-forth begs a very important question:

Why would the NFL encourage San Diego to pursue a risky path to a stadium deal, when the team which stands to benefit is categorically opposed to the path precisely because it's so risky?

I honestly have a hard time believing San Diego literally believes this vote and the EIR which results from it are going to be the foundation by which San Diego keeps the Chargers. There's simply too much risk involved here to satisfy the NFL, much less the Chargers. especially with no (known) financing plan in place.

Therefore, I see this as a symbolic move at the moment. Maybe literally an attempt to buy time.

As Faulconer and Melvin suggested, this was an easy way for the NFL to test San Diego's resolve. In other words, the NFL was saying: "If you won't commit $2.1 million now, how could we ever expect you to commit anywhere from $600 million to $1.2 billion to keep this franchise in San Diego?"

In response, San Diego is telling the NFL that they're fully prepared to do what's asked of them to keep the franchise from leaving. And if the NFL insists on a process that everyone knows is high risk, then San Diego will pursue it.

What I don't think will happen is the NFL forcing the Chargers to re-engage in this particular high-risk process.However, this may cause the NFL to reconsider just how desperately the Chargers need to go to Los Angeles.

Also, San Diego could then to go to the NFL and tell them honestly that the only way San Diego can provide the certainty the NFL and Chargers want is by working toward a vote in 2016. It also allows the NFL to give San Diego an opportunity to pitch a deal the Chargers might actually want.

On the other hand, a cynic might (justifiably) consider the NFL allowing San Diego to pursue this path, knowing it will end in failure and thus smoothing the road for the Chargers to leave San Diego.

If this $2.1 million is what allows San Diego to make its best offer, fine. If this $2.1 million is literally being used on a slim-to-none possibility, then it's a waste of time and resources.

Tidbits Leading to Wild! Author! Speculation!

A couple of important pieces of information have also leaked out this week.

First was the revelation that the EIR for Mission Valley would not include any analysis on future development. An EIR is supposed to examine the potential impact of any reasonably anticipated development as a result of the initial project. Since this will not be part of the EIR, this means that San Diego's unannounced financing plan will not include the $150 - $225 million potentially available by selling 75 acres of the Qualcomm site. as suggested by the Citizens' Stadium Advisory Group (CSAG).

Second was the revelation that the city is looking at selling the Sport Arena site to help pay for stadium costs. Speculation in the article centered on a potential AEG development of the site with a new Sports Arena.

Third, in the Goldsmith interview, there were these interesting little nuggets:

Let's assume the Chargers leave. There's going to be a Plan B for that property. It would be my preference, personally, as a citizen; I'd like to see a professional soccer stadium or something along those lines, with a park... All the work that's being done now, a good chunk of it, could be used for... that Plan B.

City Attorney Jan Goldsmith to Darren Smith, 7/15/15

Then, in response to Darren Smith's question about whether another NFL team could play in Mission Valley:

I'm not suggesting anything. I'm just saying that being at a table with the NFL in Chicago on August 10th, and having more communications with the NFL; they're coming out here the latter part of this month, and those ongoing communications showing that the City of San Diego has our act together, which we do. St. Louis has a bunch of lawsuits. Oakland has been stumbling... Showing that we have our act together opens up opportunities for our city. The preference would be the Chargers. I have no idea beyond that, but I'll just tell you that getting our act together and getting our team united bodes very well for our city.

City Attorney Jan Goldsmith to Darren Smith, 7/15/15

Let's also remember that we're going to see the results of a study conducted by Convention, Sports, and Leisure international regarding the possibility of a non-contiguous convention center expansion. That report is due out in August. If the results support a non-contiguous expansion, does anyone else besides me think that maybe the NFL will encourage San Diego to move towards the joint convention center / stadium concept pitched by JMI and the Chargers?

And maybe a proposal to increase the TOT (such as a special Sports and Convention tax - the 2/3rds vote option), or maybe a general TOT increase going to the General Fund, and then paying for new facilities from the General Fund (a 50% vote option)?

Again, this is just my speculation. It probably won't happen because it makes too much sense. But it's nice to dream.

In Closing

I don't think we should be thinking about the money requested for an EIR as a literal attempt to keep the Chargers in San Diego. Almost all sides involved understand that as a literal attempt, the odds of success are very low.

On the other hand, as a symbolic gesture to the NFL or an attempt to buy time to make a best offer, the $2.1 million is somewhat more justifiable.

I don't think the NFL will actually help San Diego pursue this strategy with the Chargers.

What I think is possible is that the NFL creates an opportunity for San Diego and the Chargers to pursue a deal which could actually work.