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Before You Vote Yes on C

These are the second guesses and negative thoughts I’ve been tossing around in my mind regarding Measure C. Let’s discuss them.

A rendering of the proposed downtown stadium and convention center.
MANICA Architecture

When this article posts, there will be 1 week left until Election Day (thank f***ing goodness).

If you’ve already decided to vote yes on Measure C, that’s fine. But it doesn’t mean you get to wash your hands of the available information, and some of the arguments in opposition.

Accordingly, it’s my intention to explore a few ideas I’ve been turning over in my mind which would indicate that voting no on Measure C is the better option.

Interestingly enough, even the No on C Campaign doesn’t seem to bother trying to make these points, or at least they’re de-emphasized making these points in favor of trite swipes at Dean Spanos and complaints about the views looking down the streets in East Village. Most of those arguments are a waste of everyone’s time.

Here are 5 arguments against Measure C which even ardent supporters should be tossing around in their heads before Election Day.

Measure C will not provide a significant return on investment.

Economic studies on this point are a consensus. Sports facilities are likely to be poor public investments. You can read here, and here, and here, and you’ll see there’s very little difference in these opinions.

It is with this inescapable fact in mind that the Chargers attempted to join their stadium with an off-site Convention Center expansion. The idea clearly being that a stadium becomes a less terrible public investment if joined with something which definitely provides some return on investment (such as a Convention Center). This isn’t a new trick - for example, the Bureau of Reclamation was once known for a concept called River-Basin Accounting which did essentially the same thing with dams, aqueducts, and hydroelectric power-plants.

With that in mind, let’s look at the study performed by Hunden Strategic Partners for the Chargers, which analyzed the potential impact of the stadium+convention center. I’m not arguing their study was more accurate than the study performed by HVS, but since it’s the more optimistic scenario of the two, let’s use it as a best-case scenario.

Essentially, their study found that the facility would generate an additional $375 million in additional hotel tax revenues over 30 years.

Let’s balance that $375 million in new revenues against the following costs to be carried by the TOT: $1.1 billion cost, approximately another $1 billion in bond interest, and then another $1 billion in money slated for maintenance and upgrades.

This means even in the best case scenario, taxpayers (approximately) only get $1 back for every $8 invested.

The Padres are likely to be adversely affected.

Gwynntelligence has written about this concern a few different times, recently here. You should read the piece in it’s entirety, but it boils down to this: If the Padres lose Tailgate Park and the revenues which go with it, it has more of a pronounced negative impact on the Padres than it would for teams in other professional sports.

The reason is because other sports leagues have a salary cap. In particular, the NFL has a hard cap. MLB, on the other hand, has a luxury tax which does very little to discourage large market teams (such as the New York Yankees, Los Angeles Dodgers, Chicago Cubs, Boston Red Sox, etc.) from spending big money on payroll.

Thus, if the Padres want to compete for at least some quality players and retain some of their own top-shelf talent, they need to maximize every possible revenue stream available. Losing the revenues associated with Tailgate Park undoubtedly hurts the Padres revenue streams. As would losing concerts, events associated with Comic-Con, etc.

The opportunity for a new (or relocated) NFL franchise with better management.

For arguments’ sake, let’s assume the Chargers are 100% moving to Los Angeles in 2017 if Measure C fails, as has been reported by Jason La Canfora of CBS Sports. Here’s where an interesting (if high-risk) opportunity presents itself to San Diego sports fans (h/t to @ChangeThePadres for sparking this idea for me on Twitter).

If the Chargers leave, San Diego becomes the most recent city to lose an NFL franchise. In the Super Bowl era, here are the cities which lost NFL teams, and how long it took to get an NFL expansion team or relocating NFL team:

  • Oakland. Raiders leave in 1982, Raiders return in 1995. 13 years.
  • Baltimore. Colts leave in 1984, Ravens arrive in 1996. 12 years.
  • St. Louis. Cardinals leave in 1988, Rams arrive in 1995. 7 years.
  • Los Angeles. Rams and Raiders leave in 1995, Rams return in 2016. 21 years.
  • Cleveland. Browns leave in 1996, new Browns arrive in 1999. 3 years.
  • Houston. Oilers leave in 1997, Texans arrive in 2002. 5 years.
  • St. Louis. Rams leave in 2016...

Not counting St. Louis’ second entry on this list, here’s the average amount of time from when a city loses a franchise until they get a new franchise: 10.16 years.

As painful as it would be in the short-term, there’s some merit in considering this as an opportunity. San Diego loses the Chargers, but also loses the Spanos family’s franchise management practices. Over 32+ seasons, the Spanos family has put an overall mediocre product on the field, with a record of 247-272 and no championships.

Who is to say that San Diego couldn’t hit the sports fan lottery within the next 5-10 years by finding a prospective owner willing to... negotiate a stadium plan with more private financing, spend more money on training staff and assistant coaches, put a consistently competitive product on the field, employ analytics with regards to draft picks, free agency & game management, embrace the fanbase and local media instead of keeping them at arm’s length.

On the other hand, you could get the Lerners, followed by Jimmy Haslam.

Maybe worse (or better, depending on your perspective), you might not get another franchise at all.

Like I said, high risk, potentially high reward.

The danger of an enormous investment in a potentially declining business.

Craig Elsten, in this edition of the Generally Speaking podcast, made a very interesting point as it regards public money for stadiums (starts at 26:00):

“The NFL is on a downward plane, guys. My number one argument against building a giant stadium downtown... is that you are buying into the wrong side of the curve on the National Football League. That you are buying into a league in decline.”

-Craig Elsten, 10/21/2016

This reminded me of a post I wrote about 1 year ago about escalating stadium costs and the Los Angeles Relocation Derby representing the high-water mark of the NFL’s power and influence. The post also questioned whether future stadium battles and player safety problems could be the main problems which eventually marginalize or ruin the NFL.

We’ve got stories this year regarding declining ratings for the NFL. We’ve got repeated instances of a new stadium drawing a lot of empty seats and potential disputes with their local municipality. There’s the ongoing dramas related to the NFL’s handling of scandals both on-the-field and off-the-field.

Does this seem like the right time to tie up San Diego’s convention industry with the NFL, especially when there are signals the team might be willing to consider a less expensive (and risky for the public) option?

The opportunity cost of approving this particular tax hike.

Whether it’s via a tax increase, selling off city land, or issuing bonds backed by the General Fund, any public resource used for construction and maintenance of a sports facility is money which cannot be used for something else.

In this particular case, the opportunity cost for Measure C is that the Transient Occupancy Tax (TOT) is off-limits for any increases during the expected life of this project (i.e. 30-40 years). In the case of the TOT, this opportunity cost has to be weighed against the realistic possibility of a) another potential use for the money and b) the likelihood of the tax increase being approved.

So, if you want to simply add money to the General Fund, the opportunity cost is high because a general increase requires only a 50%+1 majority. However, a general tax increase provides no guarantees on how the money will be spent, or whether it’s spent efficiently or effectively.

Now, let’s suppose we want to raise the TOT for a specific purpose, such as San Diego infrastructure improvements. The opportunity cost is lower because the increase for a specific purpose requires a 2/3rds majority.

So while it’s true there is an opportunity cost, you have to weigh the lost opportunity against the actual chances such an opportunity could be realized. Considering there haven’t been any proposals to raise the TOT until this year, I find the opportunity cost to be relatively low.

In Conclusion

No matter how badly you want the Chargers to stay in San Diego, even the most ardent fan should take the time to consider some of these very important issues.

This is a big decision with the potential for big changes to San Diego. Everyone with the opportunity to vote for or against Measure C owes it to themselves and their fellow citizens to consider all the angles.