Today is an important today as it regards the Chargers’ future in San Diego. I’m not sure if it’s the most important, but it’s certainly not inconsequential.
San Diego residents vote today whether to adopt Measure C, the Chargers’ stadium & convention center Initiative estimated to cost $1.8 billion.
Among them, I really wish the Chargers had simply left the Convention Center element alone. Regardless of how you feel about the Convention Center question, this attracted a lot of unnecessary opposition from a powerful and influential interest group in San Diego.
The rush of losing the Los Angeles Stadium Derby in mid-January to crafting a ballot initiative by mid-March (to guarantee a San Diego stadium plan would reach the November ballot) meant there simply wasn’t time to make sure all interested stakeholders had gotten agreements in place with the Chargers before the language in the measure was locked in place.
We don’t know exactly what the facility will look like, or exactly how much the facility will cost, which makes it impossible to determine exactly how much the stadium will cost and how much the Convention Center annex will cost.
Most importantly, seeking a two-thirds majority from the voting public meant there was almost no margin for error or dissent among the voting public.
There are other concerns about the Chargers specifically, and the future of the NFL generally.
Those flaws aside, there are two primary reasons I’m voting Yes on Measure C.
Extending the Game
Dean Spanos has said he will be closely watching the election results on Tuesday night, and trying to gauge whether or not there’s any point in trying to come up with a Plan B in San Diego after Measure C fails to reach 66.7%.
Recent polling suggests Measure C will top out around 45%. I’m not Dean Spanos, so I have no idea what his magic number is for deciding to give San Diego another shot versus moving to Los Angeles and becoming a tenant in Inglewood. My suspicion is that 45%-50% will probably be enough, based on the Chargers recent discussions with Mayor Kevin Faulconer.
I also think it’s fairly remarkable if the team even comes within 5% of a simple majority, considering everything which has happened over the last 2 years.
Further, the No on C folks continue have asserted over the last couple of days that Spanos filing an amicus brief in the case of Upland vs. California Cannabis Coalition was always the plan, and that all he was trying to do was get to a simple majority. As a reminder, Upland vs CCC was an California State Appellate Court ruling earlier this year which determined that a fee or tax imposed by Citizen’s Initiative does not require a 2/3rds majority to be enacted.
Maybe that’s true, but it seems equally possible that filing the brief was simply a smart business decision. Just because the Spanos family has made a lot of mistakes over the years doesn’t also mean they’re always on the wrong side of an issue (you know how even broken clocks are right twice a day). Besides, here are some additional factors which make this a dubious conclusion.
- There’s absolutely no guarantee the California State Supreme Court (CASC) will rule in Spanos’ favor.
- There’s no timeframe on when the CASC will issue their ruling. It could be tomorrow, it could be next year, it could be 2018, or even beyond.
Therefore, it seems to me the true benefit of the amicus brief (combined with a simple majority vote) is to extend the Chargers’ option on Los Angeles into 2018. As originally planned, the Chargers were given 1 year from last January to exercise their option to join the Rams in Los Angeles. If they chose not to exercise their option, it reverts to the Raiders. However, there’s also a clause in the option which extends the Chargers’ option to early 2018 if there are unresolved legal issues.
This would provide the Chargers at least another year to pursue an option in San Diego, and maybe more if the NFL approved the Raiders’ potential relocation to Las Vegas.
Since there’s virtually no chance of a 2/3rds majority, and the odds of the CASC deciding in the Chargers’ favor are both unknown AND a long time away, I have no problem showing Dean Spanos that I’d like for him to stay and give San Diego another shot - in that way, it’s not dissimilar from a voter in an already decided state (like California) casting a protest vote for Gary Johnson or Jill Stein.
Stadiums are Luxury Assets for a Community
However, one also has to weigh the potential consequences of voting Yes on C, and the measure either somehow getting a 2/3rds majority or the CASC ruling in the Chargers’ favor in the next year or two.
Since we already know that stadiums are poor public investments, and that the convention center annex attached to it will only return $1 for every $8 invested under optimistic projections, there’s really no case to be made for public financing as an investment.
It’s not tangible, and maybe it means I’m overly sentimental, but I think there is an intangible benefit to having professional sports in your community. I remember what San Diego felt like during the heyday of Air Coryell, the early to mid 1990s, and then the 2004-2009 era. There’s simply nothing like the vibe in the community when you get to share the fun and excitement of a contending team playing quality football.
I realize I’m not speaking for everyone in this regard, but I am willing to pay taxes to keep that intangible benefit in my community.
To me, it's not too different from spending a tax return on a 4k Ultra HD TV instead of putting the money back into your home to increase its value (e.g. new garage door, remodeling bathroom, fixing closets, etc.). The difference is the size of the community
The fundamental question then, is whether or not the proposed tax increase provides sufficient revenues to cover the cost of the proposed facility (i.e. can we afford it?).
Based on my research, the answer is more likely to be yes than no.
Before going forward, the following assumptions are made about these models:
- TOT is based on the City of San Diego’s FY2017 Budget numbers. Given the current total amount of revenue going to the General Fund (about 52% of total) is $113.3 million ($216.3 million total), at 10.5 cents/dollar, raising the TOT to 16.5 cents/dollar would mean about $103 million annually for the Stadium/Convention Center allocation proposed in Measure C.
- The facility cost is $1.8 billion. This includes $1 billion for the stadium, $600 million for the Convention Center, and $200 million for land acquisition and moving the MTS Bus Yard. $1.15 billion of this cost is covered by bonds, with the Chargers and NFL covering the remaining $650 million.
- With bonds at 5% interest, the total amount of public cost is about $2.22 billion.
- Inflation rises at 2% annually.
- Purchase of the land and removal of the MTS yard takes 3 years, followed by 3 years of construction.
- The Capital Improvements Sub-Funds for both the Convention Center and Stadium are adjusted to 4% to account for higher construction inflation costs.
- This is based on existing TOT projections, and does not include any projections from proposed new hotels, or from the convention center annex.
- These projections include money set aside as described in Measure C for annual operations and maintenance, as well as capital improvements.
Model 1 - No annual growth and a 7-year recession (-3% growth).
In this case, what you will see is that due to a 7 year recession (from 2027-2032), and zero growth otherwise, there is a shortfall of about $134 million. Again, this is no annual growth and a 7 year recession. As a result of this recession, it takes revenues about 10 years to recover to the pre-recession levels.
Model 2 - Stagnant Tourism (no annual growth).
Here the numbers change only due to inflation. As you can see, $490 million reaches the General Fund after covering all other project costs.
Model 3 - Steady growth (2% annually).
Here the numbers adjust for inflation, as well as 2% annual growth with no slowdowns. In this case, the result is a fully funded project with an additional $2.324 billion to the General Fund over the span of the project.
I’d like to add that I’m not alone in projecting that there’s low actual risk to the general fund - the PRAG report commissioned by the City (allowing for the large amount of variables) reached a similar conclusion. And for all of the talk about the Mayor’s inability to make his agreed-upon terms with the Chargers legally binding, he must have seen compelling evidence the project was not likely to impact the General Fund prior to providing his endorsement.
If you vote No on C based on potential risk to the General Fund, it’s my opinion that you are placing a long term bet on a cataclysmic hit to San Diego’s Tourism Industry.
I fully accept that a lot of people here will disagree vehemently with my conclusions and decision, while others will agree just as enthusiastically with my conclusions and decision. All of that is fine.
My sincere hope is that if Measure C doesn’t pass (and I’m under no illusions that it will), it eventually leads to a deal and vote which will successfully keep the Chargers in San Diego for the long-term, with a minimized amount of public financing.
That said, it’s also my opinion that the TOT increase should cover the costs of the project, barring a severe economic downtown and/or long-term stagnation in San Diego’s Tourism Industry.
So get out and vote. Do as you think is best.