21) Chargers Stadium Measure
What we’re watching?
In January, NFL owners spurned the Chargers’ plans to move to Carson in favor of the Rams’ epic new development in Inglewood, estimated to be “the world’s most expensive stadium.” (CNN) However, the league did not leave the Chargers completely empty handed. The team was given a two-year option to move to LA and share the Rams’ new development or a promise of $100 Million towards a new stadium should they elect to stay in San Diego. Team ownership hastily put together a plan to build a new stadium/convention center annex. The rub in the deal is that the plan is heavily reliant on public funding through increases in the city’s hotel taxes. Will San Diegans choose love of team over an uncertain financial future?
What’s the Deal?
Show me your lightening bolts!!!! Pretty please?
Since 1961 the Chargers have called San Diego home (they played one year in Los Angeles). Purchased in 1984 by the Spanos family for $70 million, the team’s valuation was last reported to be around $1.5 Billion (a pretty nice appreciation-Forbes). Yet, in the modern professional sports landscape, the name of the game (business-wise) is maximizing revenue opportunities that are primarily driven by modern stadiums and the amenities they posses (particularly luxury suites and $16 beers). The team has played in what is now known as Qualcomm Stadium since 1967, an eternity in the modern NFL. By comparison, the Atlanta Falcons are building a new stadium (set to open in 2017) even though their current home opened in 1992.
The Chargers have complained for years about the need for a new stadium claiming that the lack of a modern facility not only harms the team’s ability to compete but also San Diego’s ability to attract a Super Bowl which can inject $300-$500 million into the local economy. San Diego’s last Super Bowl was in 2003 (Raiders vs. Buccaneers). The team has flirted with numerous development ideas in places like Chula Vista, Oceanside, National City and, of course, downtown. This latest proposal is likely the last chance to keep the team in San Diego. The Chargers have already purchased land in Santa Ana for a practice facility should they choose to move to LA.
The Plan
Ballot Measure C seeks to finance the construction of a joint stadium and convention center annex in the city’s East Village, the last prime undeveloped area in San Diego’s increasingly crowded downtown. In order to finance the project, the effective hotel-room tax would be raised from 12.5% to 16.5%. The current hotel-room tax is actually 10.5%, but there is an additional 2% (ergo “effective tax rate”) included to fund a marketing apparatus-called the Tourism Marketing District-that helps to stimulate hotel room demand through promotion. The percentage devoted for the Marketing District would lower to 1% with a promise that it would receive any funds left over after other obligations are met.
The measure would create a joint powers authority that would own and manage the facility that is designed specifically for use by a “professional football team.” Since it is technically illegal for any measure to benefit a single company, the language in the measure does not explicitly mention the Chargers (crafty). The measure will need a two-thirds majority to pass. In March, an appellate court had ruled that the measure only needed a simple majority, but the state Supreme Court blocked that ruling in June. (Voices of San Diego)
Finances
A recent independent budget analysis estimated the measure would generate $120 million in additional revenue annually. $20 million of that amount would be allocated to tourism marketing each year, with the remaining $100 million enough to sell bonds that would generate between $1.3 billion and $1.6 billion in capital. That money, along with the combined $650 million contribution from the Chargers and the NFL, would put the funds available somewhere between $1.95 billion and $2.25 billion –that’s significantly above the Chargers $1.8 billion estimate. (Union Tribune)
The analysis questioned if the Chargers’ budget properly estimated land costs and noted that it fails to take into account lost parking spots and relocation of a city bus yard. Those costs would be taken on by the city and are entirely outside of the stadium project. Even greater concerns were brought forth by a separate analysis by the San Diego Taxpayers Association that projects a $400 Million short-fall and negative impacts to the city’s credit rating. In response to the SDTPA’s analysis, Chargers spokesmen Fred Maas said, “I would call this vote and report rubbish, but it would be an insult to the hard working refuse collectors in San Diego. (It) couldn't pass for a third-grade arithmetic homework assignment.” (Union Tribune).
The Opposition
Over the past 15 years, American taxpayers have spent over $12 Billion to finance sports stadiums and arenas (that does not include indirect costs) (CityLab). Given the fact that an NFL team can guarantee only eight homes dates per year, the return on investment is dubious to say the least. St. Louis, from where the Rams recently relocated, still has $144 million of debt left on the now vacant Edward Jones Dome, built in 1995. (Reuters) Emotion is at the heart of sports fandom, but what happens when the beloved team manipulates their fans’ emotional investment to benefit the corporate bottom line? In essence, what the Chargers are doing, and what many other teams have done before, is attempted extortion. Therefore it is no surprise that an ardent, vocal opposition exists toward any effort to use public funds to finance the Spanos’ dream project.
The “No Downtown Stadium” coalition is leading the effort to oppose Measure C (you can read the whole platform here). The coalition argues that the Chargers have underestimated construction costs and that the plan would significantly jeopardize tourism, risk losing Comic-Con, and is a poor use for the discussed parcel of land. The coalition points out that since the funding scheme is based on hotel revenue, San Diego residents would be left holding the bag in the event of a drastic economic downturn like 2007-2008. "If hotel spending drops for any reason over the next 30 years, San Diego residents would have to pay the difference," the coalition notes on its site. "And there are many reasons hotel spending could drop, including lost conventions and an economic downturn."
Concerning lost convention revenue, Comic-Con, the largest convention held in San Diego, is not a supporter of the plan. Comic-Con prefers an expansion of the existing convention center to the Chargers off-site annex proposal. Comic-Con organizers fear that the annex could open the possibility for competing events.
There is also concern that the Chargers wouldn’t pay rent for the new stadium since the measure only obligates the team to pay all annual operations, maintenance and security costs beyond the $15 million in projected annual hotel taxes that would be devoted to the project. Based on other stadium projects, the team estimates they will end up paying $15-$25 million per year. (Voices of San Diego)
The Chargers claim that the opposition’s calculations are faulty and that their financial models have taken into account massive economic downturns similar to the post-9/11 and 2007 periods and still leaves ample room for overruns. Team representatives have been dismissive about these concerns, at times calling them flat-out false. (Union Tribune) One thing is certain: should the results on November 8 come up in the Chargers’ favor, they will return to Los Angles for the first time in 56 years and leave thousands of loyal fans without a hometown team.