Pocket Change: Costs of SD Chargers Qualcomm Stadium

Read last week’s Pocket Change

Where the San Diego Chargers will play in the future is an ongoing discussion that seems never to end.

Should they play in Chula Vista, stay in San Diego or go somewhere else, perhaps outside of the county? Can they get the state-of-the-art stadium they’ve always wanted? The issue has gotten more difficult for San Diego officials after a recent report released by San Diego’s City Auditor showed the city is spending more of its minute funds on the operation of Qualcomm Stadium.

Built in 1967, Qualcomm Stadium was once called Jack Murphy Stadium after the well-known San Diego Union sports editor. Since then, it has under gone one major renovation in 1997 when it received its current name.  A recent SDNN article by deputy managing editor Eric Yates considered different possibilities for the Chargers including Chula Vista, where officials have had a possible location in mind since 2008. The proposed location is at the site of the South Bay power plant which would have to be removed before the Chargers decide to move there.

“The infrastructure is already in place [at the power plant site],” (Chula Vista) Deputy Mayor John McCann told Yates of the location. “You have the I-5, you have the I-15 that connects as well as the 905. It’s 10 minutes from downtown San Diego and Petco Park, the trolley currently runs down the I-5 corridor, so you have an existing trolley there.”

Back in San Diego, the City Auditor released a report in April indicating that the city’s stadium expenditures exceed revenues (see chart). In addition, the audit contends that even if the Chargers move to another stadium, San Diegans will have to continue to pay for the 1997 rejuvenation bonds. The remaining debt is estimated at $21 million. Consider that $21 million is about one-third of the city of San Diego’s projected deficit of $60 million for the next fiscal year.

Then last week, San Diegans woke up to a cup of mojo and yet, another proposal - redevelop the stadium and throw in some extras, like housing units, commercial buildings and other delights. Dealy Development Inc., which presented the proposal with other local real estate leaders, said they’ve been working on the concept since January. The proposal, which is still very early in its planning stage (to show how early in the stage this plan is - the Quarry Falls project took eight years to develop) has already had Chargers’ point man Mark Fabiani asking media to detach the organization from the idea. The actual cost to the city of the redevelopment has not been explored.

Now, we’ll toss the ball over to our experts and let them run with it.

Murtaza Baxamusa, Ph.D., AICP, director of Research and Policy, Center on Policy Initiatives:

Even if real estate developers were looking down a steep cliff, in a moment of inaugural wisdom, the “Oracle of Omaha”  - Warren Buffet declared in May of 2006: “Any developer will build anything he can borrow against.”

From proposing to build a 40-foot tall deck on top of cargo operations at San Diego’s port, to 2,000 room convention-cum-mega-hotels proposed in South Bay and downtown, developers have never found an idea too Dubai-esque to belong to San Diego. That is, as long as they can make money of it.

This is where San Diegans need to mind their pocket books. The bottom line for any development deal should be the fiscal and economic benefits of a project. These benefits include returns to taxpayers in property, sales and hotel taxes, employment quantity and quality, and impacts on public services and facilities such as police, fire, parks, housing assistance and health care. In extraordinary times, where our state is struggling to support our public schools, the diversion of property taxes from education to infrastructure, in the form of redevelopment, should also present commensurate community benefits.

The Qualcomm Stadium revenues and expenditures present a good case study to evaluate the public subsidies that go into supporting a mega-project. The impact on the general fund at the time of project approval is rarely transparent. CPI has done a similar study on the College Grove Wal-Mart that received almost $10 million in public assistance. Even when capital costs are included, the operations costs are seldom computed leave alone compensated. The end result of these projects is increased distrust from existing communities, fostering the belief that the new development will erode their quality of life.

Erik Bruvold, president of the National University System Institute for Policy Research:

The events of the past two weeks have helped to crystallize some facts about Qualcomm Stadium and the future of the San Diego Chargers and, I optimistically believe, will drive the discussion forward. We first had the City Auditor Eduardo Luna’s report that should hopefully make clear to all that operating Qualcomm Stadium is a multi-million dollar drain on the general fund. In 2009, the net loss from the Q is forecast to be in excess of $12 million. On top of this is the depreciation of the asset, which, over time, will add millions more to cost of this financial albatross.

Next up was the unveiling of a stadium proposal by a group of some of San Diego’s most experienced developers and urban designers and the tepid response it engendered from both the Chargers and Mayor Jerry Sanders. They each said that the plan had too much development. Some focused on the fight between the parties and the machinations behind the release. What I took away from this plan is that financing an NFL stadium solely through ancillary development will be close to impossible. The cost of stadiums has escalated to astronomical levels. To create enough revenue and profit to offset a significant percentage of these costs, the property has to be built at such high densities as to be politically unacceptable, except in the rarest of circumstances.

Yet, losing the Chargers would be a loss. Smart and solid economic research from the Federal Reserve Bank of Philadelphia has shown that the presence of an NFL franchise has a positive impact on the property value in the host region. Before and after survey research by Competitive Edge Research and Communications indicates that San Diego has experienced a positive bump to its national image after hosting the Super Bowl. The challenge, and one where leadership is really required, is figuring out the right structure of deal so as to stop the bleeding at Qualcomm, retain the Chargers with a modest but affordable public investment, and sign a lease which allows the Chargers to remain competitive as a San Diego franchise. That may be impossible (which might suggest a talk with the NFL about the current structure of revenue sharing and the long term realism of a strategy that requires municipalities to invest hundreds of millions of public dollars in a stadium), but it’s absolutely worth redoubling regional efforts and trying to find a solution that works.

Hoa Quach is the political editor. She can be reached at Politics@SDNN.com

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This entry was posted on Monday, June 1st, 2009 at 1:02 pm and is filed under Chargers, Football, Pocket Change, Politics & Government. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.