San Diego stadium plan could include half billion dollars in hidden subsidies, depending on fine print

Yesterday I got a lot of questions from newspaper and radio reporters (including one who introduced himself as from the “San Diego Union-Tribune” — I congratulated him profusely on the restoration of their rightful name) about the new $647 million Chargers stadium subsidy plan and whether there were any hidden risks for the city. I mostly replied that $647 million is a plenty big risk in itself, but now the Voice of San Diego thinks it’s found as much as another $352 million in additional subsidies:

  • $217 million to $327 million in future operations and maintenance costs, based on estimates that running Qualcomm Stadium costs the city between $7.2 million and $10.9 million a year. “It’s a significant issue,” Erik Bruvold of the National University System Institute for Policy Research told VoSD. “That’s another general fund subsidy.”
  • $20 million to $25 million for a new park on the stadium site, which would be paid for with “potentially state and federal funding,” according to Citizens Stadium Advisory Group member Mary Lydon.

Now, there’s no doubt that maintenance and operations costs are a huge hidden cost of stadiums — and new ones, with more moving parts that can break, typically run even more to maintain. The question now is, is this something the city would really be on the hook for, on top of that initial $647 million in cash and land? Let’s look at the proposal itself:

To pay for the proposed stadium, parking, stadium-related infrastructure and operations and maintenance, CSAG’s financing plan includes 60 acres of land from the City of San Diego valued at $180 million, and more than a dozen funding sources that exceed $1.4 billion

So the implication there is that future operations and maintenance costs would be covered by the initial $1.4 billion, which includes the $647 million from the city and the rest from the team (assuming you count things like NFL funding and naming-rights revenue as “from the team”).

Anything else?

The City, County and Chargers should share the costs of operations and maintenance. These costs will rise over time so payments should be indexed to inflation.

Now, “share” is an incredibly nebulous word — 90% team and 10% city is a share, and so is 10% team and 90% city. What appears to be going on is that the task force has estimated $1.154 billion as the cost of a stadium plus related infrastructure, coming up with $1.4 billion in revenues, and hoping that the difference will be enough to fund future operations and maintenance costs. (Here “share” would mean “paid for out of the big pot of money that both the Chargers and the city are throwing cash into.”) That’s certainly conceivable — the remainder would be $246 million, which is toward the low end of VoSD’s estimates — but it’s more than a bit worrisome that the task force report never actually spells out how much it’s actually budgeting for maintenance and operations, not to mention that elsewhere it proposes using a chunk of this excess money to pay off Qualcomm’s remaining $52 million in debt.

Plus, under the heading of “creating revenue streams to help the City and County recoup capital costs and pay for operations and maintenance,” there are additional subsidies not mentioned in the first $657 million, including $116 million for an “Enhanced Infrastructure Financing District (a TIF by any other name) and $40 million in hotel taxes from a potential new hotel. And again, the task force appears to be double-dipping here, as elsewhere this money is designated for infrastructure for the hotel and other development, not for stadium operations.

So depending on what exactly the plan means — and it’s worth noting that the whole maintenance and operations piece is listed under “Recommended terms for negotiations with the Chargers,” which makes it even less set in stone than the rest of the proposal — we could be looking at anywhere from $647 million to $1.155 billion in public subsidies for this deal. That’s an awfully wide range, and no doubt one reason why NFL commissioner Roger Goodell responded with a “let me get back to you on that” when asked what he thought of the proposal. Though he could also have realistically gone with “Somewhere between $600 million and over a billion dollars in free taxpayer money? Mmm, yeah, that’s why I got into this business.”


5 comments on “San Diego stadium plan could include half billion dollars in hidden subsidies, depending on fine print

  1. Now that the public is wiser to the debunked myth that stadiums pay for themselves, it looks like the tact has shifted to ‘just make it really complicated’. Adding parking structures, hotels and land swaps to the mix confuses and alienates the general public. THEN, when they highlight numbers like “the city and county each pay $121 million” you look at the $121 term and think that’s a bargain compared to Miami, Cincinnati, etc. The psychological impact of $121M (each) is less than $242M. That’s why infomercials scream that you can get a product for *cough* four easy payments of *cough* $19.99.

  2. “…40 million in hotel taxes from a potential new hotel…”
    There’s your solution! Build another 39 hotels.

  3. The stadium stories has made what is usually a boring off-season…exciting. As a “Oakland” RAIDERS fan, I’m rooting for the Chargers to their house of cards stadium in San Diego because I want to see Mark Davis sweat. See, the press and LA RAIDER fans have propped up the Carson house of cards as the real thing when it should be called what it really is: a fantasy. You have two teams with owners who don’t the liquid cash to fund their own stadiums so they need the cities, counties to foot the bill but every city isn’t Santa Clara who borrowed money to build Levi’s Stadium. I know the RAIDERS and Chargers want the media to sell the Carson frontier as the real thing but seriously, what businessman would foolhardily enter into an agreement that could fall apart if the other team gets a deal with their home city?

  4. @ Neil

    Did you notice that CSAG estimates the cost to build the stadium at only $950 million. That’s pretty funny. Or that they’ve estimated the value of naming rights in San Diego at $10 to $12 million per year, even though Santa Clara could only come up with $11 million per year from Levi’s in Silicon Valley while surrounded by Corps with money to burn.

    NFL teams don’t split PSL revenue, that money is always considered the team’s contribution.

    Those 75 acres are only worth the estimated $225 million if the land is rezoned for residential use and the required infrastructure spending is approved. And the “One Paseo” project is a great example of the difficulty of the approval process.

    My favorite bit is that CSAG used a ridiculously low 4% discount rate to purposely overstate the present value of future revenue streams. This report is a joke and Erik Bruvold of National University is a fraud, his analysis is either incompetent or disingenuous.

    I would love to destroy the CSAG group in a debate over their moronic financial analysis. I could have produced a much more accurate report in a single day. They must have spent all that time figuring out the best way to lie to the public. 4% discount rate, Hahaha.

    I know a few lawyers who are licking their chops to kill this nonsense in court. Foulconer is risking a recall if he gets too stupid on this issue.

  5. Have you looked at interest and inflation rates lately? A 4% discount rate isn’t all that crazy these days.

    Clearly CSAG is trying to be as optimistic as it can about its assumptions, but that’s every stadium proposal, really. It’s a PR document, but at least it has some actual numbers (half-baked though they may be), not just a magic colorizing basketball.