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May 27, 2010

Chargers: We're such a crappy deal for San Diego, even paying to build a new stadium would be an improvement

The slowly simmering San Diego Chargers stadium campaign has shown signs of heating up of late, with our old friend Mark Fabiani showing up on local radio to tout the team's latest plans for an $800-million-ish downtown stadium. Among Fabiani's arguments for the plan:

One, it costs, according to the grand jury, $17 million a year to operate and maintain that stadium. The City loses that amount of money every year. And, second, the City owns that 166 acres of land which could be put to better uses. It could be developed. It could be a park created along the riverfront. So there are all sorts of things that could be done that would be better for that piece of land.

These are legitimate arguments: There's always something else you could do with land and money, what economics geeks like to call "opportunity costs." Of course, though, a new stadium would take land and money as well, so the real question should be: Which is a better deal, the current one or spending upwards of $500 million to build a new stadium?

Right now it's hard to say without knowing more of the numbers — how much is the old stadium land worth, for example, as compared to the land that would be needed for the new stadium? — but Fabiani's case isn't helped by the revelation that the city's losses on Qualcomm Stadium are really only $12 million a year. Apparently his $17 million figure was what it would cost to run the old stadium if the Chargers left and no other events were held there, not even college football or monster truck rallies. At which point the city could always just knock down the place and build a park along the riverfront if they wanted.

Possibly the best summation of the situation comes from Voice of San Diego writer Liam Dillon (author of the last article linked above), who told KPBS radio that "the argument for a new stadium is simply coming down to the fact that taxpayers have such a lousy deal with the Chargers that they basically need to make a new deal with the Chargers. ... If the City keeps making bad deals with the Chargers, who's to say that this time the City is going to make a good deal with the Chargers?"

At this point, you have to wonder if the best option for San Diego would be for the Chargers to just move to Los Angeles, letting them keep their city money and reclaim the Qualcomm site as well. And anyway, a 116-mile drive is just a trip to the grocery store for most Southern Californians, right?

COMMENTS

Why are some people SO okay with having the Chargers move? Why doesn't anyone consider what a respected football team does for the moral of the city? Where is the sense of loss? The Chargers belong HERE. NOT in Los Angeles. I have lived in both areas. This is their home, and they should stay here.

Keep in mind that a high majority of football stadiums are built by partially using public money. It's how it goes. So why are Southern Californians so afraid to be as supportive as a Midwestern (Indianapolis) or even Back East (NY/NJ) area's populace? And especially for something that, in turn, lifts their city, their area up, as the Chargers do in San Diego.

Posted by Tony on May 27, 2010 09:56 AM

Sorry: *morale* of the city...

And furthermore: it's not just the football team that lifts the city up. The stadium itself can do the same. Go ahead, be a witness to all the excitement surrounding the new Cowboys stadium. The New Meadowlands stadium in New Jersey was just awarded the privilege to host a super bowl... (and Indianapolis was already awarded one as well).

Posted by Tony on May 27, 2010 10:01 AM

Mr. deMause, this is Mark Fabiani with the Chargers. Thanks again for the opportunity to comment.

First, the $17 million figure that I cited came from a San Diego County Grand Jury report in May 2010. The Grand Jury examined the amount of money the city loses by operating Qualcomm Stadium every year, and the number it came up with is $17.1 million. This number is consistent with past reports, including one by the San Diego Union Tribune. The Voice of San Diego report that you refer to assumes that the City will do virtually no maintenance on the stadium between now and 2020 -- an assertion that people who know something about what it takes to keep a 1960s-era stadium up and running regard as absurd. In any event, if you have a complaint about the $17 million number, you should direct it to the County Grand Jury!

Second, it's unfair for you to imply that it is somehow the fault of the Chargers that the taxpayers have a bad deal at Qualcomm Stadium. The Chargers yearly rent number is $2.5 million, which is relatively high as NFL rents go. The problems for taxpayers at the Qualcomm site are caused not by the Chargers, but by these factors:

(1) The City of San Diego and voters chose to help finance a new ballpark for the Padres, which cost Qualcomm Stadium the rent and other revenue from 81 baseball games a year. That decision can hardly be blamed on the Chargers.

(2) The City has for years chosen to run the stadium the old-fashioned way rather than privatizing its operation and creating a for-profit incentive to book as many events at the stadium. Only within the last several days has the City issued a Request for Proposal to private firms to assess how the stadium might better be managed. Again, it's hard to see how you can fairly blame this on the Chargers.

(3) The City has chosen to try to operate and maintain a stadium that was built in 1967, which many other cities have regarded as an ultimately losing proposition given the escalating deferred maintenance needs of such facilities. Likewise, the City has chosen not to monetize the 166 acres on which the stadium sits, even though the land is potentially quite valuable. Again, blaming this situation on the Chargers, as you do, seems misguided.

For our part, the Chargers are suggesting that we look at other alternatives downtown that would allow the City of San Diego to free up its 166 acres at the Qualcomm site and its 100 or so money-losing acres at the Sports Arena site. Your post seems to advocate that San Diego should instead leave things as they are -- which is a fine position, as long as people are prepared to accept a situation where more than 250 acres of taxpayer-owned land generate no revenue and instead will cost taxpayers more than $300 million between now and 2020.

Your alternative solution -- let the Chargers move to Los Angeles and tear down Qualcomm Stadium -- ignores the fact that San Diego State's Division 1A sports status depends on the University's ability to play in Qualcomm Stadium (because there are no other sufficiently large stadiums around campus). So your notion that Qualcomm Stadium would be torn down the minute the Chargers disappeared from San Diego is, at best, highly speculative.

Again, thanks for the opportunity to comment. If any of your readers have questions, they should feel free to contact me at mdf@markfabiani.com.

Best, Mark Fabiani.


Posted by Mark Fabiani on May 27, 2010 12:57 PM

ooooh, Fabiani's here!!

fight! fight! fight!

question for Mark:

Why would the organization release a rendering of the potential new stadium showing it sited directly on top of the MTS bus storage and maintenance facility? (an expensive piece of regional transportation infrastructure that would have to be relocated). Especially when there is a parcel of land adjacent by a block to the west that's about a similar size to the stadium rendering parcel that's currently only a parking lot.

Why not propose the stadium over the parking lots and save the costs of relocating the MTS facility?

Posted by Sasha on May 27, 2010 02:05 PM

Hi, Mark - glad to hear your thoughts as always. My questions are threefold:

1) If $2.5 million in rent is "relatively high" by NFL standards, and maintenance on an NFL stadium is between $11m and $17m a year, doesn't that imply that the economics of NFL leases is fundamentally broken? I mean, if my rent only paid 20% of my landlord's monthly costs, he'd have burned down my house for the insurance money by now.

2) What are the expected operating costs of a new stadium, and how do the Chargers expect to cover them? I know it won't have deferred maintenance needs, but new stadiums are also way more complex buildings than old ones, so tend to have pretty high operating costs. How would you avoid a situation like the Indiana Pacers, where they have a new arena but are complaining that their operating costs keep them from being able to compete?

3) Even if the annual cost of Qualcomm operations is $17m, how does that compare to the annual costs of a new stadium? Bond payments on $500 million are going to be far more than that - is the difference in value of land between the Qualcomm site and the new site really enough that the city could come out ahead?

Posted by Neil on May 27, 2010 02:38 PM

Mark,

WRT Item 1, while it is true that Qualcomm has lost the 81 dates that the Padres brought them, it has also lost the stress that 81 games a year put on that building. How could the maintenance have gone UP on Qualcomm when the building is being used less frequently?

Thanks for coming to the board.

Posted by Steve Steffens on May 28, 2010 06:20 PM

Sasha, you ask a great question. Why not use all of Tailgate Park -- a flat, vacant piece of land -- instead of the transit yard which will, as you say, have to be relocated? The answer is familiar to Californians: Earthquakes. There is an earthquake fault that runs through Tailgate Park that prevents the stadium from being built on the site. We are using as much of Tailgate Park as we can under the applicable California earthquake safety laws and regulations.

In addition, it is worth noting that many people who live and work downtown would like to see the transit yard relocated for various reasons, but I'll leave those interests to speak up for themselves.

If you have additional questions, please don't hesitate to email me directly at mdf@markfabiani.com.

Best wishes, Mark Fabiani.

Posted by Mark Fabiani on May 28, 2010 10:44 PM

Neil, as always, your questions are right on the money. I'll do my best to answer:

(1) On whether the economics of NFL leases "is fundamentally broken": I can't speak authoritatively about other teams and cities, but I can tell you for certain that any municipality trying to maintain a 1960's era multi-use stadium for a single NFL tenant is definitely in a fundamentally broken economic situation. There is no way that the rent from a single tenant can pay to operate and maintain such an aging facility. Perhaps that's the reason that so many cities throughout the country have replaced these multi-use facilities with single-purpose football stadiums or baseball parks and put the burden on the private sector to operate and maintain those new facilities. That is exactly what we've proposed in San Diego: The private sector would operate and maintain a new publicly-owned stadium.

(2) How can the Chargers cover the operating costs of a new stadium? First off, we wouldn't be proposing to do so unless we thought it was possible. Indeed, if you look around the country, you can find private stadium and arena operators making a go of it. For the Chargers, a downtown San Diego stadium would be an important adjunct to the Convention Center, capable of hosting corporate meetings and events. A retractable roof would allow us to host major events such as the Final Four. But whether we are right or wrong about what can be accomplished in a new downtown facility, the burden of making things work will be on the private sector and not the taxpayer.

(3) How will a stadium downtown be paid for? There is a study sponsored by the downtown redevelopment agency now underway to help answer this question, if it can be answered. Without prejudging the results of the study, though, it's fair to say that you have put your finger on what is really the most likely solution (if there is one): Finding a way for the City to monetize the 166 acres it now owns at the Qualcomm site and, potentially, the 100 or so acres the City controls at the Sports Arena site. Whether this is a solution that works -- and that is acceptable to the public -- is of course very much up in the air.

Best, Mark Fabiani.

Posted by Mark Fabiani on May 28, 2010 11:02 PM

Steve, your question about the costs of maintaining Qualcomm Stadium is one that perplexes a lot of people around San Diego as well. But the fact is that various studies over the years -- most recently, a May 2010 report by the County Grand Jury -- have shown mounting losses to taxpayers, in the range of $17 million per year. The fundamental problem, of course, is that the stadium is now home to just one tenant -- the Chargers -- that pays significant rent. And with the publicly-approved construction of Petco Park downtown, the major events that would normally have found a home at Qualcomm now utilize the more modern baseball park.

If you have additional questions, please feel free to email me directly at mdf@markfabiani.com.

Best wishes, Mark.

Posted by Mark Fabiani on May 28, 2010 11:06 PM

Hello Mark,

First off thank you all the great info. I have a few questions for you. How much are we speaking of in total? 700 to 800 million plus more to relocate and build the transit yard, also an additional 75 million to build a retractable dome and then another 500 thousand for the research for funding and development. It seems like taxpayers will be responsible for 500 million which is about half of all that. At a time of economic downfall is this really necessary or is this possibly just about a very expensive luxury,(to have a local team). Would it not be a smarter idea to tear down the stadium so no more taxpayer money is spent maintaining it. Building an inexpensive stadium for college athletes somewhere more suitable. Sending the Chargers to LA really doesn't seem like a bad idea. We love the Chargers and we don't mind driving a little once in a while to see the game, just like all the fans from LA have been doing for many years. Plus no taxpayers money will be spent and San Diego can save some money. Plus with a New Stadium in LA the Chargers stadium can host Super Bowl. Imagine only a couple hours away! I think it will be better for everyone that way. 8 years and millions spent should already be a sign that its just not practical especially in this economy where San Diego is nearing Bankruptcy. What are your comments? Sorry I know this is a long question but please comment. Thank you!

-John M-

Posted by John M. on June 2, 2010 07:00 AM

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