Remember that rumor that San Diego Chargers owner Dean Spanos was going to find a way to build a new downtown stadium with “100% private funding“? Hope you didn’t take that too seriously, because the actual funding plan has now been leaked, and it’s a doozy:
The Chargers will ask San Diego voters in November to raise taxes on hotel stays to 16.5 percent from today’s 12.5 percent rate to help build a $1.8 billion hybrid stadium and convention center next to Petco Park downtown, said sources close to the team’s negotiations with lawyers, bankers and the hotel industry…
Under the financing plan taking shape, the Chargers would deposit $650 million —including $300 million from the National Football League and $350 million from the team — into a trust fund toward the stadium portion’s projected cost of $1 billion.
A new, city-controlled agency would contribute $350 million, using sales of tax-exempt bonds backed by the increase in hotel taxes. The Chargers would be responsible for any cost overruns for the stadium piece of the project beyond $1 billion, the sources said.
As for the convention center, hotel taxes would back its $600 million construction cost, along with $200 million for land acquisition.
That’s a total of $950 million to be generated by new hotel taxes, if you’re scoring at home. Which, yes, would be paid entirely by hotel visitors, not general taxpayers, but there would still be many costs to San Diego as a whole, opportunity and otherwise: If a 4% hotel-tax hike takes a bite out of hotel stays as some tourists seek out cheaper destinations, then that’s a cost to the city’s baseline hotel tax collection (and its economy); and if it doesn’t take a bite out of hotel stays, then it’s a 4% hike that could have been used to pay for something else other than a “convadium.”
According to the San Diego Union-Tribune’s report, the Chargers would pay operating costs for the stadium, would keep all NFL-related revenues (including naming rights), but let a city stadium authority get any revenue from the convention center and from non-NFL events at the stadium. Neither of which seems likely to amount to a ton compared to the football money, but it does make it harder to calculate whether this should be called a “$950 million public subsidy” (not that it’s going to stop me from doing so, until it’s proven otherwise).
This whole mess will be voted on by San Diego residents in November, though whether it will require a simple majority (maybe possible) or a two-thirds supermajority (you must be high) is likely to come down to a court to decide. So no odds on whether this thing is actually going to happen, but I guess Spanos deserves credit for going big.
Looking for clarification: Is the $200M in land part of the $600M? I read the total subsidy as $1.15B…
$350M (stadium) + $600M (convention center) + $200M (land)
Yes, the city is responsible for land acquisition and expenses related to moving the bus yard.
It should also be noted, that an increase in the hotel tax from 12.5% to 16.5% is — in terms of real money — a 32% increase in the current rate. The tax on a $200 room would go up $8, from $25 to $33. While that may not sound like a lot, it’s actually huge if you are a convention seeking a host destination, and looking to sell attendees on hundreds or thousands of rooms across multiple days.
This just in – LA Coliseum to be renamed ‘Dean’s Den’ in 2017
And there it is. The classic “well the tourists will pay for it” scheme. It rears its ugly head continuously, yet these sports franchise owners always fail to mention all this imaginary money is backed by bonds, which are backed by projected tax revenue. Never once mentioning if said projections fall short, then Joe Taxpayer is on the hook in making up the difference.
Again, if these stadiums are so profitable, the private sector would be chomping at the bit to make these investments.
Will people start using Air B&B to circumvent the 4% tax? (if it ever passes)
Alex,
They still have to pay the tax on air b&b stays. That is why the city has not outlawed them. It is technically against the law to have a short term rental in San Diego, but why would the city enforce it if they are getting their palms greased. I think is funny that the author says the city is paying 950 million for a stadium, when in reality it’s only the original 350 million they offered. The other 600 million is for the expansion of the convention center, which it wants and the hoteliers, in the past, have been willing to support. I took a class on this once. I was called bias in the media 101.
The headline says “$950m for new stadium and convention center.” Maybe a class in reading comprehension might have been a better idea?
Las Vegas Chargers in 2018.
So is this for the so called Convadium concept or a real expansion of the existing convention center as everyone not named Dean Spanos is after?
Now that we’re finally getting to raising money to pay off the bonds in Sacramento, this whole issue is making me so ticked off. In Sacramento, it’s from parking. For everyone.
We have many 10 hour meters. The primary zone for parking has been deemed to be Front Street to 16th, C Street to W Street. In that zone, 10 hour parking is now done. If you want to park that long, you now must move to a parking lot.
Parking hours in this zone will now run through 10 p.m. Previously, it had been until 6 p.m.
So what this means is if you’re not someone on a high salary, and you had a spot in that area with no parking restrictions, your expenses just increased by about $200/month, because you’re out of your free spot and into a paid parking lot. It’s possible that you never go into the arena, ever; here’s your $200M bill — forever.
And they haven’t started raising the rates in lots downtown, but I suspect that’s next.
This is in a City where parking meter revenues must go ONLY towards traffic and parking expenses. That’s the law. And they still got away with it.
Now, if you’re in the area EAST of 16th, these restrictions are not in effect. I predict a lot of people will walk in from 16th Street. Good for physical fitness, I guess.
I’m just rankled by the notion that some $3,000/month clerk just had his or her expenses rise to that degree. No, I do not expect them to walk 12 blocks to avoid this expense. But I think it’s a great argument for raising the revenues for this arena FROM THE ARENA ONLY. Paying for the arena from parking is as nauseating as watching fish rot.
“If you don’t use the arena, you won’t pay for the arena”? Bullshit.
Going big with OPM (Other People’s Money)? I can do that. I can show you real big….
Well, so much for Dean talking his pals at Goldman Sachs into writing a check. We SD taxpayers will be on the hook for the bonds and more than likely for the new city-controlled agency that disburses the magical hotel tax funds. I’ll be interested to hear Comic-Con’s take on the 32% increase in room tax: so much of this scheme is focused on enlarging the convention center to keep Comic-Con, (and they have been lukewarm to a new site that’s not next to the existing convention center), when they hear their attendees are going to pay that much more, Vegas, LA and Orlando might look even better.
Moreover, the notion that the stadium won’t cost local citizen’s anything because tourists will pay through a TOT increase is about as ignorant as economics get. When visitors have to pay more money in tax towards their accommodations, that’s less money that goes to other local goods and services. Instead of $8 going into a local bar, restaurant or souvenir shop, it’s collected in taxes. Over time this takes a rather larger chunk of cash from local businesses. One could argue that the tax goes into the general fund, which ordinarily would be great (for safety, police, infrastructure, etc), but her it gets siphoned towards the new stadium, so…
By the way, Golden 1 Center announced its third big act. Get ready for this: It’s Jimmy Buffet!
He’ll be one month shy of his 70th birthday when he gets to town.
I don’t know for sure, but I thought the under-30 crowd was supposed to be the primary target demographic when running an arena. Can anyone confirm that? /sarcasm.
In related news, the SDUT football metaphors are flowing once again.
http://www.sandiegouniontribune.com/news/2016/mar/23/chargers-stadium-take-hike/
The local hoteliers and our dear Mayor already wanted to raise the tax to 15-1/2% for a contiguous expansion of the convention center. That’s been held up in court because the expansion would actually be OVER the bay and deny public access to that part of the bay. It is laughable to say the hoteliers and Comic Con would be against an increase in the TOT when they themselves ALSO want to raise the TOT for the contiguous expansion of the convention center. As a San Diegan, I would rather have conventioneers walk for two small city blocks to a new expansion of the convention center than build over the water and essentially block access to the marina that’s next to that proposed expansion. They already do that for the events that are held in the surrounding area (Petco Park, Hard Rock Hotel, etc.) without complaint. This is San Diego! You can walk outside in January, That’s the attraction for people to come here in the first place. And while everybody hear cries foul for higher room rates when was the last time anybody said, “Gee, honey, I won’t be taking you to Hawaii for our anniversary ’cause the TOT is just too frigging high. Let’s go to Columbus, Ohio instead.” Oh, except the TOT is 16.75% in Columbus, Ohio.
This plan, that hasn’t come out yet, calls for $650 million from the Chargers/NFL. The rest of the cost for the City for the stadium and convention center expansion would be paid for through new taxes. The Mayor’s previous plan called for just taking out $350 million straight out of the already burdened City and County general funds for a new stadium in Mission Valley with no way to replace that money. This Charger’s plan at least comes up with a way to actually pay for the stadium AND the non-contiguous expansion of the convention center. This new plan also calls for the Chargers to pay the city $450 million ($15 million a year for 30 years) for maintenance of the new stadium. The stadium would be the City’s to do with as they please for the rest of the year. Hopefully, they will do more with the new stadium than they are now which is just having used car tent sales in its parking lot.
I believe the state law in California is that it requires a 60 percent supermajority to pass a tax increase. On the other hand, if Spanos had opted to use bonds as the funding mechanism, it would have taken a 55 percent supermajority.
If anyone else reading this is a political or legal expert who has the correct information, please let me know.
I’m not exacty sure why it would be in the Chargers’ best interests to build a stadium Downtown without parking and with a forfeit of non-football related renevue.
Do they anticipate that naming rights would be worth more in a Downtown Stadium? Or that they will get more Super Bowls?