The San Diego Chargers owners have let drop some more details about their proposal for a downtown stadium, in a briefing for reporters yesterday. As revealed last week, the Spanos family wants a whopping 4% hotel tax hike, which would help fund a new $1 billion stadium, to open by the year 2022, like so:
- The city would take the proceeds from the hotel tax hike and use it to sell $1.15 billion in bonds, $350 million of which would be used for stadium construction, and another $200 million of which would be used to buy land for the stadium/convention center complex.
- The Chargers owners would put in $350 million of their own money, presumably with the help of selling naming rights. (Sports team owners always get to call naming rights money their contribution, even if the stadium is partly paid for by other parties and if they don’t themselves own it. This is usually termed “standard business practice,” which is a euphemism for “all the other kids’ moms let them do it.”)
- The NFL would kick in $200 million in G-4 money, plus the $100 million in consolation prize money it agreed to give the Chargers and Oakland Raiders out of the Los Angeles Rams‘ relocation fee.
- The Chargers would pay for cost overruns. No word yet that I’ve found on who’d pay for operating costs or property taxes.
The other $600 million in bonds would go to pay for construction of a convention center annex. Chargers execs say there would also be money left over from the tax hike for the general fund and other uses, though they didn’t provide details, presumably because they have no friggin’ clue how much money the tax hike would eventually produce.
This would be somewhat worse for San Diego taxpayers than the already-not-great plan that Mayor Kevin Faulconer proposed last summer: That one would have been limited to $350 million from the public (part from the city, part from the county), whereas this one also includes land costs, though part of those would go for the extra convention center space. (Which San Diego also probably doesn’t need, but I’ll leave that for Heywood Sanders to go into.) The main takeaway here, in fact, looks to be that Dean Spanos intends to take the $100 million the NFL gave him from L.A. relocation fees and pocket it, using it to reduce his stadium costs rather than the city’s, which is to be expected, I guess, given that he’s the one writing this proposal.
Actually, the real main takeaway is that Spanos is trying to go with an “everything but the kitchen sink” plan: It’s not just a stadium, it’s a convention center! And money for tourism promotion! And for the general fund! And to get Agent Carter back on the air! The hope here — in addition to getting backers of a convention center expansion on board their stadium campaign — is to so muddy the waters in advance of any public vote that people feel there’s something for everyone, and maybe it squeaks through to a majority.
It’s still not clear whether the stadium bid needs a majority or a supermajority of voters in November, incidentally, and may not even be worked out by the courts before the vote. Plus, there’s a mayoral election in November, though it may be skipped if someone is a clear winner in the June non-partisan primary. This is all a big flaming ball of uncertainty, in other words, so it’s probably appropriate that the funding plan is, too.
Since when do the owners of professional sports franchises set local tax policies? Even better it’s taxation without representation, as presumably tourists/business folks (not the locals) will be paying the majority of the tax money. And while that’s not illegal, it is maybe the main reason we got all uppity and decided to start our own country in the first place.
The Chargers’ plan is actually the exact opposite of “taxation without representation”. It’s the most targeted public funding plan in American stadium history. Only hotel owners – the direct benefactors of increased convention and event business downtown – would be taxed.
The plan seems like a longer shot than the mayor’s plan, which makes me wonder if the Spanoses are just biding their time until the Fertittas sell UFC and use that money to buy the Chargers for Las Vegas.
Ben you have always been at war with Eastasia, haven’t you?
I don’t see how this can go before voters with so many holes and unknowns. Examples: Is there or isn’t there a roof? Is the convention center portion of the project beneath the stadium, or beside it? How much will be spent on surrounding road improvements? How are the 1,300 parking places that currently exist on that parcel replaced? How will the trolley be improved in that area to facility 65,000 people when parking downtown is at a premium? With the city owning Petco Park and an adjacent 65,000 facility, how are non-sporting events negotiated so as not to disadvantage the Padres (who currently take a 60 or 70% split of revenues for non-baseball events they host)? What costs are required to shuttle attendees of large events at the bay front convention center to/from the annexed convention center?
Basically, the Chargers just concentrated on a football facility to serve their needs 10-13 days per year (note, the Chargers have proposed no source of non-football revenue streams) without really thinking through the bigger picture except for in terms of extremely broad strokes.
Haha hotel tax is a bad source since air bnb will canabalize the crap out of that, meaning the hole would be plugged by the general fund most likely.
Los Angles Chargers SOON
Ben, Air BnB guests pay transit occupancy tax in San Diego
First, let me say this: if we ALL get ponies by passing this, then I’m in. HOWEVER, the lack of details regarding this plan is alarming, especially since we’re nearing a deadline for the filing of any initiative on the November ballot, as I understand it. As a hotelier, it’s kind of interesting that we haven’t heard any reaction from the industry about this proposal – I feel that while there’s some money in this tax increase for more marketing of the city, (AND PONIES!), that may be too big of a tax bump to try and sell to large convention groups. Individual comments locally are “I never think about room tax when I go on vacation” don’t really mean too much when compared to a convention group that is booking thousands of room nights over several days. The potential increase to attendees is not always easy to spin, and convention planners are definitely sensitive to any price increases, especially on something they can’t negotiate.
Just one of the many idiosyncrasies of this whole mess.
By combining this with the convention center it hides the true stadium cost to the city. Pretty smart by Spanos in my opinion.
The hotel tax is 12.5% now (very high) and if it goes to 16.5% it will not make any business travelers stop coming to San Diego when their hotel rooms are being paid for my corporations anyways. San Diego is a big convention city and a new convention center will bring a lot more to the city than the Chargers and the occasional SB which will be competing up the coast with Santa Clara and LA.
By combining the two on one referendum it helps the Chargers mask the details as most of the money is going to the convention center anyways.
Only 350M is of the 1.15B in bonds would be used for the stadium. 350M (Bonds)+ 350M (Chargers) + 300M (NFL) and you have 1B with the Chargers picking up the cost overruns over 1B. Not a bad deal if you ask most cities.
Keep in mind SD and SD County are flush with cash and are not some poor municipality here. They probably could give out 350M and not break a sweat from the #s I have seen.
This could work, devil is in the details, but if only 350M of 1.15B is going to the stadium then this could pass.
Karl: Be sure to ask the city who is covering the ongoing costs of maintaining the ponies and who gets the revenue streams that having a pony might generate (which, if everyone gets one are probably pretty low).
SBSJ hits in on the head. The Chargers are trying to spin this as the team and NFL covering 65% of the cost of a new stadium, ignoring the fact that the stadium of the portion can’t get done without the city putting up $200M to acquire the land and relocate the bus yard. Here’s the rub: the city could easily put a convention city annex on the adjacent land without involving the bus yard at all. The only reason the bus yard becomes an issue is to accommodate the footprint of a stadium, but the Chargers/NFL don’t pickup a dime of this expense.
http://articles.chicagotribune.com/2011-11-30/news/chi-taxpayers-helped-pay-for-work-at-us-cellular-field-soldier-field-20111130_1_stadium-authority-hotel-tax-revenue-soldier-field
http://www.dallasnews.com/news/cowboys-stadium/20100710-Tax-income-to-pay-Cowboys-Stadium-9172.ece
The above articles show how this hotel tax can go – good or bad.
The problem is these bond payments aren’t just for 5 years, where there is some assurance you won’t get trounced too badly if the economy goes south (unless it goes horribly south). But when you start talking about 10’s of years for repayment you are walking a fine line – how many of these years will the city (aka taxpayer) be on the hook because the estimates were too aggressive? I’d love to see how Dallas is doing now 10 years after enacting a tax (the article above is from 2010). I believe Indianapolis did this same hotel tax deal – I’d love to see how they’ve done.
Comic Con is what’s in the back of the minds of people when it comes to the convention center. I believe they are only good in SD until 2018. Does this proposal keep Comic Con? This deal tries to appease both parties – the football lovers and the Comic Con lovers. You are bound to get extra votes in favor when you combine these 2 parties together.
No one on local radio brings up the “what happens if the tax bits don’t surpass the bill”. Someone on the radio, I believe it was the guy the Chargers brought in to work on this, said they want to make this into a 220 day a year building. Good luck with that. Use big numbers, convince ignorant people.
I have a feeling that this is going to pass, unless it needs supermajority. I really hate saying this too…
This is not a serious proposal. I don’t think anybody thinks a simple majority is all Spanos needs. This is a tax for specific projects and that require a 2/3 approval to pass. Throwing the tax surplus into the general fund is not going avoid the 2/3 requirement. And initiatives cannot cover 4 or 5 different projects at one go. And if they need 2/3 approval, this is a city that rejected a hotel tax to increase fire service after a huge forest fire demonstrated a need for better service, so building a billion dollar stadium for a billionaire would seem to be a reach. Plus, if I was a San Diegan, I’d ask why aren’t the Chargers pitching in to buy the land and build the infrastructure? What’s to prevent the Chargers from saying, “Oh, that’s convention expense, send the bill to the city.” So, shady.
It appears the Chargers are stalling until Kroenke’s palace is ready.
Arlington is doing just fine paying of it’s debt…
http://www.star-telegram.com/news/local/community/arlington/article10754984.html
Indianapolis, not so well..
https://www.mainstreet.com/article/5-cities-that-shelled-out-big-time-for-their-super-bowl/page/3
…but why they paid almost 90% of construction costs is a mystery to me.
As far as operating costs, they would come out of the TOT. I didn’t see a word about property taxes either in their 110 page missive.
As far as an expansion to the convention center, the local hoteliers and politicians have been trying to expand the convention center for years and have failed miserably. Once, they tried to raise the TOT by way of a private, hotelier CEO vote only. That was thrown out of court as unconstitutional. They tried to expand again and this time it is in court because, for some unfathomable reason, the City decided it would expand OVER THE BAY. That is probably getting thrown out, too.
The reason everyone wants an expansion of the convention center is that the biggest moneymaker of the year, Comic Con, has threatened to leave if our convention center isn’t expanded. We need a stadium, we need an expansion of the convention center. Why wouldn’t the Chargers try to kill two birds with one stone? And as far as raising the TOT, I have no problem with that either. Why not build both from visitor’s money? San diego has the second lowest TOT in the nation relative to it’s size. Hell, Columbus, Ohio has a 17% TOT. Why should we charge less that Columbus or SF or Riverside? As far as the hoteliers resistance to the convention center being non-contiguous that’s only because they fear that other hotels may take their business. The City politicians agree with the hoteliers closest to the convention center because their pockets are lined with their money. This is San Diego so that’s just business as usual.
While you say that the City’s offer of $350 million for a new stadium at the Mission Valley site doesn’t include land acquisition it doesn’t mention the clean up the Mission Valley site needs. The City is currently suing Kinder Morgan for $256 million dollars to clean up years of fuel leaks that have traveled from the gigantic fuel containers under the current stadium site to the river basin/aqifer next to the stadium. The City is very disingenuous in saying that the Mission Valley site needs no cleanup but at the same time is suing Kinder Morgan for hundreds of millions of dollars.
I know this site loves to blame sports owners for all of a cities financial woes but they’re just used as a distraction. The real reason local governments are always falling short is because they refuse to tax the rich and big business for their fair share. Too bad this site never mentions that the vast majority of subsidies go to oil, manufacturing and other businesses not sports teams. But of course, you are part of the shell game that makes us forget about that aren’t you?
“Too bad this site never mentions that the vast majority of subsidies go to oil, manufacturing and other businesses not sports teams.”
I could certainly mention it more, but I absolutely do mention it. For example:
https://www.fieldofschemes.com/2012/12/07/4202/united-states-of-subsidies-just-scratches-the-surface-of-corporate-welfare/
Sports subsidies are such a huge issue that I can’t even cover all of those, let alone other state and city subsidies for car companies and computer chip plants and the like – and that’s without even getting into federal subsidies like those for oil, agribusiness, etc. Clawback.org is a good site for coverage of those, though even they barely scratch the surface, because again, the problem is too enormous for any one or five people to address.
Edward Moretti – Everyone wants to expand the convention center yes, but there are really only one convention that need the space, ComicCon and another that could use it it’s not pressing, AFCEA West. So your looking at expanding floor space likely likely either sit empty or canabalize floor space from the main convention center. From a business perspective it’s crazy, and as a payback mechanism for the city it’s even more nuts. It’s robbing Peter to pay Paul.
Mr. Moretti,
Your case to increase the hotel tax seems plausible, though I’d say San Diego is probably a bit more expensive in general than Columbus, OH–so hotel owners might be quite logical to oppose an additional 4% on a $200 room, since they won’t see it anyway.
I honestly don’t understand the economics proposed of spending so much money to keep a single convention by creating capacity that doesn’t seem needed for anything else. Particularly when the convention retains general freedom to go somewhere else.
Furthermore, tying a stadium that has nothing to do with a convention (and also won’t be used much), further muddles the public policy picture. Does San Diego need a stadium? Or do the Chargers want one? (Surely concerts and tractor pulls don’t need luxury boxes).
San Diego will be so much better when the Chargers move to the LA Colieseum. And if the morally bankrupt NFL commissioner and owners, and crack NFL legal team stay in place, maybe NFL football will be totally gone in about 10 years.
8% hotel tax raises eyebrows, 16% changes plans. I love San Diego, it doesn’t need this.