Opinion

Roundup: The Chargers Tax! And a Chance Encounter

 

At some point in my life, my career went from writing a lot to talking a lot. Now, I spend more time answering for other people’s writing than my own. This is nice, at times.

It can also be unexpectedly stressful at other times. July 15 was one of those days. You’ll remember that week, Keegan Kyle wrote this outrageous multi-layered fact check of County Supervisor Bill Horn. It wasn’t a normal fact check. It was a fact check odyssey.

We spent all week flogging the story on TV, radio and social media. At the same time, VOSD’s own Rob Davis was setting up to get married Portland. And many of us were heading there to bear witness.

Sitting at the airport gate, my 11-month-old son was crawling on the carpet. I was stuffing a tuna sandwich into my face.

All of a sudden, next to me, Horn sits down. No, Horn was not going to Davis’ wedding. Turns out the National Association of Counties was also meeting in Portland.

We chatted. He was a good sport. And he ended up posing for a pic with my son and me.

 

 

You’ll note that my kid simply could not look away from the awesome sight that is Supervisor Horn.

Chargers vs. Convention Center

I’ve been noticing that, with increasing frequency, people pushing for a new football stadium in San Diego are offering up the idea that the desired Convention Center expansion could be contained in a football stadium.

This is not new. I wrote about it several weeks ago.

What surprises me is how much life it has. Last week, U-T writer Matt Hall asked Chargers counsel Mark Fabiani whether the maiming of state’s redevelopment subsidy ended all hopes of using public money for a new Chargers stadium.

Fabiani replied with this (my emphasis added):

 

(1) In the short term, any hope of using redevelopment funding is dashed, to use your word. (2) We need to find other funding sources, possibly by reconfiguring the project so that it functions as a powerful complement to the Convention Center and as the anchor of a new Sports and Entertainment District and (3) We also need to find a way to bridge the financing gap between now and 2024 — possibly with the help of other government agencies in the region that may see long-term benefits from this kind of multi-faceted downtown project.

 

Hmmm. How would reconfiguring the project so that it functions as a powerful complement to the Convention Center provide another “funding source” for the stadium?

I have an idea, but before I could get it out (remember I spend more time talking these days than writing unfortunately) I saw the U-T’s Tim Sullivan do yet another long think piece on the puzzle, which included this (emphasis added):

 

The Chargers will attempt to convince league owners that California stadium projects deserve special consideration and additional funding. They will try to sell a vision of a stadium that can be considered a component of convention center expansion, of an entertainment complex attractive to private investors, and of a football team worthy of public dollars.

 

Hmmmm. The only way the a Chargers stadium can be helped by it being considered as part of a Convention Center expansion is if the money that’s being put together for a Convention Center can be transferred instead to this convention center-stadium hybrid.

And what money is that? Why it’s the hoped-for increase to the hotel-room tax.

Let’s review: The reason why it’s hard to build a new stadium in California, as opposed to say Texas or Arizona, is that in order to raise a special tax to pay for it, you need two-thirds of voters to approve it. In other places you only need a majority.

Two-thirds is nearly impossible. It was that threshold that actually killed a 2004 attempt to raise the hotel tax despite widespread support for it.

But the hoteliers have figured out a way to increase the tax by themselves (or they think they have) without a vote of the people.

Now the football boosters want the hoteliers to share. They’re saying, essentially, “Why you want to build just a lil’ ol’ simple Convention Center when you could build a big ol’ Convention Center and play football in it too?”

What would be interesting about this is that, if it were to ever be taken seriously, and I doubt it would be, the hoteliers would have to do a true study on the economics of the stadium and the benefit of a deal like this.

And I would absolutely love to read that study.

Bankruptcy!

Call me a freak, I still think it was wrong for the city to not even have a thorough discussion about whether bankruptcy would have provided a more equitable solution to all that ails the city. We’re about to get rid of pensions for future city workers while current workers, and even some of the people trying to get rid of future pensions, get to keep their own.

Pensions went up, and up, and up and now they’re just gone? Where’s the balance? The intergenerational equity? Why are we letting one generation protect their lot by selling out the next?

The city of Vallejo is just emerging from bankruptcy. And I caught this quote from one of the attorneys for the retirees in a Bloomberg story about the resolution.

 

Bankruptcy saved Vallejo tens of millions of dollars in reduced labor costs, said attorney R. Dale Ginter, who represented retirees in the case who were forced to accept reduced benefits.

 

So I emailed Ginter, who was on vacation, and asked if any of the benefits were so-called vested retirement benefits. My point was this: everyone says that vested benefits like basic pensions can’t be adjusted in bankruptcy. In Central Falls, Rhode Island, retirees are being asked to voluntarily give up benefits as the city flirts with bankruptcy.

So what was Ginter talking about? Were vested benefits on the table?

 

Depends on your definition of “vested”. Pension benefits with CalPERS were NOT altered. However, most retiree’s healthcare benefits were reduced to $300 per month because most of the unions, after their collective bargaining agreements (“CBA”) were rejected (or under threat of rejection) negotiated new CBAs that provided for that reduction. This is a very substantial reduction because retirees were previously receiving healthcare benefits valued at about $800 to $2,500 per month, with most retirees being at the lower end of that range.

The new CBAs, achieved by bankruptcy court rejection of existing agreements (or threat thereof), will also save the City significant amounts over the coming years. We don’t represent the unions and I cannot provide you with a precise amount.

 

So it depends on what you mean by vested. Critics of bankruptcy might ask why this couldn’t have been done outside the court.

But the point of bankruptcy is to force everyone in the room to deal with a lopsided financial situation. When deals like this are made, bond interest rates are lowered and a host of other changes achieved, the savings can be monumental.

We’re likely to see a wave of municipal bankruptcies across the country. Perhaps in a few years we can see if San Diego was right to do everything possible to avoid even thinking about it.

 

You can contact me directly at scott.lewis@voiceofsandiego.org or 619.325.0527 and follow me on Twitter (it’s a blast!): twitter.com/vosdscott.

 

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Scott Lewis

Scott Lewis

I'm Scott Lewis, the CEO of Voice of San Diego. Please contact me if you'd like at scott.lewis@voiceofsandiego.org or 619.325.0527 and follow me on Twitter (it's a blast!): @vosdscott.

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17 comments
Will Dawson
Will Dawson subscriber

$ 300,000.000.00 leaving the city with just $ 300,000,000.00 to finish the project. In the NFL contract and the Spanos' commitment any and all cost overruns MUST be shared by all three parties in ratio to the amount from each party.. Plus the Spanos' and NFL must pay any and all legal bills for challenges to the project.

Sandawg
Sandawg

$ 300,000.000.00 leaving the city with just $ 300,000,000.00 to finish the project. In the NFL contract and the Spanos' commitment any and all cost overruns MUST be shared by all three parties in ratio to the amount from each party.. Plus the Spanos' and NFL must pay any and all legal bills for challenges to the project.

susanf
susanf subscribermember

if they try the approach described herein, i certainly hope they will encounter strong and sustained opposition. it's just another bad idea authored by those who want something for nothing.

susanf
susanf

if they try the approach described herein, i certainly hope they will encounter strong and sustained opposition. it's just another bad idea authored by those who want something for nothing.

James Danforth
James Danforth subscriber

The Chargers and NFL are 20th century relics. The city should focus on concerns that provide economic benefit to the Citizens, not entertainment. In other words, football has no value compared to many other opportunities. Let them go elsewhere.

JamesMD
JamesMD

The Chargers and NFL are 20th century relics. The city should focus on concerns that provide economic benefit to the Citizens, not entertainment. In other words, football has no value compared to many other opportunities. Let them go elsewhere.

Mark Giffin
Mark Giffin subscribermember

They have not been pushing it unless they perceive bankruptcy a threat and possible avenue for local governments

mgland
mgland

They have not been pushing it unless they perceive bankruptcy a threat and possible avenue for local governments

Vlad Kogan
Vlad Kogan subscriber

Scott, sorry, I should've read more closely. My point is that, although bankruptcy could reduce interest rates on currently outstanding debt, it will jack up rates on new and future debt, so will probably be a net loss (in terms of borrowing costs) overall.

vkogan
vkogan

Scott, sorry, I should've read more closely. My point is that, although bankruptcy could reduce interest rates on currently outstanding debt, it will jack up rates on new and future debt, so will probably be a net loss (in terms of borrowing costs) overall.

Scott Lewis
Scott Lewis administrator

>> When deals like this are made, bond interest rates are lowered and a host of other changes achieved, the savings can be monumental.

scottlewis
scottlewis

>> When deals like this are made, bond interest rates are lowered and a host of other changes achieved, the savings can be monumental.

Frances O'Neill Zimmerman
Frances O'Neill Zimmerman

Very cute CEO's baby and funny joke about kid's fascination with alleged civil rights firebrand Supervisor Bill Horn. Or is it mayoral candidate Congressman Bob Filner who was the Freedom Rider?

Vlad Kogan
Vlad Kogan subscriber

So, if the problem is employee compensation, you can't use bankruptcy as a surgical strike to address it. There is a lot of collateral damage, including people who have bought city bonds. So as soon as bankruptcy is on the table, investors panic, and the city's interest rate for borrowing starts looking a lot like Greece's.

vkogan
vkogan

So, if the problem is employee compensation, you can't use bankruptcy as a surgical strike to address it. There is a lot of collateral damage, including people who have bought city bonds. So as soon as bankruptcy is on the table, investors panic, and the city's interest rate for borrowing starts looking a lot like Greece's.

Bob Jones
Bob Jones subscriber

Selling off assets is common practice within corporations during re-organization and consolidation to improve future financial prospects. If the City of San Diego were run like a viable business or corporation the ASSETS would most certainly be identified and all options considered. It remains unclear what time honored business "practices" our elected City officicals follow, if any.

rwj5125
rwj5125

Selling off assets is common practice within corporations during re-organization and consolidation to improve future financial prospects. If the City of San Diego were run like a viable business or corporation the ASSETS would most certainly be identified and all options considered. It remains unclear what time honored business "practices" our elected City officicals follow, if any.