The prevailing paradigm of development in San Diego has been to shift the risk of negative outcomes from the developer to the community. This is based on the premise that any development is good for the community.
Here are some examples:
- Qualcomm Stadium
In 1997, the city invested $78 million for expanding Qualcomm stadium, in return for 10 percent of the gross revenue as rent. The guarantee of 60,000 tickets was calculated by the city manager over a three-year span that included the 1994 Super Bowl and exceeded the capacity of the stadium at that time. According to the Grand Jury investigation, the ticket guarantee “creates a potentially severe financial disadvantage for the city and shifts the balance of advantage toward the Chargers.”
The deal became lose-lose for both the Chargers and the city, and the taxpayer investment to keep the Chargers until 2020 is now sunk, as we look for other uses of the site.
- College Grove Wal-Mart
In 1998, the city was eager to attract investment into a run-down multiplex and bowling alley on College Avenue. In 1998, it bought the land using its redevelopment authority, and sold it to the developer (Wal-Mart and Vestar) giving about $14 million in public assistance (including land subsidy), as CPI has documented. This included an agreement to lease back some of the land to use for a Park and Ride lot, refunding Wal-Mart $2.4 million generated in sales tax. Since then, the Park and Ride has been under-used and served as an overflow parking lot for the development. In order to reduce its debt service and principal repayment obligations to Wal-Mart, the city renegotiated the deal in early 2005. However, the deal fell through as the developer would not disclose the sales tax financials.
When it comes back to City Council next month, it is expected the city finally will require a variety of benefits for the community, including median improvements on College Avenue and increased revenue for the general fund.
- Navy Broadway Complex (NBC)The 1992 agreement with the Navy to develop this prime waterfront property promised “extraordinary benefits” to San Diegans including tax revenues of potentially $20 million a year.
However, many questions were publicly raised about the deal, including serious doubts about the fiscal impacts. Most significant were the loss of $8 million in transient occupancy taxes (TOT) if condo-hotels were developed, and the future obligation of the city to provide police and fire safety services for the development. So what was the response from city officials? These critical funding questions “will be addressed at the time construction documents for the NBC project are submitted for the ministerial permitting process.” A ministerial process means no public input. Delegating to a ministerial process gives an excuse for elected officials to avoid controversial community involvement.
Finally, when media started swarming over the financing questions, the mayor’s staff announced a deal in which the developer would reimburse the city for lost TOT if condo-hotels were built.
The last example illustrates how our officials are sold on the idea that any development benefits the community. Seldom does anyone sit down with a calculator and fill in the costs and benefits columns. The CEO of the downtown redevelopment agency, Nancy Graham, recently told reporters: “We don’t get into the financial analysis, and neither does the city.”