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Sunday, Jan. 11, 2009 | When the new Padres owner takes account of the team’s financial standing, he’ll have San Diego residents to thank in part — and not just because they’ll be in the stands buying $9 beers.
Taxpayers shelled out two-thirds of the $454 million price tag of building the Padres’ home, Petco Park, which makes up a significant chunk of the team’s value. Forbes last year estimated the stadium was worth about $99 million, or about a quarter of the team’s value, which the magazine pegged at $385 million.
Daniel Rascher, the president of SportsEconomics and a sport management professor at the University of San Francisco, estimated the Padres would be worth about $150 million less if they were still sharing a stadium with the Chargers.
“What really bumps up a team’s financial value is a new TV contract and a new stadium,” he said. “Your stadium revenues double in a new stadium.”
Padres owner John Moores bought the team in 1994 for $80 million. As he and his wife divorce, the couple’s 90 percent share in the team is being sold — reportedly for around $400 million, according to The San Diego Union-Tribune.
Now, some residents are wondering whether the city should get a share considering its contributions.
“One of the reasons it’s a valuable commodity is that the city invested in it,” said City Heights attorney John Stump of the ball club.
Moores has said he’s put more than $100 million of his own money into the club over the years.
The team has reached an “agreement in principle” to sell the team to a group led by Jeff Moorad, who just stepped down as chief executive of the Arizona Diamondbacks.
While residents admit it might be too late for a payout this time, they said it’s something to keep in mind for future negotiations. The city’s agreement with the Padres doesn’t call for a payment in the case of a sale — an arrangement that would be unheard of on a national level.
Rascher said it’s basically understood that a club owner is going to make money from a stadium, “and it’s coming partly from private money and partly from public money.”
“At the time [public officials] decide to throw a couple hundred million dollars into a stadium, that’s it,” he said. “They’re never going to see that money again.”
He said San Diego is in one of the better situations on a national level, because they were among the first to pair stadium-building with redevelopment that can bring in money for local government.
The ballpark deal was approved by voters in 1998, soon after the Padres had played in the World Series. At the time, Moores had said the team was operating at a loss and needed a new stadium to compete with other ball clubs. The city and Centre City Development Corp. — the city’s redevelopment arm — agreed to pay $301 million of the ballpark’s $454 million cost, with the city owning 70 percent of the stadium.
The Padres had to put up $153 million for the stadium and, with their private partners, invest more than $300 million in development around Petco Park, with the idea that revenue from the new hotels, stores and housing would help pay the city’s share of the stadium debt and revitalize the East Village.
The city’s agreement with the ball club calls for any new owner to take over all the requirements of the contract — including that the Padres stay in San Diego for at least 22 years. Frank Alessi, CCDC’s vice president and chief financial officer, said having a home for the team in San Diego is important because the ballpark deal sparked redevelopment and good publicity.
“Obviously, if you watch San Diego ballgames on TV, it’s a great advertising for the city and it obviously has been a great redevelopment effort,” Alessi said. “It eliminated a lot of blight.”
There’s a longstanding debate about whether the ballpark deal lived up to its billing, with supporters touting the changes that the park has brought to the city.
“It has taken an area of downtown that was probably the worst area of the city and has done a 180 on what the development’s like,” said Tim Moore, the city’s ballpark administrator.
Moore said the financial benefit from the ballpark — mostly property and sales taxes — is difficult to measure, if an accurate accounting can be taken at all.
Steve Erie, a political science professor at the University of California, San Diego, said the deal was poorly structured, allowing too much discretion to the Padres and making the city responsible for too much of the project’s cost. That, he said, allowed Moores to do a “bait and switch” — substituting development in ways that did not benefit the public by, for instance, providing less affordable housing than was originally proposed and a scaled-down version of the Park at the Park.
One source of controversy is that the property taxes from the ballpark development flow not to city’s general fund but to CCDC, which as a redevelopment agency receives the increased property taxes in the development area. CCDC money can only be spent on redevelopment within its boundaries.
Some have called for CCDC to pay the city’s entire share of the debt — something the agency is now agreeing to do in part because of the city’s deteriorating finances. Last week, the CCDC board gave tentative approval to paying off the city’s $11.3 million annual bond payments for at least five years.
Newly elected Councilman Carl DeMaio said he’s doing “cartwheels and handstands” about the move. While he said the ballpark has “spurred a renaissance in the downtown,” DeMaio added that it “never should have been paid for from the general fund.”
The debt on the ballpark bonds comes out of the fund for taxes on hotel and motel visitors. But taxes from the hotels in the ballpark district cover only a fraction of the cost of the bonds, and the hotel money that now goes to pay the ballpark debt could be used for certain expenses paid out of the general fund.
Now that CCDC is expected to cover the debt, mayoral spokeswoman Rachel Laing said hotel tax money will cover some of the general fund expenses.