The Morning Report
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When you start with the assumption that you want to build a football stadium but you don’t, like so many other cities, want to raise taxes, you give yourself a complex puzzle to solve.
The mayor’s stadium task force came up with a clever solution. The plan the group presented is as detailed, coherent and attractive as it could be. If you’re going to subsidize a stadium without a tax increase, this is about as good as you’re going to get.
After he handed out the plan at Monday’s big press conference, the second question to Adam Day, the chairman of the mayor’s stadium task force, was about one of the biggest slices of the pie his team put together to pay for a new facility: the land sale.
The task force proposal includes selling 75 acres of land in the Qualcomm Stadium lot for $225 million. It’s a crucial part of meeting the $1.1 billion stadium price tag.
But $225 million is a lot of money and one of the reporters wanted to double check. How long would it take to get the zoning changed so that a developer, you know, could build stuff?
Didn’t matter, Day said. “The sale is separate. We’d receive the proceeds of the sale upfront and development can occur anytime in the future.”
“You believe the fair market value of that land is $225 million without entitlement?”
“Yes. We believe that’s a conservative number,” Day said.
Later, on the phone, I asked Day again. You sure that’s the price of the land without getting new zoning? After all, it’s zoned for a stadium. It’s hard to picture a developer wanting to buy it with no guarantees they could build anything but a stadium.
But Day was steadfast. Yes, the transaction could happen right away, within a year, he told me — even if the city didn’t change the zoning.
“One guy wanted to buy the whole lot,” Tony Manolatos, the task force’s spokesman, chimed in.
But that land can’t sell for $225 million without a major zoning change. That’s according to the very letter the task force points to in justifying its estimate. Borre Winckel, president of the Building Industry Association, wrote to the task force May 4 with the crucial proof the group needed:
Based on our industry’s knowledge of the Mission Valley residential and commercial market and a review of public information, it is thought that the Qualcomm site would be realistically valued at an average of $2,000,000 – $3,000,000 per developable acre.
At $3 million per acre, 75 acres is $225 million. But then the kicker:
This estimate assumes the Site gains an approved Master Plan, that Merchant Builders would go through a substantial review for its individual neighborhood design proposals consistent with the Master Plan, and such Merchant Builders would be delivered sheet-graded fully serviced pads with perimeter infrastructure provided.
See that? That $3 million per acre assumes the city not only changes the zoning but builds infrastructure around it and delivers to the developer a nicely graded plot on which they can hoist their condo towers.
Day told me to call Jason Hughes, the commercial real estate broker on the task force. I did. (Full disclosure: Hughes is a Voice of San Diego sponsor and the employer of my wife.)
Hughes said the estimate is legitimate.
“We had multiple large-scale developers give us their valuation. If anything, our pricing is low,” he said.
But yes: Hughes said the estimate depends on the zoning being changed.
Now, zoning can be changed. That, however, would take some time.
For any normal corporation seeking half a billion dollars or more from taxpayers, that would be a reasonable wait.
But we’re talking about the NFL and the Chargers. To them, this is the kind of hole in the plan they can drive a truck through.
The task force chief, Day, told me weeks ago that the task force would provide certainty for the financing of the stadium. The Chargers were demanding hard cash. It was like they were selling us a home and they wanted us to prove we had the money in the bank.
The complaint from the NFL that the group was relying on building things around the stadium to finance the facility’s construction was unfounded, Day said, because they would not be relying on building things to finance the facility’s construction.
He said he would prove it. And that’s why he’s forced to say that the land sale at that price could happen without changing zoning for the land: because the timeline gets all screwed up if you have to wait for a zoning change. Even if it goes through in one-third the time the controversial One Paseo took, it would still be a year or two.
Combined with the mayor’s commitment to hold a public vote, the zoning change would take too long to meet the Chargers’ absurd demands and deadlines.
Perhaps they weren’t meant to be met.
The Chargers just aren’t into us. There we all were, gathered for a big presentation of the stadium plan, gawking at the miniature model the architect threw together for free.
And what did the team have to say? Chargers special counsel Mark Fabiani distributed a press release. Was it about how excited the team was to work with the mayor to implement his new plan?
[Carson CA – May 18, 2015]—The Oakland Raiders and San Diego Chargers have named Carmen Policy as Director of Carson Holdings, LLC, where Mr. Policy will help direct the teams’ joint Los Angeles stadium efforts. Mr. Policy is the NFL executive who is best known for his work in the front office of the San Francisco 49ers, a franchise that won four Super Bowls during his tenure.
His name is Carmen Policy? Are you kidding me?
The task force has put the puzzle together as well as it could. Sure, you may have a problem with subsidizing one company to the tune of $640 million in public assets — and some do. But if you’re going to subsidize that company and not raise taxes to do it, this is an elegant way to do it.
“It’s a better deal for local governments than we have now,” said Kris Michell, CEO of the Downtown Partnership. That’s not the highest bar — we have a pretty terrible deal right now.
And it would be one thing if the Chargers said something like, “Boy, this is something we can work with. Let’s get down to business and get it done.”
But they didn’t. The team kept working on plans to move to Los Angeles.