The Morning Report
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On Tuesday, the city and county negotiators will meet with Eric Grubman, the NFL’s vice president, and Chargers Special Counsel Mark Fabiani.
At some point, Grubman is going to ask them how they plan on financing a new stadium.
“We will ask them for the financial assumptions that the plan is based on,” Grubman told me.
I would love to hear their response.
We aren’t getting anywhere with our questions. It’s not clear whether the mayor and company are keeping a plan in a secret binder or if they just don’t have a plan at all.
In the Union-Tribune last week, I thought we had a breakthrough when I saw this line in a story comparing San Diego’s effort to keep its NFL team to St. Louis’ push:
“Matt Awbrey, a spokesman for San Diego Mayor Kevin Faulconer, countered that San Diego is in better shape than St. Louis when it comes to a new stadium for the Chargers. He said the city already has the land for a new venue – the Qualcomm Stadium site – and a financial framework laid about by a Faulconer appointed task force.” (Emphasis mine.)
All right, all right, all right. So the plan the task force set up for the stadium effort is the financial framework the mayor’s going with.
No, no, no, Awbrey told me when I inquired after the story. The task force’s plan is most definitely not the mayor’s plan. Was Union-Tribune writer Jonathan Horn wrong? If he was, he didn’t put up a correction.
Such is the dance we’re doing in San Diego. The mayor and his county partners may not have a plan they’re willing to share with us but they are betting that they will convince the NFL to force the Chargers to keep negotiating here.
The theory is that we’ve done so much work – we are ramming through an environmental study, after all – and that proves our worth to host the team.
That is why it would be so interesting to be in the room Tuesday with the mayor’s team, the Chargers and NFL. What will they say when the NFL asks how they plan to come up with the difference between how much the Chargers are willing to pay and how much a stadium will cost – a difference right now that sits at about $600 million or more?
If the mayor’s team says, “Unfortunately, there is no plan,” well, that doesn’t seem like the way to win over the NFL.
On the other hand, if the mayor’s team reveals a new plan, that would be something. But what could be in it?
The mayor and City Council have now removed the option of selling land around Qualcomm Stadium to help pay for the new stadium. And they have removed the option of developing that land to help pay for it.
Here’s the mayor’s spokesman Craig Gustafson to me, in reference to the task force, or CSAG’s, recommendation to sell land to pay for the stadium:
“The CSAG’s suggested plan included ancillary development but the city/county plan does not, and therefore it would not be appropriate for the [environmental impact report] to study ancillary development. The city/county plan does not rely on ancillary development for a stadium to be financed,” he said.
Two things: There apparently is a “city/county plan.” And it looks likely that plan is to simply invest the county and city’s general fund dollars into a new stadium.
In a preview of Tuesday’s meeting, the Union-Tribune’s David Garrick wrote that, in addition to straight general fund money, we have another option: “And the city also has other potential revenue streams, such as $700 million in remaining capacity to sell lease-revenue bonds, where the city raises money by using city buildings as collateral for bond sales.”
This is kind of alarming. First of all, that’s also general fund money. It’s not a separate spigot of cash. Here’s Liam Dillon’s excellent, timeless explainer of how those lease-revenue bonds work. So far, they’ve been crucial for the city’s much touted but still insufficient investments in major infrastructure repairs.
We would have to pay those bonds off with money that could otherwise pay for streets, parks, police, firefighters, lifeguards and all the other things the general fund can handle.
You can’t say, “We can invest this much from the general fund and we can also do lease-revenue bonds.” In fact, the general fund money already being considered for the stadium would come first as a check from selling lease-revenue bonds that we then have to pay off.
Even if you assume the Chargers and NFL are good for $500 million for a new stadium and that the Chargers will pay $10 million per year in rent, and we’ll sell $100 million in personal seat licenses (all assumptions the mayor’s task force made), we’re still facing a $330 million or so gap to build a stadium.
If the city and county both came in at about $150 million each from their general funds, yes, we’d be close to a deal.
But that’s a tough sell to San Diego voters.
The mayor might point out that we are already losing at least $12 million a year on the current stadium. Maybe he can persuade voters it is best to send that to a new stadium.
Unfortunately, it’s not clear why we wouldn’t lose the same amount every year on a new stadium. If we use the Chargers’ new, large rent payments to pay off stadium debts, we won’t have them for operating expenses. An analysis by National University System Institute for Policy Research figured we’d lose almost $11 million a year if we followed the task force’s plan.
And what will the county tell its voters?
Actually, for the plan to work, it can’t consult its voters. It will have to spend the money without their input and so far it is reluctant to do that. It’s unclear why we’re so sure the minimum three supervisors will change policy on that.
Going the general fund route is not an easy one. Without tax increases, you have to admit that the payments on the new stadium will come at the expense of other city needs.
That’s a fine request to make of voters. But if the NFL and Chargers suspect it would have a tough time being approved, they are on to something.