The Morning Report
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This post has been updated.
For years, the city of San Diego has spent millions of dollars each year to subsidize the Chargers.
But the city did, after all, get a home football team out of the deal.
Consensus is growing that the Chargers are going to receive NFL approval to move to Los Angeles this week, leaving San Diego without its main tenant at Qualcomm Stadium.
The team’s current deal with the city involves taxpayers actually cutting the Chargers a check at the end of the year, instead of the other way around. But that doesn’t mean the team’s departure is necessarily good news for the city’s bank account.
With the Chargers gone, the city will save some money – but not a lot.
Each year, the team is nominally obliged to pay the city $3 million, but the money the team gets from hot dog, beer and other concessions, along with payments related to a disability-access lawsuit, ends up putting the city in the red. When the team goes, its revenue and costs are essentially a wash for the city.
Taxpayers will, however, save about $1 million that now goes toward police officers and firefighters working Chargers games.
But remember that it costs money to keep Qualcomm functioning with or without the Chargers.
The city doesn’t make enough from San Diego State football games, monster truck rallies, motocross and other events at Qualcomm to cover expenses. We’d likely still lose about $6 million a year just operating and maintaining the stadium with the team gone. And that doesn’t even count paying for the $85 million in long-term repairs Qualcomm needs.
The Chargers are going to pay the city some money, but not enough to cover its debt.
The Chargers’ much-maligned lease with the city allows the team to leave whenever it wants. But the lease does require the team to pay a termination fee on a sliding scale. If the Chargers give notice by May 1, they must pay San Diego $15.2 million:
You could buy a lot of stuff for $15 million. Unfortunately, we owe more than $50 million.
Back in the mid-1990s, the city borrowed close to $70 million to renovate the stadium – Qualcomm, the electronics company, kicked in some cash, hence the name.
We still need to pay $52 million back on those renovations, a $4.9 million annual hit that continues for the next decade. The idea has been that the money we’d get from the Chargers leaving town would go toward repaying the stadium debt, but city financial officials said that’s yet to be decided. Even if it happens, we’re going to remain pretty upside down.
The city has spent some money planning for the future, but will spend even more.
Back in the summer when the city was still marching to the NFL’s beat, Mayor Kevin Faulconer pushed the city to complete a speedy environmental review for the Qualcomm site – the mayor’s preferred solution for a new stadium. That came at a cost of $2.1 million and was necessary, the mayor said, to show the NFL that the city could have a new stadium ready for construction by the beginning of this year. Of course, the decision to spend the $2.1 million came after the Chargers had walked away from the negotiating table.
Not to worry, the mayor said at the time. If the team left, the environmental review would still be valuable for Qualcomm’s future, especially if a new sports facility like a soccer stadium went there.
But the environmental review’s value depends on what’s ultimately going to end up on the Qualcomm site. To figure that out is going to cost some more.
“The amount of residual value the requested [environmental review] might have for future city projects will largely depend on project specifics and the amount of time that has lapsed,” the city’s independent budget analyst said in a July report. “If the Chargers relocate, it is reasonable to assume there will be some indeterminable amount of additional consultant and/or staff expense for environmental review of a future project at the site.”
Update: As of late December, the city had not finalized the environmental review. According to a mayoral spokesman, the city doesn’t want to finish the review until the Chargers agree to a formal stadium proposal. There’s still $700,000 unspent in the project’s budget.