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Mayoral candidates dream big on Chargers stadium

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When it comes to forwarding a plan for a new Chargers stadium, San Diego’s four mayoral candidates are happy to talk, but reluctant to get too specific.

They all reject a new tax to build the project, and they all embrace Mayor Jerry Sanders’ vision of a multi-use stadium that would anchor a new arts and entertainment district in the East Village.

In justifying public involvement in the stadium project, each of the mayoral candidates has cited the necessity of building a facility that’s used more than the 10 times a year the Chargers will play football there.

Assemblyman Nathan Fletcher has said the project would need to be occupied between 300 and 350 days a year. Councilman Carl DeMaio even said it’d need to be used 365 days a year.

Using the facility so frequently, they say, will help spur the economic activity required to increase tax revenue and give the city a return on its investment.

As a point of comparison, Lucas Oil Stadium in Indianapolis, which was one of three stadiums on a three-city scouting tour by Sanders last summer, held 34 ticketed events last year, good for 44 days of occupancy, according to information provided by stadium staff.

Fletcher dismissed Lucas Oil’s event total, saying San Diego could do better than Indianapolis because of its desirability as a destination. But Lucas Oil has hosted many of the big-ticket sports events promised by a new stadium, like the Final Four and a Super Bowl.

Even if an eightfold increase in occupancy over an award-winning multi-use stadium were possible, however, it wouldn’t necessarily be all that beneficial, according to stadium finance experts.

Dean Baim, whose research at Pepperdine University’s college of business and finance includes professional stadium financing, said such an increase would only create a need for more public support.

Nearby Petco Park hosts 82 baseball games per year. If a new stadium down the street were to be used more than 300 days during the same calendar, there’d be inevitable overlap during baseball season, straining downtown’s traffic and parking limitations.

“If you don’t have good traffic flow, that’s not going to lead to people wanting to have their Springsteen concert there,” he said. “I’d look at that and say I’ll shop [the concert] in Anaheim or something along that line.”

To handle the crowds associated with having two large stadiums and an expanded Convention Center so near each other, you’d have to significantly restructure road access, Baim said.

“That’s one of those public dollar things that get buried,” he said. “New sewer lines, traffic flow, parking lots, those things usually are not compensated by the team, so they cost public money.”

An action by the City Council this week to increase the number of offseason events at Petco Park points to another issue with the economic promise of a new stadium.

If the new stadium is going to host 300-plus events per year, it’ll compete for those events with not only nearby Petco Park, but also every other large venue in the region.

That means a new stadium is taking events from other venues, limiting the regional economic impact provided by each event, but also that venues in competition for a finite number of large-scale events could drive down event rents paid by underbidding one another, according to Robert Baade, who at Lake Forest College became the first professor to study stadium financing.

“Adding one more venue might not be advantageous from the city’s point of view, because while in competition to attract a highly valuable event, they might give away the stadium,” Baade said. “Various events are good at playing stadiums off each other. What you can derive in rent matters to the availability of options. So some people argue what a new stadium can create, when just competing with other venues, you might generate profit from rent down to zero or less.”

Both Baade and Baim said a plan floated by DeMaio to outsource the stadium’s booking responsibilities to a private company to increase its usage rate has been shown in independent studies to be more successful than letting the city handle those duties.

“But are we talking about a deal maker or breaker? I don’t think so,” Baade said. “Infrastructure costs will dwarf what we incur in administrative costs, so you have to be careful with that argument.”

Beyond usage volume, the conversation around financing a new Chargers stadium often devolves into semantics: How does one choose to define public support?

Sanders said last week that he expects in the coming months to unveil the plan coordinated by an investment bank he recently hired. He still envisions any plan going before voters in a special election, he said, and Chargers special counsel Mark Fabiani has pegged the total cost at around $800 million, with the Chargers providing $200 million and the NFL another $100 million.

Earlier this month, Minnesota officials signed off on a plan to provide around $800 million for a new Vikings stadium, much of which would come from pull-tab gambling proceeds. And a recently inked new stadium for the San Francisco 49ers involved the Santa Clara Stadium Authority borrowing $450 million to be repaid through naming rights, personal seat licenses, luxury suites, and non-football event and concession rights.

The mayoral candidates have floated funding mechanisms like those used in Santa Clara, as well as novel ones, like a little-used provision in the Immigration Act of 1990.

But in all cases, the plan would involve the use of public property, an inherent public contribution that teams and cities often ignore when they tout the level of private financing for a new project.

For instance, San Francisco last week announced the NBA’s Warriors were moving to the base of the Bay Bridge from their current home in Oakland. The new arena was reported as a fully private plan, which ignores a handover to the team of San Francisco’s Piers 30-32 and an adjoining lot. The properties are worth $55 million, but require renovations that city officials say give them negative valuations.

Fletcher has come out strongest against public funding of a plan. At one debate he promised a project without any public funding, before he recently sharpened his position to say he opposed using money from the city’s general fund.

But public funding of some sort is a virtual necessity for any project, according to Baade and Baim.

“It’d be a stretch, particularly in a city with a population the size of San Diego, to imagine a 100 percent privately financed stadium,” Baim said.

Likewise, Baade said the national climate makes it hard to imagine a wholly privately financed plan.

“I don’t know how you do it otherwise,” Baade said.

Fletcher says he’d turn the Qualcomm Stadium site into a public park along the river with new housing and research and development facilities for San Diego State University. He’d turn the Sports Arena site into a manufacturing incubator and job training center. The revenue culled from both would help fund the new downtown project, which would be built in place of the current Metropolitan Transit System bus lot.

Likewise, Fabiani has said developing adjacent properties would be a necessary part of a financing plan because of the public’s distaste for direct subsidies.

But reinventing those public properties is a use of public assets, according to Baim.

He asks whether it makes sense to sell those properties now, while real estate prices remain low, simply because the money is needed to pencil out the price of a stadium.

The potential difference in return between selling now and selling later is a loss shouldered by taxpayers, he said, and added that there’s an opportunity cost associated with whether financing a stadium is the best use of funds given the city’s infrastructure and service deficits.

Fletcher was noncommittal when asked if he envisions providing upfront financing that’d be repaid to the city through different funding streams.

“What I know is we can build a facility that serves the entire public in a way in which the public benefits,” he said. “I don’t know what day dollars will move to different accounts.”

But when DeMaio, who said he has put together a taskforce that’s forming a financing plan, questioned Fletcher’s promise, he focused on the use of taxpayer funds, rather than the sale of public property.

“For anyone to claim emphatically that it’s not going to cost a dime, they either don’t know what they’re talking about or they’re intentionally misleading the public, and neither is acceptable,” he said. “Show your financial projections. Fletcher needs to be called out for promising that he can put together a plan that won’t cost a nickel.”

DeMaio specified stadium naming rights and personal seat licenses as two elements of his envisioned public-private partnership that would reimburse the city for upfront costs rather than “requiring a subsidy that’s put on the table.” There’s also his aforementioned plan to outsource event booking to a private company.

Fletcher said his campaign might produce an on-paper outline for his proposal in the future.

At the May 20 NBC San Diego debate, Rep. Bob Filner called Fletcher out on the implicit public subsidy involved with selling public land to finance a new stadium.

“I say, ‘No public money,’ not just that little phrase about no general funds,” Filner said.

Instead, Filner says he would demand public ownership of the team in exchange for any support, a proposal that’s at odds with NFL bylaws. (The Green Bay Packers are an exception, grandfathered in when the league was formed.)

Both Baade and Baim said it was unlikely the Chargers or the NFL would agree to make the change, and NFL spokesman Greg Aiello has dismissed the idea whenever it’s been mentioned. A state legislator in Minnesota broached the subject to no avail before the Vikings project was approved.

District Attorney Bonnie Dumanis has consistently said she’d let the Chargers leave town before she approved of public funding that took away from “core services.”

“I’d like to keep the Chargers here. I’d like to put leadership into that,” she said. “Should we have a fourth phase of Convention Center expansion? Those are the things we need to talk about.”

Using the new stadium as an extension of the Convention Center and making sure it’s full more than the 10 days a year the Chargers play is a common sentiment among the four candidates.

Fletcher, however, has proposed the most novel form of funding the project.

The EB-5 program is an arcane section of the Immigration Act of 1990. It allows foreign investors to get a green card if they invest $1 million — or $500,000 in certain areas — in a project that creates at least 10 American jobs.

It’s been used to provide some funding for the Atlantic Yards development in Brooklyn, home to the Barclays Center, a new arena for the NBA’s relocated Nets.

Fletcher says San Diego should create an EB-5 district surrounding the stadium to generate another $5 million in funding.

While doing so would displace the cost to non-San Diegans, it has the potential to create controversy if the public takes the time to understand it, according to Baade.

“What’s the difference between that and an out-and-out bribe?” he asked. “Green cards are scarce. Now green cards are for sale. If you’re letting people in for that reason, why not teachers or doctors or scientists, or those who will really invest in a way that will really improve the economy, rather than in a pro sports facility?”

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