San Diego

8 Dec

“In his report to the city on best practices in arena district development, consultant Mark Rosentraub of the University of Michigan pointed to the example of San Diego’s Petco baseball field, where the city took on a $300-million loan.

A CRL-like mechanism was put in place to pay off the city’s loan, but only after John Moores, owner of the Padres baseball team, guaranteed that if there was any shortfall with the CRL, he would make up the difference. In the end, taxes from the new real estate development produced far more than was needed to pay the San Diego’s debt.

So these things can work brilliantly, but that doesn’t mean it will happen here.”

–David Staples, December 4th, 2010

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“Even though a lot of development has taken place, the city still owes about $154 million on ballpark bonds, and the recession has hotels seeing less business. That means the city has seen a drop-off in the taxes it receives whenever someone books a room. Those taxes were supposed to help pay off the stadium.”

In this struggling economy, UCSD Political Science Professor Steve Erie says it’s evident San Diego could have made a better deal with the Padres.

“Should there have been more public benefit built in to the initial agreement? And more of a spread of the initial risk, because all of the public risk is on the front end,” Erie says.

Now San Diego is facing multi-million-dollar deficits and is making cuts to police, fire and other public services. Erie wonders whether it’s the right time for the city to be thinking about building a Chargers stadium.

“What are the civic priorities of San Diego? And have we handed the keys over to professional sports teams because that’s our marker of major league status?” he asks.

–KPBS, January 26th, 2010

San Diego’s downtown redevelopment agency will shoulder debt payments for Petco Park for the next five years, relieving the city of one financial burden as it struggles with ongoing deficits and budget cuts.”

“Built for $454 million, the baseball park is within one of two redevelopment areas managed by the CCDC and was partly financed with bonds. The city has about $153 million to pay on the ballpark bonds.

In the past, San Diego used its general fund – which pays for parks, libraries, fire and police services – to make debt payments.

But faced with a $54 million deficit in the fiscal year that will start July 1, council members decided unanimously that the money for the debt service should no longer come out of city coffers.”

–San Diego Union-Tribune, March 11th, 2009

“Even when economic development is part of the deal for a taxpayer subsidy, it won’t work if there is no market for it. Look at the deal in East Village that the Padres wangled. They promised to build office buildings, retail establishments, hotels, and condos. They reneged on most of the promises, and the condos and hotels that were built have few people in them.

–San Diego Reader, September 22nd, 2010

“‘If you build it, they will come.’ It works in fantasy movies (Field of Dreams, 1989). But it hasn’t worked in San Diego’s East Village. As part of the $301 million ballpark subsidy, developers created a slew of condo and hotel units. But few folks are in them. The whole project is a drain on an insolvent city’s general fund.”

So there might have been a lot of private investment generated by the government subsidies, but was it efficacious spending? Of course not. The conclusion is inescapable: all the subsidized construction accomplished was to exacerbate a big, bulging glut.

Indeed, the study confesses on page 61, “Would redevelopment have happened anyway? Likely, but not to this extent, and not at this rapid pace.” The ballpark project just hastened and exacerbated the harmful overbuilding, which won’t be worked off for some time, particularly as the economy sags anew.

“Very few of the condos were built because of the ballpark,” notes Mike Aguirre, former city attorney. Kogan and Richard Rider of San Diego Tax Fighters agree. The subsidies, not the ballpark, seduced builders to erect those condo towers. If there had been a market for them, they would have been built without a ballpark.”

–San Diego Reader, July 28th, 2010

“Last week’s ballyhooed consultant report saying Petco Park has been a boon for San Diego didn’t mention a possible Chargers stadium downtown — but that may be where it’s heading.

In keeping with its client history, the consultant — Conventions, Sports & Leisure International of Texas — could be warming up to examine a proposed Chargers relocation. If the firm’s previous analyses are any guide, expect promising forecasts for stadium boosters.

In San Diego, CSL found risking taxpayer money paid off handsomely, with each $1 of public investment in the ballpark met by more than $5 in private investment.

The report is just one of dozens the consultant has produced for governments, universities, professional sports teams and the tourism industry to assess public and private investment, often predicting positive economic benefits before projects are undertaken, according to a review by The Watchdog.”

“The assumptions in CSL studies have worried critics, who say these types of reports can overestimate the money generated from surrounding developments, underestimate the amount governments spend and fail to factor in the benefits taxpayers might receive from alternate uses of tax money.”

–San Diego Union-Tribune, July 21st, 2010

“Though the report calls this “return on investment,” the reality is actually far murkier: The taxes in question are for a “ballpark development area” that was drawn around the new stadium, within which a large number of hotels and other development has since been built. But there are two factors that aren’t taken into account by the study: the “but-for” question (the Gaslight District was actually starting to draw development interest even before the Padres landed there, one of the reasons the team chose it for their stadium site), and the substitution effect, wherein at least some of the tax revenue now being generated around the stadium would have been generated elsewhere in the city otherwise (if fans had spent their entertainment dollars on something else — like, say, Padres tickets at their old ballpark).

Sports economist Mark Rosentraub, meanwhile, is quoted as saying that even if some tax revenues were just relocated, Petco Park is a success because it’s “a model of how you can use a stadium to rebuild an entire neighborhood.” Not mentioned in the article: Rosentraub served as a paid consultant to MLB and the Padres during the campaign for the new stadium.”

–Field of Schemes, July 16th, 2010

“Sanders points out that when the San Diego convention center wanted to hype an expansion, it turned to Conventions, Sports & Leisure International, a firm with offices in metro Dallas and Minneapolis. When the San Diego Regional Economic Development Corp. wanted to show that the $300 million ballpark subsidy had been a success, it turned to — you guessed it, Conventions, Sports & Leisure International. Even though the ballpark area still suffers from economic depression, the consulting firm delivered.”

–San Diego Reader, July 15th, 2010

“But Kogan said the study overstates Petco Park’s benefits by including the hotel occupancy taxes that likely would have been generated anyway because of the convention center.

‘To attribute all of the economic impacts of the convention center to Petco Park is a huge problem,’ he said.

Henderson added that CSL’s calculations left out the cost of financing the bonds, totaling more than $11 million per year. That cost was initially covered by the city, although the Centre City Development Corp. is now making the payments.”

–San Diego Union-Tribune, July 14th, 2010

“But the U-T story does not state that Mark Rosentraub was a paid consultant in the development of the ballpark and surrounding real estate. This information could have been culled from the pages of the U-T. Rosentraub calls the Petco project “a model of how you can use a stadium to rebuild an entire neighborhood.” The last time I talked with him, for a Reader column that ran Aug. 26 of last year, he was raving about all the buildings (condos, hotels) that have been built in the ballpark district. I told him those condos had very few residents and the hotels had very few guests. He had no response.”

–San Diego Reader, July 14th, 2010

“I’m all for pride, but not at any price. So I asked my friend Ron Johnson – who lives in San Diego and enjoys watching the Padres at Petco Field – for his view of the matter. Is the result there as positive as portrayed by Rosentraub? Here is Ron’s reply:

‘I had the same reaction when I read Rosentraub’s piece last week. Where is his evidence? I don’t know of a single ex-post study on the impact of Petco Field. The San Diego Union Tribune ran an article a while back and it was fairly balanced, but the type of analysis that would convince economists was absent. Essentially, Petco has added to an already booming downtown, but whether it could possibly yield a positive return on taxpayer dollars is a big stretch. The area where Petco was built was considered blighted when Petco was proposed, but by the time construction started the surrounding area was already seeing new hotels and huge expensive condos going up. In my opinion this had little or nothing to do with Petco.’

–The Sports Economist, February 14th, 2006

“But Mike Aguirre, candidate for city attorney, says, “Every time we spend money on the Chargers ticket guarantee or subsidize Petco Park bond payments or have to pay into the pension plan to correct past underfunding or retain outside law firms because of past legal mistakes, the opportunity cost is imposed on the neighborhoods, the taxpayers, the community groups. We are like a family that doesn’t use income to pay for essentials because it is busy spending money on a wasteful lifestyle.”

–San Diego Reader, May 20th, 2004

“For one, the team didn’t follow through on a promise in a campaign mailer to price 10,000 to 20,000 tickets from $5 to $10. The ballpark redevelopment project also was supposed to create 17,000 jobs, but a Padres official now says there is no way to know if that will happen.”

–San Diego Union-Tribune, April 5th, 2004

“The final cost of the San Diego Padres’ new Petco Park is in: $474 million, $63 million more than was originally proposed. Of that, the team is paying $173.2 million and public sources the remainder, but even that calculation is subject to interpretation: so-called “soft costs” of public financing are estimated to add another $74 million to the city’s stadium expenses, while the Padres’ “private” share includes $60 million in naming-rights fees on the publicly owned stadium.”

–Field of Schemes, April 2nd, 2004

***Doing A Simple Google Search Bonus!***

An excellent essay on the history of PETCO Park by Mark Hitchcock. A couple highlights:

Today, the City of San Diego finds itself with a $1.2 billion deficit. To improve the City’s cash flow, libraries have been closed or had their hours cut-back, roads have gone neglected, police and fire departments have been under-funded, salaries for City employees have been frozen, and jobs have been cut. Meanwhile, thanks to a generous financial contribution from the City, the Padres now play in brand-new PETCO Park. “

“Of the $115 million that the Padres were responsible for, most was not an out-of-pocket contribution. Instead, the Padres’ contribution was to come from revenue generated by the new stadium, “including the naming and advertising rights, ticket and luxury sales, concessions, and potentially, the sale of private seat licenses.”


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5 Responses to “San Diego”

  1. Alex December 8, 2010 at 11:50 pm #

    People are often told that new stadiums are essential for a team to become competitive, so what’s interesting about the Padres’ and Petco Park is that it’s done nothing to affect their competitiveness, financially-speaking.

    Looking at team payrolls year-by-year (data from 1988-2010 is available here – http://content.usatoday.com/sports/baseball/salaries/totalpayroll.aspx?year=2010), the Padres are usually in the middle of the pack (15th-20th), and go through a cost-cutting/rebuilding phase every few years where they drop towards the bottom of team payrolls. This cycle has been going on since well before Petco Park opened in 2004 – in fact, they had a mid-sized payroll and made the World Series in 1998. In the past two years, they’ve cut payroll,dropping from the 15-20 range in team payrolls to near the bottom. They also just traded their star player because they wouldn’t be able to keep him past his current contract.

    Now, all this hasn’t prevented them from competing (they came within 1-2 games of the playoffs in 2007 and 2010). But it does show that Petco Park hasn’t affected their standing compared to the rest of the league.

  2. Andy Grabia December 8, 2010 at 10:09 pm #

    p.s. All bolds are mine.

  3. The Other John December 8, 2010 at 10:05 pm #

    I thought Dave Staples article was quite balanced, hitting the central issue clearly. Will the City of Edmonton get it’s money from this public subsidy?

  4. Mustafa Hirji December 8, 2010 at 9:12 pm #

    I note in passing that these sources disagree on whether the downtown was revitalized or whether there are a bunch of mostly empty condos in the area.

    I’m guessing the actual state of their downtown is somewhat nuanced which means less than an outright success.

    • Andy Grabia December 8, 2010 at 10:06 pm #

      I note in passing that these sources disagree on whether the downtown was revitalized or whether there are a bunch of mostly empty condos in the area.

      Yes, the Union-Tribune is the main paper, while the Reader is the alternative paper. The UT is like the Journal, parroting the line on stadium deals that’s fed to them by the teams and the economic agencies, while the Reader and the other sources have dug deeper. Basically it’s the same as here: you have to swim through the local paper’s bullshit to find the truth.

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