After rejecting NFL, will San Diego subsidize soccer? – The San Diego Union-Tribune
In November, San Diego voters famously rejected a taxpayer subsidy to build a stadium for the Chargers, ushering the team to Los Angeles.
Now comes a group of wealthy investors with a concept to build a stadium for Major League Soccer and share it with San Diego State University’s Aztecs football team at the city-owned, 166-acre site of Qualcomm Stadium in Mission Valley.
Crucially, the group says it won’t demand a penny from the public. Sometimes there are good reasons to spend public money on private development, but only rarely, and voters are rightly wary.
In any case, I’m skeptical this lunch is truly free. We won’t know for sure until the details emerge, maybe as soon as this week.
In the meantime, let’s consider the concept.
Overall, it’s a serious proposal by serious people that plucks ideas from several older proposals. Still, the public could benefit from hard negotiation by SDSU and city officials, or even some healthy competition. The big mystery is whether taxpayers will get either.
The soccer group wants to build a park and stadium on just over half the site, and develop the rest. San Diego absolutely needs more housing and parks, while the city budget could use the $13 million a year or so it loses each year on the old stadium.
Mike Stone, the La Jolla investor leading the group, says it will offer to pay the city the “fair market value” of the site, as determined by a third party appraiser.
The offer would come as a ballot measure that also seeks permission to build a 55-acre park and develop housing, office and retail space eventually worth well north of $1 billion.
The group would gather enough signatures to place the measure on the ballot, then ask the city council to approve the plan instead of the electorate. It’s a new tactic in California to rush developments past the ordinary approval process that takes years.
A key question is determining fair market value in the absence of a market. Stone seeks to pay the appraised worth of the site “as-is” — or lacking city entitlements to do anything but sit in a lawn chair and watch the Q crumble.
However, the same ballot measure that sets the price would simultaneously confer high-value development rights. This is a major wrinkle.
In 2015 the unentitled site’s value was estimated at no more than $50 million by experts hired by John Moores, the former Padres owner who backed Measure D, an unsuccessful ballot measure that sought to “prevent real-estate speculation” by anybody who bought the site.
Value sure to spark debate
At roughly the same time, the fully entitled value of buildable parcels was placed at $3 million an acre by different experts helping a stadium task force formed by Mayor Kevin Faulconer. Plug that number into the 75 acres Stone proposes to develop and you get $225 million.
Put simply, Stone may offer to pay the friendly, unentitled $50 million price for land that would be entitled in fact, and thus conceivably worth $225 million.
Does an instant paper gain of $175 million represent a taxpayer subsidy? Only if you believe the city could successfully craft a master plan, entitle the property and sell off parcels to builders, with each step blissfully free of the kind of political favoritism that some worry the Stone group will receive.
San Diego has plenty of pretend developers in and around its politics. We can expect a healthy argument over land value, probably featuring a lawsuit or even a ballot measure to reverse an approval by the city council.
Incidentally, as he prepared for negotiations with the Chargers, the mayor hired yet another expert in early 2015 to appraise the Q site at both the as-is and fully entitled values.
Then, days before he met with the team, Faulconer abruptly directed the appraiser to halt work and not deliver a formal report. Given that the mayor has refused my requests to examine worksheets or memos from the appraiser, we can guess that preliminary numbers were deemed too low to entice the National Football League.
We shouldn’t be surprised if Stone’s appraiser also produces a shockingly low opinion of as-is value. After all, the exercise involves discounting for the very real risk that San Diego may never entitle the land for enough condos, apartments and offices to pencil out.
Any developer must demolish Qualcomm Stadium, build a park, grade tons of dirt in a floodplain, divert a creek, bridge a river (for traffic relief), bury utilities and pour streets, sidewalks and parking garages. That’s before the construction of the revenue-producing buildings required to cover the cost of capital and produce profit.
Traffic drives up cost
And we’re just getting started. In California, developers generally are expected to pay for lanes, ramps and transit improvements in the name of traffic “mitigation.”
It’s a purely ideological requirement. No law of physics or holy writ says the burden of marginal growth must be carried by the last developer to arrive instead of the public.
Traffic jams typically include commuters from old homes, too. Yet in California (unlike, say, Texas), those who buy a home beside an empty lot feel entitled to outrage if the neighbor builds one for her kids.
So if the soccer investors don’t offer many millions for off-site upgrades, we can expect opponents to add the perceived shortfall to the “gift of public funds” column.
If I know my developers, Stone will respond by touting the perpetual tax revenue the city would get in return.
Indeed, the mayor’s task force estimated that even a low- to mid-rise project could produce property and hotel taxes with a net present value of $156 million. If true, this nearly offsets the $175 million of implied subsidy on the land sale.
Other details will matter to alert councilmembers.
The concept would hold 15 acres open for five years in case the Chargers or another NFL team wanted to come back. It’s probably also a strategy to retain city ownership and keep the private development below 80 acres, a threshold that triggers a public vote prior to sale.