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A Hotel Tax Hike Has Been in the Chargers’ Playbook for a Long Time

The gulf between what the Chargers are willing to spend on a stadium, and what San Diego politicians seem willing to contribute, proved too big to bridge.

Not long after the Chargers announced that they would try to work out a deal in San Diego and hold off on a move to Los Angeles, the team met with San Diego County Supervisor Ron Roberts and Mayor Kevin Faulconer.

The meeting was at Chargers headquarters on Murphy Canyon Road. Anticipating actual negotiations for the first time in months, the city and county flew in their full cadre of consultants for the gathering.

That turned out not to be necessary. The meeting did not go well.

“It was like a cold glass of water being dumped on everything,” Roberts told me in an interview.

At the meeting, the Chargers told Roberts and Faulconer that if they wanted to keep talking about a new stadium in Mission Valley, the $350 million in public funds the two politicians were prepared to put up was not enough.

They would have to support an additional $200 million from a tax hike on hotel rooms or another tourist-based revenue source, like car rental fees.

That tax hike would require a countywide vote. At the time, everyone in the room assumed two-thirds of voters would have to sign off. The Chargers wanted a commitment that Roberts and Faulconer would give it their full support.

“That was the sum total of the discussion. An additional $200 million was really a nonstarter,” Roberts said.

I asked the Chargers’ Fred Maas why the team wanted more money. He said the team was not comfortable with the estimates of the costs of a new Mission Valley stadium. It would need to be a $1.2 billion facility, not $1.1 billion as the city and county projected.

Maas said the team also thought the county contribution to the deal was unlikely to materialize or was, at best, uncertain.

Indeed, none of Roberts’ colleagues on the Board of Supervisors had signaled support for his proposal to spend $150 million of county dollars on the plan.

Maas said it had gotten to the point where the Chargers did not think it was something bankers would count on.

“There were serious questions that gave us pause,” he said.

Roberts said that if the team had questions about that, nobody asked them.

“If they had raised the issue, we could have worked on it. But it was never an issue,” he said.

The Chargers also simply wanted to put less in the plan than Roberts and Faulconer wanted.

The politicians were assuming $187 million of the $1.1 billion stadium construction costs would come from the sale of personal seat licenses. Combined with the city and county contribution of $350 million, the personal seat licenses and the Chargers’ contribution, along with NFL loans, were to make up the difference.

The Chargers representatives, however, wanted personal seat licenses to count in their contribution to the stadium. The NFL, in fact, always counts seat license sales as part of the team contribution.

Put more simply: The Chargers wanted to spend less for a more expensive facility.

The team’s leaders and NFL representatives thought the true cost of building the stadium would be $1.2 billion. Under the Chargers’ plan, taxpayers would be paying for 46 percent of the stadium.

Roberts and Faulconer had pictured taxpayers footing 32 percent of a $1.1 billion facility. Crucially, their argument also included the Chargers covering annual maintenance and operations costs.

The gulf between what the Chargers are willing to spend on a stadium, and what San Diego politicians seem willing to contribute, proved too big to bridge. The Chargers decided they would stop talking to politicians and start preparing a plan to appeal to voters directly. After the meeting, the Chargers set their sights on downtown and began a frenzied process to slap together a proposal for a convadium that they had talked about for years.

Under the team’s proposed initiative, nothing happens for the downtown convadium until the Chargers cut a check to the city for $650 million.

Almost half of that, $300 million, would come from NFL loans and grants.

The other $350 million would come from the Chargers.

Again, though, the team gets all personal seat licenses and naming rights for the new stadium. The bulk of construction and ongoing operations of the $1.8 billion combined facility would be paid for with a hotel-room tax hike. It would take the city’s hotel-room tax from effectively 12.5 percent now to 16.5 percent.

This has become a major point of opposition.

“While the Chargers are asking taxpayers for a multimillion-dollar subsidy, the team’s investment is minimal at best,” wrote City Councilman Chris Cate in an op-ed for us. Cate was notably silent on the mayor’s plan and its investment of public dollars in the stadium.

Opposing taxes is easy. But while it might be a bit of sticker shock, the plan to raise taxes on hotel rooms to fund a stadium is also a clean proposal to voters: The NFL is a show. It’s very popular and gets lots of money around the country in deals like this. Unlike in cities like Los Angeles and San Francisco, the NFL has concluded it can’t sell nearly as many seat licenses here. So, since customers won’t pay it, we’re asking the government to subsidize it with a fee on visitors.

This is how much the show will cost in San Diego. Do you want to pay it or not?

The difference now, though, is a new court ruling makes it potentially much easier to pass. The Chargers might be able to win approval with just a simple majority.

It should not be a surprise that the Chargers are seeking a hotel-room tax hike. It’s been in the NFL playbook for years, and team President Dean Spanos and his lieutenants have long had their eyes on one. It is what many places do to build stadiums.

In Arlington, Texas, the city’s sales tax, hotel tax and car rental tax were all increased. Indianapolis voters approved an increase to the hotel tax, car rental tax, restaurant tax and other fees. Fifteen years ago Houston raised hotel-room taxes for its stadium.

It’s almost as though San Diego politicians have preferred to find some way to just give the stadium money without actually raising revenues to make sure it had little or no effect on existing spending.

Councilman Scott Sherman called the Chargers’ hotel-room tax hike plan “the path of most resistance.”

In other words, it wasn’t the public taxpayer investment in the plan that seemed to bother him as much as the increase in taxes to pay for it.

Republican Ray Ellis seemed to go the furthest. The candidate for the hotly contested District 1 City Council seat not only blasted the plan but said no public money at all should be invested in the facility.

Then Ellis, in a statement, accused the Chargers of putting this together as a con to boost fan interest in the team while it actually packs its bags for Los Angeles.

The Chargers’ Maas was not pleased with that comment.

“If that was the case, we wouldn’t have gone through this level of financial commitment and gymnastics to put something like this on the ballot,” Maas said. “There have been a lot of sophomoric statements by people who care more about politics than the truth.”

Maas estimated the Chargers will spend $5 million to put the ballot measure together and gather signatures for it. He said the team was all in on its own plan and would not be jumping to support a competing initiative, the Citizens’ Plan.

Roberts says he thinks the team is sincere.

“There’s a way to have a positive campaign. I would have suggestions for them on how to do that but I’m not having any discussions with them,” he said.

Update: This post was updated with a link to Ellis’ statement. 

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