The Chargers' Shaky Stadium Estimate

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The Chargers' Shaky Stadium Estimate

The team argues that its current home will cost taxpayers more
than $300 million in the next decade. But a VOSD analysis shows it
relies more on dramatic shifts in policy and fuzzy estimates than
hard data.

The argument goes like this: The city of San Diego loses money each year operating Qualcomm Stadium, the Mission Valley home of the Chargers. A lot of money. A whopping loss of more than $300 million between now and 2020, when the team’s lease ends at Qualcomm.

Couldn’t that money be better spent?

That’s the position taken by the Chargers special counsel, Mark Fabiani, most expansively in a December op-ed in The San Diego Union-Tribune.

For taxpayers, $300 million is the most important number in the Chargers’ stadium search. And not just because taxpayers should know how Qualcomm chews up their taxes. It’s also a key figure the team can use to justify hundreds of millions of dollars in public investment for a new downtown stadium.

The number sounds authoritative. The Chargers say they’ve been citing it for years. When voiceofsandiego.org asked how the Chargers settled on $300 million, they produced a detailed spreadsheet stating the city’s losses would actually be higher: $340.5 million.

But a VOSD analysis shows that the Chargers’ estimate isn’t based on hard data, but rather on drastic shifts in city policy and fuzzy estimates. It assumes the city will invest $113 million more than it currently plans to improve Qualcomm. It uses one number that’s partly based on a single line in a nearly five-year-old Union-Tribune story.

By using these numbers, the Chargers come up with the $340.5 million estimate. But that could overstate the costs to taxpayers by as much as $145 million, the VOSD analysis found.

The city owns the 167-acre Qualcomm site. And the city — not the team — is responsible for operating, maintaining and improving the stadium. The city and the team have a lease at Qualcomm through the next 11 years. But that lease hasn’t worked out well for the city. It’s so bad, the city essentially pays the Chargers to play at Qualcomm, and the team can break the lease every year.

The Chargers argue that taxpayers clearly have a lousy deal at Qualcomm. The implication: Building a new downtown stadium could give the public much more for their money and keep football in San Diego.

The key question is how much money the public will be asked to pay toward an estimated $800 million new stadium. Both the team and the city say they don’t know yet. But $300 million could go a long way.

Fabiani, the team’s special counsel, stands behind the Chargers’ calculations of the city’s losses. The improvement estimates, he said, are “extremely conservative.” In the years of the team searching for a new stadium, he said no one has seriously questioned the team’s estimates on Qualcomm’s operating costs. If he were to tell the City Council how much money taxpayers would lose at Qualcomm, Fabiani said he’d provide the same information.

“We’ve made exactly this presentation for eight years,” Fabiani said.

The Major Gap: Stadium Improvements

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Qualcomm Stadium is 43 years old and needs repairs. That’s not in dispute. The question, though, is how much work will actually happen at the stadium between now and 2020 — in a cash-strapped city that has recurring budget deficits and a $900 million list of other citywide repairs it needs to make.

The city doesn’t keep track of all the work needed at Qualcomm. Nor do the Chargers. But they still estimate it — and the difference between their estimates is vast.

The city plans to spend $8 million on stadium improvements in the next 11 years. The team says the city will spend $113 million more.

This difference forms a key part of the Chargers argument. The team contends that the improvements are necessary for it to play football at Qualcomm. In other words, the team treats the costs as absolute certainties for the city.

But the Chargers aren’t providing specifics. Fabiani said he didn’t have a list of projects the team believes that Qualcomm needs. Before the team renegotiated its lease with the city six years ago, the city was required to maintain Qualcomm as “state of the art.” Now the lease says the city must make sure that Qualcomm is not “uninhabitable.” The Chargers contend that $113 million will be spent simply to keep the stadium operating.

Fabiani wouldn’t commit to filing a lawsuit to enforce the habitability clause and require the city to spend $113 million.

“It’s not a matter of us requiring it or not,” Fabiani said. “If the stadium is supposed to be operable as an NFL stadium, at some point you can’t play in a stadium that doesn’t have a scoreboard.”

For their estimate, the Chargers relied on information from the city’s last attempt to catalogue the repairs needed at the stadium, prior conversations with city officials and advice from their stadium consultant.

Eight years ago, Qualcomm’s then-manager said the stadium needed $50 million in upgrades for things such as a new sound system and fixing old concrete. The Chargers took that number, added inflation and another $50 million in improvements they believed the stadium would need over the next 11 years. That totals $113 million.

Fabiani argued that the estimate is conservative. When the team renegotiated its lease at Qualcomm, Fabiani said city officials told him the stadium needed $150 million in long-term maintenance. In an interview, team stadium consultant Dennis Wellner estimated that stadiums typically need $175 million in improvements over 30 years.

The city has conceded it might not be spending enough at Qualcomm. A May 2009 city audit said the planned spending on Qualcomm improvements “appears highly insufficient,” but didn’t detail how much more money was needed.

But there is a significant difference between the improvements Qualcomm might need and the improvements the city might actually pay for. And the $8 million in improvements isn’t the only money the city plans to pay to maintain the facility. It budgets millions more annually for day-to-day upkeep.

For the Chargers’ $113 million estimate to be true, they’re relying on one of three things happening — and there’s no indication any of them will:

  • A dramatic change in city policy to pump money into Qualcomm.
  • The team winning or settling a lawsuit to force the city to pay, which Fabiani would not commit to filing.
  • Something expensive breaking and needing immediate repair.

Qualcomm stadium manager Mike McSweeney declined numerous requests to comment for this story, but Tom Haynes, an analyst with the city’s Office of the Independent Budget Analyst, said it was questionable to assume the city would spend such a large sum on Qualcomm improvements.

“I think you could make the argument that the city would not actually expend those dollars,” Haynes said.

The Smaller Gap: The Annual Loss

Someone has to pay for Qualcomm’s grounds crew, electricity to keep the lights on and 24-hour security services: City taxpayers.

The stadium’s operating costs are so high, the city doesn’t make enough money from the Chargers, San Diego State University or anyone else renting the facility to cover them. It takes a loss.

The Chargers estimate the city loses $15.5 million a year operating the stadium. They determined their estimate by averaging numbers from two different sources. One source is a single sentence in a nearly five-year-old Union-Tribune story.

The sentence reads, “The city budgeted about $19 million this year to maintain Qualcomm Stadium and to make the bond payment.”

Fabiani said he didn’t know how the newspaper came up with its total. He didn’t know if it was net of any revenue the city made or if it just detailed the city’s expenses. But he said he counts it as an “independent audit.”

The other half of the Chargers estimate is a May city auditor projection, which said the city would lose about $12.5 million operating Qualcomm last year.

Fabiani said the Chargers did not rely solely on the city’s numbers because the city overstates Qualcomm’s revenues and undercounts its losses — painting a rosier picture than reality.

He’s right. The auditor’s projection, for example, did not include all the costs the city incurs running the stadium. The city doesn’t track all of the money it pays for Qualcomm out of the same account, and lawsuit payments and public safety costs weren’t part of the auditor’s determination.

But there’s a more precise way to calculate the city’s losses than the Chargers’ method. Over the course of a month, VOSD broke down the city auditor’s numbers, added in the police and fire departments’ annual spending at Qualcomm and talked to the Chargers about their costs to the city. Then it took all those losses over three years and added them up.

The VOSD analysis found that losses at Qualcomm average $12.2 million a year — about $3 million less than the team says.

The VOSD figure includes money the city pays its police for such things as keeping rowdy Raiders fans off the field, money it pays the Chargers as part of a disabled access lawsuit and money it pays for the stadium’s grounds crew, electricity and those private security services.

The analysis relied on city financial receipts from 2006 to 2008 detailed in the May city audit, financial statements related to the disabled access lawsuit and data from the city’s police and fire departments.

It provides the clearest answer yet to a complex question the city has struggled with: How much money the city loses operating the stadium annually.

Using the VOSD analysis, the Chargers’ estimate overstates the city’s operating losses at Qualcomm by $32 million over the next 11 years.

City officials said they don’t plan to take the Chargers estimates at face value as negotiations for a new stadium move forward. Mayor Jerry Sanders’ office and City Councilwoman Donna Frye, whose district includes the Qualcomm site, both said they planned to assess the city’s costs at Qualcomm independent of the Chargers.

Said mayoral spokesman Darren Pudgil, “The city will, of course, do its due diligence on every financial aspect of a potential stadium project, including the costs associated with operating Qualcomm Stadium.”

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org and follow him on Twitter: twitter.com/dillonliam.

 

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