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City Leaders Should Shed the Qualcomm Stadium Debt, But Only for the Right Deal

City leaders must prioritize a long-term strategy for the Mission Valley site, and time is taxpayer money.

While reading the 301-page SoccerCity proposal to redevelop the Qualcomm Stadium site, it became clear to me that we need leadership from City Hall, and our elected leaders should keep the following in mind to ensure taxpayers are getting the best possible deal for a prime piece of real estate the Chargers called home for 49 years:

Commentary - in-story logo Prioritize paying off the existing $47.5 million in debt the city owes on Qualcomm Stadium.

• Proactively solicit competing proposals, and do so on a timeline that keeps all options open, giving credit to the initial plan for getting ideas rolling.

• Learn from mistakes of the past – the city has a track record of entering into bad deals at this site.

• Be deliberate and decisive – inaction is costly but so is entering into a bad deal.

I’m CEO of the San Diego County Taxpayers Association, and while our organization is still conducting an analysis of the current proposal, I wanted to lay some concerns on the table now before the Taxpayers Association releases any official position on the plan.

The stadium still hosts San Diego State Aztecs football games, concerts and other events, but my biggest concern is that the massive property is a severely underperforming asset without the Chargers as a marquee tenant — and, frankly, it was underperforming even with the Chargers. Operations and maintenance costs that exceed revenue means the stadium costs San Diego taxpayers millions of dollars a year.

Then there is the $47.5 million in debt that remains from the last time taxpayers renovated the stadium and built a training facility for the Chargers. A strategy to retire that debt should be city officials’ first order of business, because the longer it goes unpaid, the more taxpayers pay in interest.

The Chargers recently wired $12.58 million to the city as a penalty for terminating their stadium lease early. Let’s forget for the moment that whoever negotiated an agreement that did not tie the entire amount of the debt to the Chargers’ penalty schedule saddled us taxpayers with a horrible deal. However mismatched the amount, though, that money should immediately be used to pay down the stadium debt.

Since voters will soon be asked to sign a petition supporting the SoccerCity proposal, the Taxpayers Association has focused its preliminary review on whether the plan would help the city eliminate its Qualcomm Stadium debt as quickly as possible and, if so, how.

So what money would taxpayers make potentially to pay off the stadium debt sooner rather than later?

The proposal appears to suggest the city would receive a check for the land from FS Investors, the group behind the SoccerCity plan. The check would be an upfront rent payment for 99 years, the length of the proposed contract.

The proposal does not specify the amount owed by FS Investors. Instead, the proposal says the mayor would determine the lease price based on outside appraisals and related information shared with the public.

My preliminary understanding is that FS Investors would pay to demolish the existing stadium and build a new one for a MLS soccer franchise it would own. The city would maintain ownership of the 166-acre site and FS Investors would have an option to buy 79.9 acres – any sale of 80 or more acres of city-owned land triggers a public vote.

If it is determined that it would cost more to demolish the existing stadium and clean up the site than the land is worth, FS Investors would pay the city $10,000, according to the proposal. If the land is valued more than the demolition and cleanup costs, then the one-time rent payment would be set by the fair market value analysis the mayor would oversee.

It seems, at first blush, that demolishing the existing stadium would be helpful to taxpayers by ridding the city of millions in operating expenses and deferred maintenance costs. But whether it would help pay off the existing stadium debt is unclear — that hinges on determinations of fair market value.

The proposal says the “determination of fair market value is intended to be based on a value of the property that does not consider any later effect on value caused by the adoption of the new zoning and other development standards.”

It is important to note that City Council and Mayor Kevin Faulconer are currently facing a budget shortfall. Due primarily to burgeoning pension costs, this shortfall is aggravated by the millions of dollars it costs each year to operate Qualcomm Stadium and pay down the debt.

City leaders must prioritize a long-term strategy for the Mission Valley site, and time is taxpayer money.

The city should be proactive, and ask for competing ideas. To be fair to stakeholders, ask for these other ideas on a timeline that keeps all options open, including SoccerCity. Leadership matters, and inaction would leave taxpayers saddled with stadium debt, maintenance costs and an asset losing taxpayer dollars on a daily basis.

There are still many unanswered questions about the SoccerCity proposal, and it is San Diegans’ collective responsibility to seek answers. Due diligence is critical, and city leaders must recognize the need to move decisively so the land can be put to its highest and best use while also ridding taxpayers of the Qualcomm Stadium debt as quickly as possible.

Haney Hong is president and CEO of the San Diego County Taxpayers Association.

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