Prevent Chargers relocation with innovation

by Leonardo Castaneda

MCT Campus
MCT Campus

Arguing in favor of a new Chargers stadium is never easy, but it can feel like outright mockery in the wake of a painful defeat at the hands of the New England Patriots. However, the Chargers’ demands for a new stadium are hardly new. After a decade of indecision, the time has come for the city to make a choice: Is it time for a Hail Mary pass or a throwaway?

As things stand today, the Chargers have a one-year lease in San Diego, and they have from February to May to either renew it or find a new home. Before that time next year, the city has two options: Do nothing and risk losing the Chargers to Los Angeles, or find some way to build a new stadium here.

Of course, even without a new stadium there’s no guarantee the Chargers will leave. However, event promoter AEG is making strong headway toward a new, privately funded stadium in LA. Without prospects of a new stadium in San Diego, it’s not hard to imagine the Chargers reaching a deal with AEG to move to a brand new home around a hundred miles north.

Option two is to replace the 44-year-old Qualcomm Stadium with a new venue. While there is strong support to keep the Chargers in San Diego, it is far from unanimous. Many doubt the economic benefits of an NFL franchise and see the whole thing as a con to line the pockets of the Chargers’ owners. Supporters in turn point to the many benefits of keeping the Chargers in the city. Aside from the prestige a major sports team bestows on its hometown, it can also mean millions for the city in increased tourism, especially with big-ticket events such as the Super Bowl. In the short term, the jobs created by such a massive project would give San Diego’s battered construction sector a much-needed boost.

At some point, the following question arises: How does one pay for a new stadium expected to cost $800 million in the midst of a recession? To figure that out, let’s start with what we have. The Chargers and NFL are willing to pay for 35 percent of the construction costs for a new venue. That comes out to $300 million.

When the Giants and Jets built their joint $1.6 billion mammoth stadium, the NFL contributed $150 million per team. Proportionally, the Chargers’ plans are similar, $800 million per team. Admittedly, New York is a much bigger market, but a contribution from the NFL of $125 to $150 million would be a reasonable demand.

That leaves a $350 to $375 million gap — just less than half of the total. Here is where things get tricky. Other cities such as Indianapolis and Denver that have built similar stadiums have relied on additional sales taxes. A small tax hike on hotels and car rentals, services often used during the football season, would be one way to finance the stadium. However, San Diego requires a 2-3 majority vote for any new taxes, making that a politically unattainable option.

So, how do you finance a stadium without new taxes? Here is one way.

First, build the stadium away from the convention center. Instead of building it in the heart of downtown, build it farther south where the land will be cheaper.

Second, finance the construction of the stadium with new municipal bonds. Right now, the yield on municipal bonds is at historic lows. That means now is the cheapest time in recent memory for cities to raise money through bonds. Issue a total of $400 million in municipal bonds during the next six years — the expected building time of a new stadium — to subsidize its construction. Reduce the Chargers’ total expected contribution to $325 or $300 million, but have them pay for the interest on the bonds with the revenue from parking, food and tickets at Qualcomm.

Once the stadium is built, the city and the team share revenue on parking, food and tickets until the municipal bonds are completely paid off. At that point the stadium will be built without cost to the city, and the city’s share can be sold to private investors for a profit.

Additionally, by offering tax cuts and incentives for hotels and restaurants around the new stadium the city can revitalize an older community with a second downtown. As the area grows around this new hub, property values will increase and bring in additional tax revenue to the city.

This plan is far from revolutionary or perfect. But it shows that through some creative planning and willingness to compromise, an agreement can be reached to keep the Chargers in San Diego at no real cost to the city.

 

— Leonardo Castaneda is an economics and journalism sophomore.

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