Ball Team Relying More On Government Sources
Over the past few years, several of Major League Baseball’s 30 teams have asked for and received support to build new stadiums.
The majority of those have been built primarily with public dollars.
Currently, plans are under way to get the ball moving on the $1 billion San Diego Padres ballpark and Downtown redevelopment project in the East Village.
The plan, overwhelmingly approved in the November 1998 election, is expected to cost the public more than $300 million This includes a $225 million bond issue by the city (that was closer to $299 before being reworked), $74 million to date by the Centre City Development Corp., the city’s redevelopment agency, and $21 million from the San Diego Unified Port District. The Padres were obligated to pitch in $132.5 million but have spent nearly $150 million so far.
Work has been halted on the project as the city deals with legal challenges. Eight lawsuits are still pending over to the project.
Mayor Dick Murphy recently proposed a revised financing plan that could restart the project. It was under this plan that the bond sale was reduced to $225 million from the estimated $299 million. The bonds would be repaid through the transient occupancy tax generated by hotel room taxes.
The mayor’s plan also calls for an annual debt payment of $16 million , down from $21 million.
The City Council will not vote on the mayor’s proposal until pending litigation is resolved. Because of that litigation, construction on the project is not expected to resume before late this year.
Another option being floated comes from a local businessman who says he has a plan that will put an end to the ballpark litigation and have investors in place to get the project done.
The San Diego Ballpark Development Corp., led by William Lightbody, presented a financing plan to the City Council last month and said if the plan is implemented, a leading foe of the project would back down.
“When it became apparent that the only way to get the ballpark moving again was to resolve the issues that prompted the litigation, we opened dialogue with Bruce Henderson,” Lightbody said.
Henderson, an attorney and former city councilman, has led the charge in the majority of the lawsuits filed against the project.
Under the Lightbody plan, the city would cap the bond authorization at $225 million and face no adverse impact on its operating budget.
As mentioned, the city’s annual debt service on the bonds would be $16 million a year under Murphy’s plan, but Lightbody and consultant R. Alan Smith said the city would be short more than $3 million.
Although they provided no names, they said they have a third-party investor willing to fill that annual gap to equal $48 million over 30 years.
“The sale of some naming right to a specific area associated with the ballpark is the financing mechanism which holds the most promise,” Smith said. “However, we want to make it clear that we are not talking about the naming of the ballpark itself.”
Lightbody and Smith said they have discussed the plan with San Diego city attorneys and attorneys for the Padres but have received no official feedback.
“The city has been very tight-lipped about it,” Smith said. “The feedback is, we think it has been well-received, but there’s no official confirmation.”
Although using public funds is the popular way to get the job done, the San Francisco Giants proved it’s not the only way.
The Giants made history when they moved into Pacific Bell Park last year, not because the organization built the stadium after being rejected four times by San Francisco voters, but because it marked the first time a major league ballpark was privately financed since 1962 when the Los Angeles Dodgers built in Dodger Stadium.
The new $345 million, 40,800-seat Pac Bell Park was 95 percent privately financed.
As head of the San Diego County Taxpayers Association, Scott Barnett would have been thrilled if San Diego taxpayers could have escaped the multimillion-dollar debt. But, he said, that situation would only happen in a perfect world.
“In an ideal world it would be best if taxpayers paid little or nothing for major league sports teams to be in their town,” Barnett said. “The circumstances, the political climate and reality mitigated against that.”
Barnett said the taxpayers group supports the city’s current financing plan to cover its debt with the bond issue. He said it was clear from the beginning that the use of public funds was the only way to construct the ballpark.
“The Padres made it very clear from the beginning that they were not going to be able to build the facility without public investment,” Barnett said. “The problem is, No. 1, San Diego is not a corporate town. We have two Fortune 500 companies headquartered here; San Francisco has quite a few.”
According to Giants officials, there’s no secret to what made construction of PacBell Park a success. Executives said the project was proposed in the right place, at the right time.
“At the time this was going on, this market, the Bay area, was a very dynamic market,” said Bob Rose, the Giants’ vicepresident of communications. “As everyone knows, it was the Silicon Valley and all the high-tech and dot-com businesses were flourishing and spending a lot of money.”
Rose said the team raised nearly $140 million from naming rights, corporate sponsorships and the sale of charter seat licenses, which gives buyers lifetime rights to seats.
“We sold 15,000 charter seats, which was really unheard of,” Rose said. “I don’t think there’s been more than 3,000 ever sold by any baseball team.”
Rose said the team used a similar financial model to the one used to build National Basketball Association arenas. He said they met with consultants familiar with financing of the Rose Garden in Portland, Ore.
“NBA arenas were starting to cost upwards of $200 million, so there really wasn’t that much difference in the cost between an arena and a stadium,” Rose said.
A small amount of public funds allocated by the city for PacBell Park totaled $15 million for infrastructure improvements, which the Giants will reimburse.
The private funding model will cost the Giants $20 million annually for 22 years , seen by some as being a risky move. But the team’s gamble seemingly is working.
During the first season at the new ballpark, the Giants sold out 81 home games over the course of the regular season, according to Street and Smith Sports Business Journal.
The Giants organization and financial analysts note the Giants’ situation is unique and may not work in every market.
“It takes a large market with a lot of corporate backing in order to be successful with this kind of financial model,” Rose said. “We have been pretty open (about the fact) that this was the only way that a ballpark was going to be built in San Francisco.”
Raymond Keating, chief economist for the Small Business Survival Committee in Washington, D.C., recently released a detailed report regarding ballpark financing. Keating took a close look at the financial models of teams playing in the newest ballparks and those planning to build new facilities.
“Major League Baseball has become a regular recipient of corporate welfare,” Keating said in his report. “In particular, taxpayer subsidies to fund ballparks , while once were the rarest of exceptions , have become the norm.”
To date, more than $11 billion has been spent on major league stadiums. Taxpayers picked up 81 percent of the tab, according to Keating.
At one point, the majority of ballparks were built with private money. Before 1953, 75 percent of funding for baseball stadiums came from private sources, according to the report. Only one Major League club, the Cleveland Indians, played in the government-funded Municipal Stadium.
Since that time, according to Keating’s report, 82 percent of ballpark funding has come from the government.
“Unlike most other businesses, baseball team owners today arrogantly assume that they deserve taxpayer money,” Keating said. “It is quite typical for a team owner to demand that taxpayers help finance a new ballpark, so the team can increase revenues, pay their players more, and better compete.”
