San Diego Business Journal Ballpark: Redevelopment, Investment Prospects Override Legal and Financing Issues

About a year ago, the Padres ballpark, the biggest redevelopment project in San Diego's history, was facing some uncertainty, the result of several lawsuits, and a potential initiative to overturn a 1998 vote supporting the $1 billion project.

Fast-forward a year later, and the ballpark's future is even cloudier.

Last October, the Padres, the city's contracted builders for the 46,000-capacity stadium in the East Village section of Downtown, put a stop to construction.

The $30 million in interim financing the city and Padres put up in mid-2000 until the city could issue bonds ran out, and prospects for issuing the bonds anytime soon weren't good.

The obstacles preventing the city from issuing up to $299 million in bonds were two-fold: pending litigation in the form of about a dozen lawsuits, and an ongoing federal investigation that could result in criminal indictments to a member of the City Council.

Investigation Under Way

The probe centered around the purchase and sale of IPO stock by Councilwoman Valerie Stallings in a company chaired by Padres majority owner John Moores, and Stallings' subsequent voting on key ballpark issues.

As of late December there was no word on what federal prosecutors intend to do, nor when they might conclude their investigation.

But despite the work stoppage, and murky legal picture surrounding the ballpark, most respondents to the 11th Annual San Diego Business Journal/Deloitte & Touche Economic Outlook Survey weren't backing away from their earlier support for the project.

Of 207 respondents, 152 persons, or 74 percent, said they favored building the ballpark when it was propsoed. To a follow-up question on whether they still supported it two years hence, 142 said yes.

"There are so many positive factors about this it's easy for me to argue in favor of it," said Tom Carter, partner with Carter Reese & Associates, a San Diego residential developer.

A member of a citizen task force that selected the East Village as the best site for the ballpark, Carter noted that while work on the ballpark is stopped, commercial development surrounding it continues to move forward.

JMI Realty, the Padres' master developer for the 26-block ballpark district, already started grading work on the 33-story, 512-room Westin Hotel that sits next to the ballpark and across from the Convention Center. And a 203-unit AmeriSuites Hotel at Sixth Avenue and J Street is scheduled to break ground in March.

Two Commercial Projects Planned

In addition, the development group is putting finishing touches on final plans for two commercial projects in the ballpark district, a mixed use retail and office complex, and a complex of five, low-rise office buildings called Office@the Park.

The approximate value of all the planned commercial development that JMI alone is responsible for in the district is now about $462 million, well above the $289 million that was detailed in the memorandum of understanding approved by nearly 60 percent of voters in November 1998, said John Kratzer, JMI's president.

Kratzer noted that a major difference from the project today and the one in the MOU is the addition of some 900 residential units that previously were not part of the obligation. The first phase of the huge housing development called Island Village, 280 units of affordable housing, should break ground in the second half of 2001, he said.

"This is what smart growth is all about, putting housing close to where people work," Carter said of the new residential units planned for the area.

If the ballpark site was entirely converted to affordable housing it would satisfy arch ballpark opponent Bruce Henderson.

A former city councilman and attorney who has opposed the project and other major city projects financed with city bonds, Henderson represents half of the pending lawsuits challenging the ballpark. He anticipates the federal investigation will result in a finding that all the votes in which Stallings participated are void, requiring a revote. At that point, the council, composed of mainly newly elected members, will do the honest thing, and call for another public vote on the project. This time, the city will propose using general obligation bonds to pay its share of the now estimated $450 million ballpark, a change that will require a two-thirds majority to pass.

The Padres will continue to play at Qualcomm Stadium as the facility's sole tenants since the Chargers will be moving to Los Angeles as soon as they legally can in 2004, Henderson predicted.

Of course, not everyone concurs.

"I expect we'll see construction resume sometime this year, but when I don't know," said Scott Barnett, executive director of the San Diego County Taxpayers Association, and a strong supporter of the project during the 1998 Proposition C campaign.

"Once the legal issues are resolved, the only remaining holdup is whether they can get the Campbell (Shipyard) hotel financed," Barnett said.

While the city has a contractual obligation with the Padres to issue the ballpark bonds, the Taxpayers Association wants to ensure the 1,200-room hotel that will provide about a fifth of the ballpark's annual $25 million debt service comes online about the same time the ballpark does, he said.

Mel Katz, executive officer for Manpower Temporary Services, predicts the construction will begin as soon as the legal hurdles are overcome, probably before the end of the first quarter.

"I bet big money that the ballpark will be ready and the Padres will be playing ball there by Opening Day, 2003," he said.

Fred Baranowski, president of the Downtown San Diego Partnership, representing about 350 businesses, said despite the setback, the ballpark has already proved to be a catalyst in bringing new development to a blighted area of Downtown that otherwise would probably not attract any new investment.

"What we prophesized two years ago in terms of Downtown redevelopment is truly coming to pass right now," he said. "Most of us believe the project will be completed. We've gone too far and invested hundreds of millions of dollars for it not to happen."