San Diego Business Journal

Even without the taxes from a 1,200-room hotel at the Campbell Shipyard site, San Diego can still afford to pay its share of the Padres ballpark.

So says Mayor Susan Golding, who made the assertions recently in response to speculation the Campbell site hotel, long considered a key to the city's financing plan, is facing an extensive environmental cleanup and more than two years away from groundbreaking.

"Even if (the Campbell hotel) is delayed, the city can, without question, meet these commitments on its bond payments," Golding said.

Golding proposed a couple alternative financing plans that would provide the tax revenue stream for bonds the city intends to issue for its share of the $450 million ballpark.

One alternate plan calls for the construction of an 850-room hotel at a site between Imperial and Commercial avenues, next to the ballpark. The site is now designated for stadium parking, but its long-range use is to accommodate a 36-story office building and a parking garage.

Yet another alternative calls for the use of tax increment money, the funds the city collects on appreciating properties within a redevelopment area. These would supplement hotel taxes, the Padres rent, and interest income to pay off an annual debt service estimated at $19.1 million.

The debt was lower than the original $20.7 million annual payment because the city has already paid for part of the project, which reduces the amount it needs to borrow. Also, because the project is delayed, the interest payments will likely be lower, Golding said.

"The bottom line is it works and the city can finance the ballpark as soon as the legal challenges are removed," she said.

But when those legal challenges will be removed is anyone's guess, she said.

The city has been thwarted from issuing bonds and was forced to stop work on the ballpark construction because of a federal criminal investigation into the stock transactions by City Councilwoman Valerie Stallings in a public company chaired by Padres owner John Moores.

The probe, now in its sixth month, centers on Stallings' purchase and sale of IPO stock in Neon Systems, a Texas software firm. Stallings, who represents the 6th District, disclosed the sale resulted in a before-tax profit of $14,000. On the day she sold the shares, she cast a critical vote in favor of the ballpark.

The city is also fighting about a dozen lawsuits regarding the project.

As long as these legal clouds exist, there is no market for the city's bonds, Golding said.

Scott Barnett, executive director of the San Diego County Taxpayers Association, said while he supported the concept of building an alternate hotel, his nonprofit organization is opposed to any "forgiveness" of $10 million the city advanced in June to provide interim construction financing.

The move, Golding said, was fiscally prudent, but admitted it was something the next City Council would have to decide. She said it was unlikely any new financing plan would be approved during her term which ends Dec. 4.

The council is facing practically an entire makeover, with five of nine seats, including the mayor's, up for election this week, and one other member likely to leave his seat due to his election to a state Assembly seat.

The alternative plan that included a new, 850-room hotel next to the ballpark has not been proposed by the Padres development arm, JMI Realty, although the company is open to modifying its plans, said John Kratzer, JMI's president and CEO.

While the ballpark's construction is stalled, Kratzer said JMI is focused on the commercial development that surrounds the 46,000-person capacity stadium. The company began excavation and site preparation work on two hotels in the ballpark district last month.

The larger hotel, the Westin Park, a four-star, 512-room project with condos on the upper levels, is set to break ground early next month, while groundbreaking on a 203-room AmeriSuites Hotel is scheduled for January.

As part of the financing plan contained in the memorandum of understanding approved by voters in 1998, the Padres are responsible for building, among other commercial development, three hotels totaling 850 rooms. In addition, the city would use hotel room taxes from existing and new hotels for its annual bond payment. The hotel on the Campbell site was estimated to provide about $5 million annually, or about a fourth of the total, toward the annual debt service.

While a developer for the Campbell Shipyard hotel has been selected, Manchester Resorts, construction was supposed to have started already with projected completion in 2002. That date will obviously not be met, as the project faces an extensive cleanup and required approvals from the state Coastal Commission before it can break ground. There has been no target date set for the hotel's groundbreaking, said a port spokeswoman.