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Monday, Dec 4, 2023

Redevelopment–City Likes Latest Plan To Finance Ballpark

Despite the City Council’s unanimous approval of an eye-glazing 1,000 pages of legal documents and a financing package for the Padres ballpark last week, the project is threatened by escalating costs, legal action and a new referendum.

Added to this is criticism of the $1 billion redevelopment project in the East Village by a former ardent cheerleader.

Attorney Mike Aguirre, who co-chaired the successful Proposition C ballpark campaign in 1998, said he still supports the ballpark, but not the way the deal was presented last week.

“We could have another ticket guarantee in the works but it will be much larger than the one between the city and the Chargers,” he said.

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While the Padres and city officials said new financial commitments totaling nearly $48 million provide assurances that project is a better deal for the city, Aguirre said it’s not enough.

He said the Padres should assume the estimated higher annual debt service above the original $20.7 million contained in the agreement approved by nearly 60 percent of voters. The financing package approved last week permits the city to issue up to $299 million in revenue bonds, which could increase the debt service to more than $23 million annually, depending on interest rates.

Milestone Agreement

Padres President Larry Lucchino called the new funding and the unanimous council approval of the financing plan “a major milestone” in the overall redevelopment of the East Village area. Besides building a 46,000-person capacity ballpark, the Padres are responsible for the construction of hotels, offices, retail and residential properties.

Financing on the ballpark, which originally was supposed to cost $411 million, was to come from $296 million in public funds, including $225 million in bonds from the city. The Padres were to put up $115 million, most of that coming from naming rights and other concession fees.

But city officials acknowledged last week the costs for the ballpark have risen to at least $446 million, or more than $35 million over the original cost detailed in the memorandum of understanding negotiated between the Padres and the city.

The increase comes in the form of a projected $18 million hike in land acquisition costs and $17.5 million in higher construction costs. The agreement explicitly said the Padres would cover any construction cost overruns over a cap of $267.5 million.

The Padres included the $17.5 million in construction overruns as part of its package aimed at making the project “pencil out” to the City Council. In December, three of the nine-member council voted against the financing plan.

In addition to paying for the additional construction costs, the Padres also pledged to spend $20.5 million for building two parking garages, and $10 million in potential higher land acquisition costs if the total land acquisition ends up costing more than $100 million.

Should the land costs run between $110 million and $130 million, the city and Padres agreed to split the cost. If land purchases rise above $130 million, both parties can agree to terminate the deal, but neither side thinks that’s a possibility, said Assistant City Attorney Les Girard.

Upping The Ante

The Padres also agreed to pay the city’s cost for bond insurance; pay up to $500,000 in higher infrastructure costs if that budget is exceeded; and pay half of a sewer capacity charge related to an agreement between the team and the Environmental Health Coalition.

Scott Barnett, executive director of the San Diego County Taxpayers Association, called the Padres new funding extraordinary.

“Clearly, the Padres have put in a significant amount of money they were not contractually obligated to under Proposition C,” he said.

While the taxpayers group has not done a detailed analysis of the new agreements yet, Barnett said, “Our concerns are greatly reduced from what they were a few weeks ago.”

Despite the new assurances, the ballpark was hit with yet another challenge last week in the form of a referendum campaign launched by former councilman Bruce Henderson.

Henderson, who spearheaded an earlier initiative that would overturn Proposition C, said he’s postponing that effort in favor of collecting about 25,000 valid signatures to challenge the agreements approved last week by the council.

Henderson said the fact the city increased the amount of bonds it plans to issue from $225 million to $299 million is a clear violation of the memorandum of understanding and cause for its rejection.

If Henderson succeeds in getting the needed signatures by March 1, the council has the option of rescinding its action or putting the measure to a vote, probably in November.

Besides the latest signature-gathering effort and the earlier initiative he and other ballpark opponents launched last December, there is another initiative circulating the city organized by retired law professor Robert Simmons.

Both the city and the Padres filed lawsuits against the first initiative, and a hearing on that matter is scheduled for Feb. 14.

In addition, the project has three separate lawsuits filed against it, two against the city based on environmental grounds, and one against the San Diego Unified Port District for its involvement.

The litigation and opposition signature-gathering campaigns make it unlikely the city would issue bonds in March as it had expected.

The ballpark is supposed to break ground in April, but the latest optimistic guess is sometime in May.


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