By Scott Lewis.
San Diego Mayor Kevin Faulconer and his team of consultants and staff sent the NFL a proposed term sheet in September — a long, legal document laying out exactly what the city and county would be willing to do for NFL owners if they would only compel their comrade, the Chargers’ Dean Spanos, to work with them.
The county, apparently, is prepared to hand over $125 million almost immediately — in July 2016 — to get the project started. That’s almost all of its $150 million pledge (though county supervisors have not actually approved it). The city is pledging to put in $200 million, though it might be harder to gather that cash.
NFL officials responded with a list of concerns they thought would stand out for owners, who are trying to decide whether to let the Chargers, Raiders or Rams move to Los Angeles.
VOSD obtained the term sheet and the NFL’s response after threatening the city with litigation when it initially denied a Public Records Act request for the material. (Thank you to VOSD member and lawyer Felix Tinkov, who has been assisting VOSD on public records advocacy.)
Turns out, the NFL’s concerns mirror the Chargers‘. The city and county cannot guarantee the team a new stadium or provide a timeline on when it would happen. The NFL officials pointed to the uncertainties that go along with a vote.
As unreasonable as it might seem, this has been the basic argument from the Chargers for many months: There’s a race going on to move to Los Angeles, and the team is not willing to pull out of that race unless it’s guaranteed to get something adequate in San Diego.
“The steps needed to achieve project certainty (or to understand that the project is not achievable) and the timing for doing so remain unclear,” reads the NFL’s response to the city’s offer.
The proposal does make a few pledges, though. It says the the county is willing to put up the money right away — assuming voters approve a referendum in June.
“The Parties understand and acknowledge that there will be available on or about the later date of July 1, 2016, or sixty days after the Certification Date, no less than $125,000,000 in public funds for use in Stadium Project development costs. These funds will be from the County Investment to the Stadium Project and will count against the County Investment of $150,000,000,” reads the term sheet.
The July date is specific because that would be immediately after a June 2016 vote.
“Please note that the term sheet is still in draft form, and must be negotiated with the Chargers before it becomes final,” wrote Matt Awbrey, the mayor’s deputy chief of staff of communications, in an email.
Awbrey also downplayed concerns about the vote’s difficulty.
“We note that the proposed measure does not include new taxes and therefore requires only a 50% + 1 vote,” he wrote.
The term sheet lays out for the first time how the new deal between the city and county would work. The city and county would form a new joint powers authority, or JPA, and each appoint trustees to it. The city would then lease the Mission Valley land to the JPA.
The JPA would then work with a new “Stadium Company” formed by the Chargers to build a new stadium. The Stadium Company would lease the stadium from the JPA. Then the Chargers would pay rent to the Stadium Company.
This is all designed to limit the city’s exposure and responsibility to pay for the stadium should it run over cost. The term sheet makes explicit that the $200 million from the city and the $150 million from the county will not be increased in any way.
That also seemed to worry the NFL. They wanted more proof the city could build the stadium for the $1.1 billion it says it can. They wanted to know, since the Chargers would be on the hook for cost overruns, how much say the team would have in how the building was designed the projected managed.
While the county apparently has the cash ready, the NFL is worried about the city’s ability to deliver on its end, considering potential litigation. The NFL officials cited potential lawsuits over the environmental review for the new stadium and the most likely route the city would collect $200 million: through so-called lease-revenue bonds. Attorney Cory Briggs and San Diegans for Open Government have in the past sued the city when it issued these complicated bonds the city uses when it wants to borrow money but avoid a public vote. (Our Liam Dillon explained it in a fun way here.)
“The sale of lease-revenue bonds is, and has been for some time, a tool the city has used to raise financing. The city won the lawsuit that challenged these and has successfully issued lease-revenue bonds,” wrote Awbrey.
Interestingly, though, the NFL also brought up Briggs’ other new initiative to raise the hotel-room taxand pave the way for a new stadium and Convention Center expansion downtown. It added more uncertainty they wanted clarified.
The mayor’s case for investing in a new stadium rests on the millions we already lose subsidizing Qualcomm Stadium. The argument is that we might as well stop that loss and use the money in a new stadium.
But crucial to that working out is that the mayor and county compel the Chargers to pay significant yearly rents to make sure the new stadium does not need a similar annual city subsidy.
The NFL officials want the city to lay out how much rent it is expecting.
In its term sheet, the city leaves the issue vague.
“The annual Facility Rent is expected to be an amount equal to the amount necessary to cover certain annual operating expenses of the Stadium JPA,” the term sheet reads.
Chargers special counsel Mark Fabiani said he would let the NFL’s letter speak for itself.
I asked Awbrey if the city had responded to the NFL’s concerns.
He said the city was drafting a response.