The Ballpark
by Councilman Scott Peters
for the La Jolla Village News
December 2001
After years of stumbling and legal wrangling, the City Council finally
settled on a financing plan for the downtown ballpark. I wanted to share
some of the background and thinking on the Council's decision.
In 1998, voters passed Proposition C, with almost 60% of the vote in
support. Prop C directed the City Manager to enter into a contract with
the Padres, known as the Memorandum of Understanding, or "MOU."
The Padres, the City, and the Centre City Development Corporation ("CCDC")
entered into the contract in 1999. The contract required (and capped)
the contribution by the City general fund of $225 million, which the City
was expected to obtain by issuing bonds at a total cost of almost $300
million. The City believed that the annual payment on the bonds would
be paid largely from new tourist occupancy tax revenue derived from the
hotel to be built on the Campbell Shipyard site on the downtown waterfront.
Eventually, the City expected that it would make significant revenues
from the ballpark project through the benefits of redevelopment --
increased property taxes, increased sales taxes, and decreased costs from
the elimination of blight.
When I took office, the picture was somewhat different. The Campbell
Hotel project was stalled. Ballpark construction had been started, then
stopped. Fortunately, assessed property values (and property tax revenues)
in the ballpark district were way up. However, ongoing litigation prevented
our taking any positive action on the project.
One thing, however, was the same. The City still had a contract with
the Padres requiring performance. I am confused by the recent implications
in the media and letters to the editor that the City Council could have
walked away without any cost under that contract. That is simply not the
case. The Padres have already spent over $70 million on the project and
would certainly have had a claim for breach of contract. That created
the potential of huge outlays in legal fees and damages without gaining
any of the benefits of redevelopment.
Mayor Murphy has personally spent hundreds of hours in the past year
finding a way to navigate the legal pitfalls, improve the finances of
the deal and satisfy our Council that his plan was sound. I believe he
did a remarkable job. The Mayor's plan relies less on the general fund
and more on tax increment revenues from downtown. This is money, generated
in a state-approved "redevelopment project area," can only be
spent in that redevelopment area -- downtown -- not on amenities
in other city neighborhoods. The plan approved last week reduced the City's
contribution to $205.9 million from the original $225 million and lowered
the total bond issuance to $166.3 million. Under the Mayor's plan, the
annual bond payment will be $13.9 annually. It would be difficult to claim
that this financing was not "reasonably acceptable" to the city
-- the language defining the City's obligation in the contract --
when the annual bond payment anticipated at the time of Proposition C
was $20.7 million.
Unfortunately, we continue to be plagued by two of the fourteen lawsuits
ballpark opponents have filed. The opponents have lost every single claim
in every case in every court before every judge. However, because two
are still on appeal, the City will have to pay bondholders an additional
$3 million per year because of the perceived additional risk from the
mere existence of pending litigation. Once we prevail at the appellate
level, we can refinance the bonds and lower our interest payments further.
I'm excited about the new ballpark and the revitalization it will bring
to a blighted area of downtown. In much the same way that Horton Plaza
turned the Gaslamp Quarter area of downtown into a thriving business and
emerging residential area, the ballpark will transform the East Village
to a vibrant new downtown community, one that we all will enjoy.
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