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$11 Million Stadium Lease Extension, Pension Problems and Mobile Homes Massing: San Diego Summarized | 8-6-18

$11 Million Stadium Lease Extension, Pension Problems and Mobile Homes Massing: San Diego Summarized | 8-6-18

Welcome to San Diego Summarized where each week we examine headlines from around the city:

The proposed lease extension of SDCCU Stadium by SDSU could ultimately cost the City of San Diego an additional $11.0 million, determined the Independent Budget Analyst Report.

City Council is due to decide whether to extend the lease in session on Monday, August 6th and the outcome is expected to fall in favor of extending the lease for the Aztec football program.

SDSU’s current lease to use the SDCCU stadium for its football games expires on December 31, 2018, and the City had planned to decommission the stadium beginning in January 2019.

The proposed SDSU lease amendment before Council would allow SDSU to play its 2019 and 2020 seasons at SDCCU stadium and would require the City to continue to operate the stadium for two additional years. In exchange for the two-year extension, SDSU would be required to increase the rent it pays to the City from $1 per ticket (which generated $154,000 in FY 2018) to $1.1 million per year and allow the City to retain all net revenue associated with parking and concessions ($733,000 in FY 2018).

This would increase the total revenue generated from the lease from $154,000 annually to $1.8 million annually.

A look at one of the staircases within SDCCU Stadium. 

A look at one of the staircases within SDCCU Stadium. 

The decision to extend SDSU’s lease at the stadium should not significantly impact actual decommissioning and wind-down costs; if the lease extension is approved, these costs (roughly estimated at $6.5 to $11.0 million) would be shifted from in FY 2020 to FY 2022.

While the proposed lease extension would generate additional revenue at the stadium, because total revenue from operating the stadium does not cover the stadium’s operating costs continued support from the City’s TOT receipts would be required. We estimate the stadium’s operating deficit during the two additional proposed years would total $5.6 million annually.

The decision to extend SDSU’s lease at the stadium and commit to continued stadium operations is a policy decision for Council. The continued net cost to the City associated with stadium operations should be weighed against the benefits associated with events that would be held at the stadium during the extended term.

It remains to be seen how the outcome of the November elections in which two different ballot initiatives would facilitate a transfer of ownership of the site where SDCCU Stadium sits. 

San Diego's pension crisis/conundrum/scandal took yet another twist this past week when the State Supreme Court rejected a previous ruling by the Court of Appeal regarding a 2012 citizens' initiative that reshaped San Diego's pension system.

For background, refer to Scott Lewis' explainer for the Voice of San Diego.

"Former San Diego Mayor Jerry Sanders wanted credit for the 2012 ballot measure that eliminated guaranteed pensions for future city employees along with other changes to how the city compensated its workers."

"It was Proposition B, the coda to the pension crisis, the last act of the drama that consumed city politics for a decade. While the new system was actually not that much cheaper than the comparably low pensions city employees had already negotiated, it was the kind of grand, loud reform that could finally put the issue to rest in the minds of the public."

"It became a proud line of legacy on the resumes for conservative elected officials like Sanders, Carl DeMaio, the former City Councilman, Mayor Kevin Faulconer and former City Attorney Jan Goldsmith."

"Now, six years later, the highest court in the state gave Sanders the most authoritative validation possible, crediting him with conceiving the idea for Proposition B, developing its terms and negotiating it before other citizens stepped up."

"And because of that, because he did that while he was the city’s CEO, its chief labor negotiator, the California Supreme Court ruled unanimously he violated the law. He had an obligation as the city’s top manager to first approach unions about the idea. He could move on if they rebuffed him, but he had to take that step. It’s called meet and confer."

With that, the court put the city of San Diego on notice that it could be in for an unimaginably complex series of negotiations and changes."

The use of citizen's initiatives has been an increasingly utilized tactic by all manner of folks who have realized the capacity to streamline certain actions. Eliminating pensions for city employees was meant to alleviate the city's often overwhelming financial commitments and was touted as a big win for the city at the time.

The fallout from this most recent ruling on Proposition B could literally land anywhere. The Court of Appeal could invalidate Proposition B entirely, mandating that the city reverse course and backfill the past six years of pensions for the 4,000 employees.

San Diego is already suffering from immense strain and the city is projected to be in serious trouble. The San Diego Unified School District expects to have to cut $41 million for the 2019-2020 school year. Backfilling 4,000 employee pensions isn't in any budget that exists today.

The permutations abound. One option offered up by Lewis would see the City Council immediately begin putting new employees into the pension system again so that the group of people who must be dealt if the whole measure is thrown out stops growing.

But with the measure still in affect as law, the city would have to assume the Court of Appeal will throw it out.

Governing magazine takes a look at “the new form of affordable housing” – cars.

More people have begun to live in their cars because of rising housing prices. In San Diego, we’ve seen this kind of homelessness double but officials recently failed to count some of these people, which gave the impression of a decrease in homelessness. Being forced to abandon land for cars is not new.

During the Dust Bowl, another grim time, the folk singer Woody Guthrie sang that he’d “swapped my farm for a Ford machine.”

Questions? Comments? Concerns? Leave a comment below and join the conversation.

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