Taxpayers on $271 million Petco hook With Chargers deal hanging fire, city council privately votes to battle ballpark claw-back

Wikipedia image Petco Park

As mayor Kevin Faulconer's task force works on a stadium financing plan to keep the Chargers from leaving town, the San Diego City Council is fighting a court battle to hang on to $271 million in reimbursements for city obligations used to pay for downtown's Petco Park.

If they fail, as some legal observers expect they might, taxpayers here could be forced to make up the considerable ballpark debt, even as the city faces the prospect of coming up with yet more millions for a new professional football stadium.

Susan Golding

Larry Lucchino

The saga dates back to the 1998 origins of the downtown ballpark, when Republican then-mayor Susan Golding along with Union-Tribune publisher Helen Copley, Padres owner John Moores, and his sidekick Larry Lucchino, assured voters that the new Padres venue would come virtually tax-free for the average Joe.

"The financial components of the deal are these," then-U-T reporter Gerry Braun explained in a November 1998 story a week before the public voted on Proposition C, an advisory measure on the project.

"The city and its redevelopment arm, the Centre City Development Corp., will contribute $275 million to the project, largely through the issuance of bonds. The bonds will be paid off with hotel-room taxes and new property taxes created by the project." The latter cash was to be routed through the city-controlled redevelopment agency.

Because so-called general obligation bonds wouldn't be used to finance the deal, there was no requirement for two-thirds voter approval, and the measure, sold as largely a free lunch by its backers, passed with 59.5 percent of the vote.

Thirteen years later came the California budget crisis of 2011 and governor Jerry Brown's successful move to shut down local redevelopment agencies and ship the property-tax money they had been skimming from tax rolls back to the state and other tax recipients, including counties and school districts.

The law signed by Brown set up a settlement process by which the cities behind the former redevelopment agencies could petition to keep their funds under certain conditions. When the state said no to using money to pay off the ballpark bonds, San Diego sued in 2013, and subsequently lost.

"In January 2007, the City passed an ordinance stating that it would issue bonds in an amount not to exceed $172 million, and the City issued the bonds shortly thereafter," according to the December 22, 2014, ruling by judge Shelleyanne W.L. Chang.

In 2009, Chang's order says, the redevelopment agency "agreed to provide additional funds for the [ballpark] Project, and agreed to pay approximately $56.5 million toward the debt service on the 2007 bonds for fiscal years 2009–2013."

Then, five months before the legislature's June 28, 2011, action ending redevelopment, San Diego's agency agreed to pay the city $231,267,162.50 for "additional debt service on the 2007 bonds for fiscal years 2012–2032," according to the document.

In August 2011 the city council used $11.3 million under its agreement with the agency to make a payment on the bonds.

Two years later, California officials sent a notice to the city saying they had "found that this transfer was unauthorized and must be remitted, because transfers pursuant to an agreement between the [redevelopment agency] and its sponsoring entity (here, the City) were not enforceable obligations."

After a variety of arguments made by the city in its quest to force the state to hand over the funds were rejected by Chang, the city council, meeting in closed session on February 2, voted 9-0 to take their case to a higher court. The notice of appeal was filed February 10 in Sacramento.

The appeal action, taken by the council without public presence or debate, will likely postpone the taxpayers' day of reckoning into the indefinite future, perhaps long enough for Faulconer's task force to formulate another subsidy deal for the Chargers.

In the meantime, notes an April 2014 budget review by the office of the city's independent budget analyst, "Debt service on the PETCO Park Bonds was previously paid by the redevelopment Successor Agency in FY 2013 (pursuant to a Cooperation Agreement with the former Redevelopment Agency) but was later determined to be an unenforceable Successor Agency obligation, and the City was required to pay the full debt service beginning in FY 2014 and this continues in the FY 2015 Proposed Budget, with $11.3 million of the $13.8 million going to debt service."

The mayor's 2016 budget proposal is due out this coming April. We have a call in to Matt Awbrey at the mayor's office for details.