Under the Chargers initiative, the city’s general fund will have the lowest priority in the flow of money created by an increased hotel tax, an independent financial firm noted in a study sent to the city this week.

San Diego’s general fund will only get those tax on tourist (TOT) dollars if three priority buckets are satisfied first. Shortfalls in any year must be replenished before the general fund gets any money.

“The ability of these TOT revenues to meet the initiative’s requirements is the primary financial risk factor to the city,” concluded the city-requested study, by the Public Resources Advisory Group’s (PRAG) office in Los Angeles.

The group recommends the city use “conservative” estimates to determine if any revenues will flow to the general fund under the initiative.


“At this time,” the report stated, “we believe that it is not possible for the city to know if the projected revenue stream would be sufficient to meet overall coverage.”

Per the $1.8-billion initiative that would erect a Chargers stadium and convention center annex in the East Village, only amounts in excess of debt service, a transfer to a tourism fund, and the facility’s costs for operation, maintenance and capital expenses would flow into the general fund.

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The Chargers’ financing partner on the project, Goldman Sachs and Co., supplied PRAG with sample cash flow analyses for review.


PRAG said borrowing costs may be higher than estimated in the sample made April 30.

“While 4.25% is a reasonable rate for 30‐year tax‐exempt bonds today, it is not a conservative rate for longer‐term planning purposes for a $1 billion-plus deal that may carry a size penalty, is likely to be sold some years in the future, has the potential to require a taxable portion and may need to be amortized longer to generate more bonding capacity,” the study found.

“As a result, PRAG would recommend using a 5% interest rate for any base case scenarios.”

The group studied similar funding by the city of Orlando and concluded that, absent cost-related pressure on the general fund, the issuance of TOT-back revenue bonds “would have no impact on San Diego’s general fund ratings.”


The Chargers initiative would raise San Diego’s total TOT levy to 16.5 percent, one of the highest TOT rates of large urban centers in California and the country, per a September 2015 report by a leading lodging consulting firm.

Under the Citizens’ Plan for San Diego initiative -- which may be an indirect path to a new Chargers stadium -- the hotel-room tax would rise to 15.5 percent.