‘If you build it, they will come.” It works in fantasy movies (Field of Dreams, 1989). But it hasn’t worked in San Diego’s East Village. As part of the $301 million ballpark subsidy, developers created a slew of condo and hotel units. But few folks are in them. The whole project is a drain on an insolvent city’s general fund.
Because the truth hurts, the San Diego Regional Economic Development Corporation paid for a study to attempt to show the opposite. The purported study, by consultants Conventions, Sports and Leisure International, estimates that tax receipts from the development of Petco Park and nearby areas have come to a net $107 million. Every $1 invested by the public sector has resulted in $5.25 in private investment, claims the study.
The story about the so-called study was planted in the Union-Tribune, which played it on page one July 14 with a banner headline, then followed up with a jubilant editorial the next day. But wait a second. The same day as the front-page rave review, the U-T’s online edition noted that the posh and deeply depressed W Hotel in San Diego has been foreclosed upon. The next day the Daily Transcript revealed that 40 San Diego hotels are in default, and according to Atlas Hospitality Group, the situation is likely to get worse. (Any local hotel built or refinanced in the last five years is underwater, says hotel guru Jerry Morrison.)
The same week, the Voice of San Diego reported that there are more than 1000 condos for sale downtown. A month earlier, the U-T had said there are 1400 condos for sale downtown, a “three-year glut.”
So there might have been a lot of private investment generated by the government subsidies, but was it efficacious spending? Of course not. The conclusion is inescapable: all the subsidized construction accomplished was to exacerbate a big, bulging glut.
Indeed, the study confesses on page 61, “Would redevelopment have happened anyway? Likely, but not to this extent, and not at this rapid pace.” The ballpark project just hastened and exacerbated the harmful overbuilding, which won’t be worked off for some time, particularly as the economy sags anew.
Back in 1998, when voters approved the project, civic leaders and planners were sure that tourism would soar and there would be a need for more hotels. One reason would be the new ballpark. However, there isn’t a respectable economist believing that a sports facility stimulates tourism to any extent. Another reason for the expected boom was convention business. But convention centers are vastly overbuilt around the country, as Heywood Sanders, the nation’s ranking expert on the topic, has shown conclusively.
Sanders, a university professor, won’t say anything specifically about Conventions, Sports and Leisure International, which has been hired in San Diego by both the Economic Development Corporation and convention center, but he will speak of the so-called sports/convention center consulting firms that twist statistics to provide a conclusion desired by those paying the bills. “They often use gross figures, rather than net figures; often don’t necessarily account for the full cost of a subsidy; and don’t account for ongoing market dynamics,” says Sanders.
The purported study clashes with one published earlier this year by political scientists Steve Erie and Vlad Kogan of the University of California San Diego and Scott MacKenzie of the University of California Davis. “There is strong evidence that the bulk of the benefits from East Village revitalization have been captured by private developers, while many of the costs have been borne by San Diego residents,” says the study.
Kogan doesn’t doubt that the project generated wealth for developers. But property tax increment from a redevelopment project does not go to the general fund. Most goes back into development — or into the pockets of “the wealthy who are already wealthy,” says Kogan. (Former Padres majority owner John Moores is said to have reaped $700 million to $1 billion from the deal.) A redevelopment project is supposed to achieve three things: affordable housing, good jobs, and elimination of blight. The ballpark project did eliminate blight but was “a colossal failure” in providing affordable housing “and basically created low-wage tourism jobs,” says Kogan.
What really rankles him, and others, is that the all-too-willing propagandist Union-Tribune declared in an editorial, “The Petco study provides clear reason to think a Chargers stadium could be a major long-term positive for the city and its economy.”
What a non sequitur! Even the Chargers concede that related development is not in the cards. “It’s apples and oranges,” says Kogan. “No one is talking about pairing a Chargers stadium with ancillary development. The economic impact of stand-alone stadiums is nonexistent.”
In 1998, San Diego was giddy. The Padres went to the World Series. The Dow Jones Industrial Average was nearing 10,000. (It’s still around that level.) People would not learn until several years later of the phony accounting and financial mismanagement that dated back to 1996 and earlier. At the time of the vote, a grand jury report warned that there could be a recession and the assumption that hotel taxes would cover ballpark bond debt service could be erroneous. That was prescience personified. We went through two recessions, including the worst since the 1930s, and two horrendous bear markets. Worse, city bureaucrats admitted they were pressured to juggle the hotel-tax projections.
San Diegans learned the extent of the City’s corruption. Moores showered expensive gifts on a councilwoman who got a wrist slap while Moores didn’t even get that. Officials misled bond investors about the City’s dire financial straits. One reason the bad news was hidden was to get the ballpark built.
“Very few of the condos were built because of the ballpark,” notes Mike Aguirre, former city attorney. Kogan and Richard Rider of San Diego Tax Fighters agree. The subsidies, not the ballpark, seduced builders to erect those condo towers. If there had been a market for them, they would have been built without a ballpark. After all, there was a downtown condo boom throughout the United States, almost all in cities not having ballpark projects, says former councilmember Bruce Henderson.