— As the deadline for the city's November ballot draws closer, Padres owners John Moores and Larry Lucchino are turning up the heat on the city council. At issue: the millions of dollars of taxpayer subsidy that all sides acknowledge will be needed to build a new downtown baseball park. Last week, Moores and Lucchino fired off a letter to the council, spelling out their rules of battle. A verbatim transcript of a leaked copy of the letter appears below.

June 18, 1998

Honorable Susan Golding and Members of the San Diego City Council

City Administration Building

202 C Street

San Diego, CA 92101

Dear Mayor Golding and Members of the City Council:

Tuesday evening, the Padres received the City's revised ballpark financing proposal in the form of a 31-page draft "Memorandum of Understanding." Although City officials and attorneys needed over 30 days to prepare the proposal, the City has requested that we respond in writing to do just that. Since it is not possible to respond in detail to each of the issues addressed in the proposal in such a short time period, we have outlined below our reactions to the central issues. We trust that our effort to comply, even with this unreasonable timetable, is further evidence of our good faith eagerness to make a deal with you in a timely manner.

In general, our efforts to reach agreement have been stymied by a flawed negotiating process. It now appears from the new and non-sequential proposal we have received that the City's decision-makers have not been at the table during the negotiations. We respectfully suggest that if we are to reach agreement on a project of this magnitude in accordance with your deadlines, it will only be after authorized decision-makers for both the City and the Padres meet to negotiate. Moreover, we are somewhat troubled by the way in which the City is seeking to use the calendar. For months now, the Padres have asked repeatedly that the City submit a "comprehensive" proposal to the Padres for discussion and that this be done in time to permit any agreed-upon plan to the voters in November. After months of waiting, we were presented Tuesday evening at 6:30 pm with a completely unacceptable financing plan, asked to provide a written response by Thursday morning (which we have done), and required to sign an agreement with the City in nine days (by June 25, 1998, sooner than we had ever been informed by the City staff) if there is to be any ballpark plan on the November ballot.

To summarize at the outset with respect to the specific proposal, we found the City's proposal, as well as many of the statements made in the cover letter, disturbing. While the City's proposal may be more detailed and certainly is structurally different from all prior City proposals, from an economic and a risk assessment standpoint, the City's proposal relegates the Club to a bleaker financial position than it was in under prior negotiations. Therefore, we simply cannot accept the City's proposal without major change. While the Padres appreciate the time and effort spent by the City to prepare the proposal in an effort to make it comprehensive (as we had requested in our May 22, 1998 letter to you), the City's proposal is unacceptable for many reasons, including the following:

1. The City's proposal is a step backwards in our negotiations. While the City's proposal offers the same $175 million in transient and occupancy tax revenue that the City previously offered, the City's proposed Padres/private sector payment of $135 million is $10 million more than the City requested orally during our last meeting. Also, the City's proposal unrealistically sets the cost of the Ballpark at $240 million, an amount less than any amount recently discussed with the City. This is critical to the Padres since the City's proposal would require us to assume all Ballpark cost overruns, including this extra $25 million.

2. The City's proposal differs in several significant respects from the structure of the agreement that we have been discussing for several months. For example, whereas the parties have agreed that the contributions from the Padres and the private sector be combined and our discussions have long proceeded along these lines, the City's proposal for the first time separates the two (although it would require the Padres to generate and guarantee both the Padres and private investments). In addition, the proposal is so riddled with generalities and legal loopholes that it is difficult to identify what, if anything, the City is agreeing to commit itself to do.

3. The proposal is not based at all on the agreements reached between municipalities and other clubs in similar circumstances with whom we compete. In fact, the City's proposal appears to ignore this market analysis. As we have made clear to the City's negotiating team several times, there is a market for determining the reasonableness of an agreement between a municipality and a club, and the City's proposal is clearly unreasonable in light of that market. A construction contribution from the Padres on the order of magnitude as that proposed by the City is wildly out of sync with the contributions made by other Major League clubs in public/private partnership over the last 10 years, contributions which averaged about $50-60 million. The City has yet to explain why it feels justified in demanding a sum from us that is nearly triple that, when our revenues at Qualcomm are not close to the levels enjoyed by our competitors. The City's proposal would simply not allow the Padres to compete (financially or on the field) with other MLB Clubs that are receiving "market-based" deals.

4. Contrary to the assertion in the cover letter, the proposal is flatly inconsistent with at least one of the basic ballpark construction financing principles to which we have agreed. It would not provide the Padres with the opportunity for long-term economic and competitive visibility. Indeed, were the Padres to accept this proposal, the Padres would be burdened with one of the worst deals in Major League Baseball. While the agreement would purportedly ensure that the Padres remain in San Diego, our financial situation would continue to be desperate and our competitiveness non-existent. We can never agree to such an arrangement.


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