San Diego Chargers general counsel Mark Fabiani had to fire up an old computer to find the details, but it was hard to forget what a New York financial consulting firm was proposing in 2012 to get the NFL team a shiny new Downtown football stadium.
The sticky substance in the plan, however—more than $500 million in government general funds from city and county coffers—was "politically impossible to achieve," the Chargers warned. In essence, the folks at Lazard Ltd. had preliminarily concluded that taxpayers could be convinced to bankroll half the cost to build a stadium in East Village on land occupied by a city bus yard and the historic Wonder Bread building.
"The Lazard report, if you had to point to one flaw—and there were many—the Achilles' heel," Fabiani recently told CityBeat, "was the assumption that the city and county would obligate hundreds of millions of dollars from the general fund without any type of revenue stream to finance it. Goldman Sachs, our investment banker, said you couldn't sell bonds based on this."
In a document Fabiani provided to CityBeat that he said was generated in April 2012 summarizing Lazard's preliminary conclusions, the Chargers' follow-up questions and Lazard's responses, Lazard seems to approach San Diego's long-standing stadium conundrum with extreme rose-colored glasses.
In addition to the $500 million general-fund assumption, Lazard wildly envisioned the $100-million sale of so-called "preferred seat licenses" for 8,000 club-level seats and roughly half of 55,000 general-admission seats. "That's not going to happen here, unfortunately," Fabiani said. "The 49ers are the exception. They took a major risk and it paid off when they sold an impressive number of PSLs. But they're drawing on corporate commitments from San Francisco, Silicon Valley and San Jose."
Lazard also assumed:
Naming-rights payments of $8 million annually. (Qualcomm's $18 million, 20-year contract expires in 2017, Fabiani said.)
50-percent increases from 2011 prices for both club seats ("$250 / ticket in 2017") and 77 luxury suites ("assumed pricing range of $80,000-$300,000 / season").
Average general-admission prices of $105 per ticket, a roughly 29-percent hike over 2011 levels.
$250 million from stadium revenues.
Fabiani said that when the Chargers asked how Lazard figured the city would fund its sizable contribution, Lazard responded: "Lazard believes that the city and team can credibly argue that there is no new public money being dedicated to this project from the general fund, given that the city's contribution is either already being spent on Qualcomm Stadium or is derived from incremental revenues generated specially by the stadium."
Fabiani said it was clear to the Chargers that Lazard's "no new public money" mantra would not fly politically, particularly since Lazard identified no funding sources for acquiring the Wonder Bread building block (including relocation of the historic structure), relocation of the next-door bus yard, an $85-million parking garage, a "$50 million gap in basic project costs" and future maintenance costs of the new stadium.
So, it sounds like the financial adviser that then-Mayor Jerry Sanders hired in 2011 to come up with a stadium-financing plan to take to voters in late 2012 muffed the assignment, right?
"Well," Fabiani paused, "it's a report that you would write if you were from another city and you saw all these stadiums being financed in your home state and you said, Well, if the team and the league will pay half, we ought to be able to get the county and city to pay half and we're in business!' To us, it was like, Well, anyone could have done that, right?'"
Hence, it's easy to hear the frustration in Fabiani's voice when the topic is raised of yet another financial analysis promised by Mayor Kevin Faulconer's newly formed Citizens Stadium Advisory Group, before which Fabiani is scheduled to appear on Monday.
"Look, we're happy to assist this new group," he said. "But the Lazard report showed there are no magic bullets to solve this. Plus, since then we lost a huge bullet, that being redevelopment funding. Lazard's argument that the county could justify its investment through its increment from Downtown redevelopment, well that's gone now, obviously."
Fabiani even accepted a CityBeat challenge, should Faulconer's panel uncover a new financing mechanism the Chargers have overlooked for 13 years: "Yes, I would eat a deflated football if someone would come in with a magic solution."
He even suggested the Chargers would be thrilled to bask in their own ineptitude. "If someone came down from outer space and found a magic solution, we would be happy about that," he said. "Even though it would show that we were incompetent because we overlooked this for 13 years, we would still be happy because we could get on with everything else."
(As an aside, Fabiani was lukewarm about an idea to fund a new stadium via a tax on recreational marijuana, should California voters pass an anticipated initiative in 2016. "Revenues aren't what they expected in Colorado," he zigzagged, thwarting any hope for the NFL's first truly "green" stadium.)
As CityBeat reported last week, a source said Fabiani had gone "ape shit" when he saw Lazard's preliminary results in 2012. Fabiani wouldn't confirm the alleged reaction, only saying, "I don't think I hit the ceiling, but our basic point was you can't simply say you're going to get $500 million from the general fund of the county and city and claim that's a conclusion—and if you produce that, you're going to be embarrassed. And the team will be embarrassed."
And, as it turned out, no realistic financing plan for a new stadium emerged. As CityBeat reported previously, a source said the Lazard report was left for Sanders' successor, Bob Filner, to handle. But another source close to Filner had a different take: "Filner asked for the report during the transition period, but the Sanders people never provided it."
Late Wednesday, Faulconer's office posted online for the new stadium advisory group a slew of stadium-related documents dating back years. Included in the sizable release was something titled, "Lazard Report Draft 2011."
But it's nothing of the sort. The Nov. 9, 2011, 32-page document is labeled "Discussion Materials" and basically lays out a plan to come up with a plan, including "next steps" to "open dialogue" with the NFL and the Chargers. "This looks like an introductory document, not a report of conclusions," Fabiani said, adding those "next steps" occurred after that date and into May 2012.
In fact, the consulting contract with Lazard wasn't signed until March, two months after the City Attorney's office raised red flags about the agreement. In a Jan. 30, 2012, memo to Julie Dubick, then-chief of staff for Sanders, Assistant City Attorney Mary Jo Lanzafame ticked off eight questions she would need answered in order to "perform the appropriate level of legal review."
Despite Sanders announcing Lazard's hiring in October 2011, Lanzafame in the memo three months later noted that "our office has not been privy to any conversations with Lazard or city staff / the Mayor's office regarding negotiating the subject contract."
Two months later, Lanzafame signed the contract on behalf of City Attorney Jan Goldsmith. The City Attorney's office referred questions to the mayor's office.
Whether Lazard completed any actual report is unknown. "This is the only report we have from Lazard," Faulconer spokesperson Craig Gustafson told CityBeat, adding, "We were able to verify that Lazard was never paid." He attached Lazard's contract, which states that Lazard would receive payment only upon delivery of a "final financing plan."
Such political perplexity is perhaps apt context for the current group handpicked by Faulconer to forge the elusive Ultimate Stadium Solution. As Fabiani put it: "No matter which experts you bring in, they're all going to run up against the same roadblocks that we've run up against for the last 13 years."