Qualcomm Stadium Site Burdened by Legal Issues | NBC 7 San Diego

San Diego Chargers launch a hurry-up offense to replace the aging Qualcomm Stadium

Qualcomm Stadium Site Burdened by Legal Issues

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    NEWSLETTERS

    As the city debates building a new Chargers stadium at its current, Mission Valley site, legal problems involving rent could ensnare a proposal. NBC 7's Gene Cubbison explains. (Published Thursday, March 5, 2015)

    As the civic focus on a new stadium site seems to be shifting toward Mission Valley, NBC 7 has learned of some troubling issues involving the current Qualcomm stadium location.

    It seems the city got some bad advice as to the property's value several years ago.

    As a result, the remedies aimed at addressing the legal flaws and dealing with the city’s quest for a new stadium could be complex and costly.

    It all starts with the little-known fact that nearly half oft he 166-acre site -- and most of the land under the stadium itself -- is owned by the city of San Diego's Water Utilities Department.

    Under the asphalt is an aquifer that could yield potable water.

    For decades, the city leased the 80 acres owned by the department for $15,000 a year in rent.

    But payments stopped in 2005 when the lease expired, and a later appraisal -- since discredited -- put the fair market rent at "zero" dollars, on grounds that the money-losing operation of the facility gave the department no return on investment.

    "It's illegal, flat-out illegal," said City Attorney Jan Goldsmith.

    Long story short: Goldsmith said the private appraisal in 2007 failed to consider the department, funded by water ratepayers, to be the city’s landlord as opposed to a business partner.

    In an interview Thursday, Goldsmith noted that the city has paid $150,000 to the water fund as a good-faith deposit on recalculated back rent that will be due, plus further lease payments going forward.

    Those amounts, according to the city attorney, will be determined through “arms-length” negotiations based on a new appraisal of the property's fair market value -- a benchmark that could seriously escalate the cost of whatever's built.

    A leading real estate economist consulted by NBC 7 pegs the fair-market value of the entire site at about $300 million.

    By simple math, the water fund's portion would appear to be worth just under half that amount.

    So, how do the “parties in interest” square up things for a new stadium project?

    "Perhaps the water fund could retain the water rights under Qualcomm, but then get other compensation by having a land exchange for something else owned by the city,” Goldsmith explained. “But you'd better make sure these appraisals are honest and make sure there's an arms-length transaction. Another option is the buy the 80 acres from the water fund."

    Either way, the Chargers are resolute in their preference for a hybrid stadium/convention facility on a 12-acre site in downtown’s East Village, not far from Petco Park and the city’s quarter-century-old Convention Center for which another expansion is being sought.

    Chargers special counsel Mark Fabiani told NBC 7 in a telephone interview Thursday that the legal and financial complications surrounding the Mission Valley location wouldn't have been such a concern for the team a decade ago.

    But given rising land and building costs, Fabiani continued, the current Qualcomm Stadium site is now a much more expensive proposition: “To use a water board analogy, everything ripples out from there.”

    Goldsmith expressed optimism that the snarls can be worked out.

    But he offered these cautionary notes: "Chargers fans, if you want to put a stadium on the Qualcomm site, we've got to treat the water fund fairly, because the water fund is different from the taxpayers.

    “And that's OK, we knew that. And the Chargers know that. So is it more of an impediment? No. It underscores, however, that you don't take the whole property and 'Let's use it! And tomorrow we start building a new stadium!' Wait a second,” Goldsmith counseled. “There's something you've still got to do."