Bond Plan, MLB Help Revitalizes Ballpark

San Diego Business Journal, Nov 12, 2001 by Denise T. Ward

As of late October, it seemed like hopes were rapidly fading to build the Padres' 46,000-seat Downtown ballpark by the spring of 2004 -- if at all.

Already two years behind schedule, some even hinted the ballpark's surrounding 26-block, billion-dollar redevelopment project may be shelved as well.

But rather than a post-Halloween trick, ballpark supporters got a treat when city officials unveiled a package to issue bonds, which was followed by Major League Baseball's guarantee of $48 million to spur construction of the Padres' $450 million ballpark.

"This will take us off the endangered species list basically," said Bob Vizas, president of the Padres.

Bond insurers required Major League Baseball to step in and guarantee the Padres fulfill their obligation. Vizas said the ballclub plans to issue its own bond measure of about $160 million. The Padres, however, will not need the level of insurance on their bonds as the city because it is a private entity.

Vizas said the city's plan to move ahead with the project means "the future of baseball in San Diego," and it will put the team in a better financial standing with the league.

The city will pay a higher interest rate on its bonds and $6 million for insurance, but Mayor Dick Murphy said they could not wait any longer.

"I think I have to point out that both the interest rate and premium are high, higher than we initially hoped," Murphy said of the plan he unveiled at a press conference Nov. 2. "This is entirely due to ongoing litigation against the ballpark redevelopment project.

"But it is my belief that it is in the city's best interest to go forward despite the pending appeals and higher interest rates."

Higher Payments

Under the plan, the city would have to pay an 8.83 percent interest rate to ballpark bond investors. That's compared to a rate of 5.86 percent in a plan released in February and a 6.25 percent rate originally proposed three years ago when voters approved the ballpark.

The city's annual bond payments under the current plan will be $15.5 million, plus an estimated $6.2 million insurance premium.

Two lawsuits, filed by former city councilman Bruce Henderson, are on appeal. Those suits question the validity of the council's actions on the project. City Attorney Casey Gwinn said the appeal process could last from 1 1/2 to three years.

Since the mayor's announcement, there has been some speculation surrounding the legality of the current financing plan. The city plans to issue taxable bonds to finance a $170 million bond measure instead of tax-exempt bonds as originally proposed.

Gwinn acknowledged the intent of the city was to issue tax-exempt bonds as stated in the original agreement between the city and the Padres, but said it is clearly stated that condition could be changed.

"It's very straightforward," Gwinn said. "If we had required that it (issuing tax-exempt bonds) couldn't be waived, Mr. Henderson could have destroyed the project simply be preventing us from having taxable financing.

"(Issuing tax-exempt bonds) is something the city had hoped to do and will do if we are able."

Move Away From TOT

The city is able to lower its bond sale from $225 million to $170 million by putting in $45 million more in upfront cash, making the city's total cash contribution $75 million. The additional funds would be generated by repaid loans from the Centre City Development Corp., the city's redevelopment arm.

Murphy said the change will shift financing away from relying primarily on transient occupancy tax funds, which are generated by hotel room taxes, and more on Downtown redevelopment dollars.

CCDC President Peter Hall said tax increment dollars generated Downtown have increased from below $20 million five years ago to more than $26 million this year. Hall said they anticipate that number to increase to more than $30-million in the near future.

"A lot of it is what's happened since 1990 because of the rebirth of Downtown," Hall said.

Hall said the tax increment money will be spent on the ballpark redevelopment project because it was produced by Downtown projects.

Nothing can officially happen until the City Council approves the preliminary official statement (expected to be presented Nov. 13), which is necessary to market the bonds, but all signs are clear that the project should be back on track by the end of the year. The ballpark should then open in the spring of 2004.

Murphy said the city negotiated the plan with all involved parties, including- the Padres, JMI Realty, which is responsible for 26 blocks of development surrounding the project, AMBAC Assurance Corp., which will insure the bonds, Merrill Lynch & Co., which will fund the bonds, Major League Baseball, and the CCDC.

The San Diego Unified Port District also has committed to spending $21 million for the ballpark project.