Team Revenue Assumptions
What assumptions does the study make about team revenue in the following areas:
(1) Naming rights
a. $8 million/yr (pledged to StadCo)
(2) Average price of general admission seat
a. $105/ticket in 2017 (~29% increase over current 2011 prices)
b. 55,000 total GA seats assumed
(3) Average price of club seat
a. $250/ticket in 2017 (~50% increase over current 2011 prices)
b. Premium ticket prices will be in line with our estimated league
median in 2017
c. 8,000 total club seats assumed
(4) Number and average price of Preferred Seat Licenses
a. PSLs sold on all club seats and less than half of GA seats
b. Avg. price of ~$3,125 assumed, including club seats
(5) Number and average price of luxury suites
a. 80 suites (77 revenue) with 2,000 total seats
b. Assumed pricing range of $80,000 – $300,000/season (~50%
increase over 2011 estimated average pricing)
ANSWERS: PROVIDED ABOVE
Team Expense Assumptions
What assumptions does the study make about team expenses in the following areas:
(1) Annual operation and maintenance of the stadium
(2) Long term maintenance and improvements necessary over the 30 year
life of the lease
ANSWERS:
StadCo is assumed to cover fixed O&M, which is estimated to be $9.4 million in 2017
(vs. $10.8 million today)
The Team is assumed to cover variable game day expenses (as they do today), which
have been estimated at $1 million per game
All future maintenance and improvements will be borne by StadCo, funded either
through excess revenues generated or by a joint funding plan to be negotiated at the
time required
Team Financial Contribution to the Stadium
Our review of the study indicates that the total team/NFL contribution to the project
will be $650 million, broken down as follows:
(1) $200 million from NFL G4 program
(2) $100 million from team equity
(3) $100 million from PSLs
(4) $250 million from stadium revenues, including naming rights
Is this correct?
ANSWER: We view the $250 million to be a joint contribution, as Stadium
construction is jointly funded and revenues therein are generated by all Stadiumspecific applications, including SDSU games, off-season, non-football events,
external advertising and associated commercial developments
City Financial Contribution to the Stadium
Because voters must approve the city’s contribution, it is important to know the
exact sources of the city’s contribution so that we can conduct public opinion
research to determine if the public will support spending these particular city
resources on a stadium
Therefore, is it possible to specify which city funding sources make up the city’s
financial contribution?
ANSWERS:
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 specifically by the Stadium
Funding sources are listed below:
(1) Existing city revenues paid to operate and maintain Qualcomm
(estimated at $11 million)
(2) Parking surcharges imposed at the new parking facility and potentially
other nearby/associated lots, including potential demand-based pricing
at nearby City meters
(3) $1 million ground lease payment from StadCo
County Financial Contribution to the Stadium
Key County officials have told us that the County has no interest in helping to fund a
stand-alone stadium project such as the one outlined in the report. Two questions:
(1) What expectation do we have that these County officials are going to
change their views?
(2) Assuming that the County decides to participate, can we anticipate which
revenue sources might be called upon (again, so that we can conduct the
appropriate public opinion research)?
ANSWER: The County is certainly a key piece of the funding picture, as we view this
Stadium as a regional asset, enjoyed by all Chargers fans, not just a City asset. The
inclusion of a roof will greatly expand the potential utilization rates of the Stadium,
providing a wider range of applications. We believe that the requested level of
funding will not negatively impact the County on a standalone basis, and certainly
not when considering the overall positive economic impact on the region. We
believe that a coordinated approach to the County, with a plan that enjoys the full
backing of the Team and clearly lays out the positive impact on the County, will be
effective in securing their support
The County’s contribution to the Project is assumed to be funded by:
(1) Property tax revenues that the County is already due to receive under the
existing CCDC tax sharing agreement and which are allocated to be spent
downtown
(2) Incremental property tax revenues generated as a result of increased
private investment in the East Village, catalyzed by Stadium construction
(“but for” revenues)
Construction Cost Estimates
What methodology did you use to determine cost estimates for:
(1) Stadium construction: $650 million
(2) The retractable roof: $150 million for a basic, non-retractable fabric roof
(3) The clean up of the bus yards site: $100 million
(4) The acquisition of the Wonder Bread Building block: Nothing specifically
included for this acquisition; the acquisition is assumed to be within the
$100 million bus yards site number, directly above.
(5) Reconstruction of bus yards on another site: Not included.
ANSWER: Stadium construction costs including the roof are estimates provided by
national construction firms and are based on a rigorous materials cost analysis, and
are inclusive of labor and a cost contingency factor. (Note that the Project has
assumed an additional overall cost contingency). Site remediation costs are an
internal City estimate
Other Government Entity Financial Contributions
What other government entities, if any, are expected to contribute in some way to
the project?
ANSWER: Beyond the direct contributions from the City and County, we expect the
cooperation of SANDAG and the MTS in delivering a coordinated solution to
redevelopment of the East Village. In addition, the City is considering approaching
other government and quasi-government entities regarding their potential
involvement in the Project
Questions about Bonding Capacity
1. As stated, the General Fund will not support the City bonds. We assume the same
will be true for the County debt. What type and revenues will support the City and
County debt? For both what are the assumed credit metrics; rating, coverage, term,
rate, etc. We want to understand the risks of execution on these bonds
ANSWER: To clarify, the bonds will not be supported by new money from the
General Fund, but rather money which is already available, allocated and spent
elsewhere, and which is directly related to current stadium operations or downtown
economic development. The Plan provides for an independent financing solution
with no impact on public services. Bonds may be structured as General Obligation
debt, or as a lease-backed revenue bond similar to the current Qualcomm Stadium
debt. Our assumption on all “GovCo” debt is for fully-amortizing bonds with a 30year tenor, a 28-year amortization period, an interest rate of 4.95% and a 1.15x
coverage ratio
2. For the Parking Revenue Bonds, we have similar questions as to the issuer, credit
and security.
ANSWER: The new parking garage will be funded by the City of San Diego as part of
its contribution, but due to restrictions in the City Charter are assumed to be funded
separately. Credit terms are the same as the general GovCo assumptions
3. Where will the $50mm of Additional Contribution mentioned on slide #3 come
from?
ANSWER: This is a plug in number that needs to be filled – the City is considering
various potential sources
4. What does the statement on slide #1 about Ongoing Chargers Credit support
mean? What exactly will the team be obligated support?
ANSWER: StadCo is set up to be a cash flow-neutral, break-even vehicle. If
revenues are insufficient to cover operating expenses, a variable lease payment
from the Chargers would cover the difference. Under our current assumption that
the $100 million Team contribution is structured as a subordinated loan, the
variable lease payment from the Team to StadCo is estimated to be $3.8 million in
2017. The 2017 payment from StadCo to the Team on the subordinated loan is
assumed at $11.6 million, including interest and amortization, resulting in a net cash
payment to the Team of $7.8 million
5. On the $250mm of StadCo bonds, what are the assumed credit metrics: rating,
coverage, term, rate, etc.
ANSWER: StadCo is structured as a Public/Private partnership vehicle which would
ideally enjoy the structural and tax-related benefits of its public ownership. Our
assumption on StadCo debt is for fully-amortizing bonds with a 30-year tenor, a 28year amortization period, an interest rate of 5.25% and a 1.25x coverage ratio