Indoor Sports Arena Plan Called Unfeasible

San Diego should give up on plans for a new indoor “sports palace” downtown because the project is financially impossible without city subsidies and help La Jolla millionaire Harry Cooper construct it elsewhere in the city, City Manager John Lockwood has recommended.

A fiscal analysis of the project, conducted by Cooper’s consultants and released Monday, put the total cost of a 22,000-seat downtown arena at $184.2 million, far more than the $120 million estimate Cooper has been using during more than a year of discussion.

But even under the most optimistic funding scenarios--with financing schemes that include a city-owned parking garage funded with tax-exempt bonds, and the addition of redevelopment area revenue--Cooper would fall $26.5 million short of the money needed to break even on the project, the report indicates. Without any city help, Cooper could be as much as $71.1 million short, the report shows.

Cooper “feels that it can’t work without a substantial city subsidy,” said City Manager John Lockwood. “I have no reason to believe that is not the case, and I just don’t feel we have the money to be of help.”

The city is facing a projected $60-million budget shortfall for the fiscal year that begins July 1, a deficit that Lockwood has warned could lead to sharp program cutbacks and layoffs of city workers.

As a result of the study, Cooper is once again proposing to erect the arena and a surrounding parking lot on most of the 38 acres he owns in Sorrento Hills, a plan that would eliminate the $16.4 million cost of buying eight blocks downtown and much of the $41.5 million to build a downtown parking garage.

“Anything over $100 million, I don’t know where it comes from,” Cooper said in an interview Tuesday. “There’s no money.”

But City Councilman Ron Roberts, the main supporter of a downtown arena, said that the consultants’ report overestimates costs and underestimates the potential revenue of redeveloping the current Midway area sports arena property, making the funding gap appear too large.

“They seem to use the worst possible case in situation after situation, which just about guarantees that you’re going to arrive at the conclusion at the end that this gap is too great,” Roberts said.

He said that the city should consider building a new arena and a parking garage in the San Diego Jack Murphy parking lot or soliciting bids from competitors on a downtown site instead of focusing on Cooper’s Sorrento Hills property.

Cooper last year announced his ambitious plan to build a 22,900-seat sports palace in the hopes of replacing the city’s 24-year-old Sports Arena and luring a National Basketball Assn. or National Hockey League team to San Diego.

Cooper, who purchased the lease to the city-owned Sports Arena at the same time, originally planned the arena in Sorrento Hills but focused on downtown at the demand of the City Council. The council will hear a status report of the plan Monday, with Cooper now fearful that someone else--perhaps Los Angeles Lakers owner Jerry Buss--will build an arena elsewhere in the region if San Diego does not act quickly.

“If the City Council says that they can’t come up with the money on the 16th, don’t let me walk out of there with no site,” Cooper pleaded. “Either give me that downtown site or an alternative.

“Don’t give me another site to go study. I’ve studied enough sites,” he said.

The report lists arena construction costs at $99.3 million and site acquisition and preparation--including cleanup of underground toxics--at $25.2 million. Purchasing land for a 3,800-space parking garage and building the structure would cost $52 million. Off-site improvements costing $7.5 million bring the total to about $184.2 million.

When the cost of borrowing is added, total development costs increase to $235.6 million, according to the report.

But operating revenues and private equity, even if combined with city-issued bonds that developers would finance leaves the project $51.1 million short, according to the analysis. Redevelopment of the Sports Arena site into apartments and retail space does not close the entire gap.

“Today’s extremely competitive market for professional sports franchises and San Diego’s high land costs combine to make the new indoor arena financially infeasible without cost-free land or another substantial subsidy of initial risk capital,” Deputy City Manager Maureen Stapleton wrote in the report.

Roberts said that the Midway site is worth “a hell of a lot more” than the report concludes, but Cooper said that city planners rejected more lucrative redevelopment plans because they would add to the area’s already severe traffic problem. Roberts also suggested that the arena could be built on a six-block site.

The task force noted that the city could add a 25-cent fee on tickets to all arena events that would generate $700,000, impose an admissions tax on all live-gate shows such as amusement parks, sporting events and musical performances or levy a short-term tax on car rentals to raise additional money.