Why the Padres aren’t (yet) supporting the Chargers downtown

It’s not an exaggeration to say that the Padres do not want the Chargers to build a stadium in downtown San Diego. The Padres would never say it themselves – it would be a public relations gaffe even they wouldn’t make – but what they haven’t said tells you all you need to know on the subject.

“We’ll study the downtown proposal and talk to them privately about it. What we want is what’s great for San Diego and also what is best for the Padres.” – Peter Seidler

So what is “best for the Padres”?

I’m sure there’s much more than just the items to be discussed below, but some of the ancillary stadium details – who gets the rights to develop adjacent land, for example – are conversations that will happen behind closed doors, with beneficiaries that extend beyond just the Padres and Chargers franchises. Is what’s best for Peter Siedler’s real estate portfolio what’s best for the Padres? I’m not so sure. So I’m going to leave that part of the equation alone.

From the public statements made by Padres personnel, you can deduce several important hangups. All, as you may guess, have a direct fiscal effect on the Padres. These must be accounted for if the City of San Diego and the Chargers want the Padres’ support.

Parking

First, the parking situation. Here’s Ron Fowler saying as much in an interview with Marty Caswell back in February:


For an ownership group and front office whose words generally rank somewhere between vague and useless, Ron Fowler offering up a specific item that would be an important part of the Chargers’ stadium plan, to the Padres, is worthy of pause.

The San Diego Padres currently control two City-owned parking lot locations around PETCO Park, as well as one that they themselves own: Padres Parkade. These three are marked in blue on the 2013 map below.

image

In addition to the pure profit they bring in through their own lot, I think it’s a safe assumption that the Padres rake a significant portion of the profits from the two others they control. Most of the Padres/City of San Diego partnerships result in the Padres taking home at least 30% of the profits, with some that exceed 70%. Given their profitability, it’s no coincidence that the Padres actually refer to these three parking facilities as their “preferred” lots for Padres fans to park.

And a recent change near the stadium in 2015 made these lots even more profitable for the Padres: JMI began construction on converting Lot C, the parking lot across the street from Lolitas, into a “mixed use building”. This removed 500 parking spaces right in front of the season ticket holder entrance. Predictably, the Padres supply-and-demanded, as parking rates in Padres lots increased in 2015 for this exact reason:

“Due to the loss of more than 500 parking spaces in Parcel C, neighborhood parking rates, including those in lots surrounding the ballpark, will be increasing in 2015.” – PETCO Park Parking FAQ

The problem with the rumored Chargers stadium proposals downtown involves the subjugation and repurposing of at least one of these profitable parking lots: Tailgate Park.

Completely destroying Tailgate Park, as proposed in part of the Chargers’ stadium plan, means that the Padres will lose 1,000 of the parking spaces they themselves control. Last year, these spaces went for $20 on weekdays and $25 on weekends, representing a potential value of $1.8 million dollars if every spot was filled and the Padres took in 100% of the revenue. That probably isn’t the agreement they have, but an estimate of roughly $1.0 million per year isn’t far from the truth.

Let alone the fact that Tailgate Park got its name due to it being the only Padres parking lot in which tailgating is legal. It may only be a small portion of fans who care about such a thing, but the absence of a tailgate parking lot could deter some fans from showing up at all. Losing even a small fraction of potential ticket revenue is an unacceptable outcome for the Padres.

Whatever the Padres may stand to lose from the parking situation, it’s clearly a concern to the team. They barely ever say anything substantive, but have chosen this to be something worth discussing. Any deal between the Chargers and the city should take into consideration the Padres’ parking revenue.

Events

Second, event revenue. Again, this is from the Padres themselves:

“It’s a big part of our business. We’ve worked hard to build that.” – Mike Dee

Translation: “get your hands off our money”.

Part of the allure of a downtown stadium, which Moores and the city pitched to voters in 1998, was the prospect of having events hosted at the stadium. The events would bring in additional revenue to both the city and team directly through ticket sales and concessions, and indirectly through increased sales tax revenue collected from local businesses.

From 2004, when PETCO opened, through the Moorad era, these “70/30 events” rarely occurred. Sure, there were occasional events: Madonna and Skrillex, for example. But these events were few and far between. Why?

The original deal that dictated how event revenue would be split between the City of San Diego and the Padres stated that 70% of the revenue for non-baseball events would be paid to the city, with the remaining 30% belonging to the Padres – hence the term “70/30 events”. I don’t know how the 70/30 split was arrived at, but it clearly wasn’t ideated by the wisest economist that ever lived. Basically, the Padres were required to perform all the logistics that went into booking, scheduling, and preparing the events, but took home only a small portion of the profits. It should come as no surprise, then, that the Padres rarely scheduled large events at PETCO Park. For example, in fiscal year 2012, non-baseball events at PETCO totaled $5.9 million in revenue with a net profit of $2.5 million.

In 2013, the Padres renegotiated the agreement with the city, flipping the 70/30 split into the Padres’ favor. (The Padres also agreed to increase the minimum yearly payment from these events, as a means for the city to guarantee a larger paycheck.) The result? Non-baseball events at PETCO in May through July of 2015 alone matched the 2012 revenue and profit figures. And even with just a 30% share, instead of 70%, the city directly took home a larger paycheck in 2015 from these events than in 2012. For the Padres, that additional 40% on a larger volume of events translates to millions of dollars every year.

If the Chargers end up with a stadium that’s better built for hosting large events, the Padres stand to lose those millions of dollars each year. I don’t think their event revenue will completely diminish, but I doubt that million dollar draws like Sir Paul McCartney will play at Petco Park when an even more modern, spectacular complex sits next door. At the very least, the Padres will have increased competition to host such an event.

This is something that the Padres and Chargers can work out, I’m sure. But that has to happen before the Padres sign on to any stadium deal. Maybe the two teams pool together future non-baseball and non-football revenue into one pot which they split, I don’t know. Maybe having their hands in the Final Four and Wrestlemania pot will make up for losing the direct revenue of hosting on their own. Again, I don’t know.

All I can say at this point is that the event revenue is a hangup for the Padres, which needs to be resolved.

No salary cap

You might find these two hangups to be a relatively small deal. That’s fair. When you’re talking about a stadium with a sticker price around a billion dollars, it’s hard to take seven digit concerns seriously.

Here’s the thing, though: baseball has no salary cap. The incremental revenue the Padres pull in represents a competitive advantage for the team. Football has a salary cap. The incremental revenue for the Chargers is not an immediate advantage.

If you’re a fan of both the Padres and Chargers, and want to maximize the overall championship odds between the two teams, then you should be in favor of the Padres having downtown to themselves until the Chargers’ new stadium deal fairly compensates the Padres.

Oddly, the Padres and Change the Padres see eye-to-eye on this one.

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2 responses to “Why the Padres aren’t (yet) supporting the Chargers downtown

  1. Pingback: Spanos gives Faulconer event revenue concession, still may screw Padres | Gwynntelligence·

  2. Pingback: How to vote Padres this election | Gwynntelligence·

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