County Grand Jury Report Finds Missed Opportunities On Stadium Revenue
A "simple internet search" possibly could have saved the city of San Diego $125,000 in commission fees for securing new naming rights to the Mission Valley stadium last year, according to a grand jury report released Tuesday.
The San Diego County Grand Jury found that city staff had the "knowledge and expertise" to seek new naming rights for the stadium. Instead, officials contracted a third party, Fox Sports College Properties, to issue a request for naming proposals after Qualcomm's naming rights expired in May 2017 following the San Diego Chargers' departure for Los Angeles.
Fox Sports received a 25 percent commission for securing new naming rights to the facility, now called SDCCU Stadium, as well as for selling other stadium advertising. San Diego County Credit Union paid $500,000 to put its logo on the building, though rights only extend to the end of this year, when the city plans to close the stadium.
Officials from the city's Real Estate Assets Division said they didn't have the expertise to value naming rights, though the grand jury asserted stadium staff were aware of colleagues' business strategies and "up-to-date market information."
"Even without these professional connections, a simple internet search provides numerous hits on the value of stadium and arena naming rights," the report states. "... It also may be argued that there was no established market value for the naming rights for a 50-year-old decaying stadium with no professional sports anchor tenant. It was a unique item in the American sports world, and Fox Sports' market familiarity did not offer anything beyond the city's own resources."
The city doesn't have procedures for contracting requests for proposals, according to the report.
The Chargers' departure could have allowed the city to recoup advertising dollars on a stadium that has traditionally generated millions in losses each year, but the grand jury decided city staff ultimately "gave away revenue," the report says.
The grand jury recommended that the city establish policies for selling naming rights to city assets leased to private parties; for valuing revenue-generating contracts; and for contracts where a private party issues a request for proposals on the city's behalf.
City officials haven't yet commented on the grand jury report. They have 90 days to formally respond to grand jury recommendations.
The grand jury's investigation into recent stadium management practices came after it learned of the city's agreements with Fox Sports and the nonprofit San Diego Bowl Game Association, which was also contracted in 2017 to sell suites and press boxes.
Chargers-held rights to suite sales reverted back to the city after the team left.
In a hurry to sell suites for upcoming events, the city contracted the duty to the Bowl Game Association. Under the agreement, the city received 40 percent of revenue, the association received 30 percent and the event sponsor received 30 percent. From July to December 2017, the city received more than $152,000 from suite sales.
The grand jury asserted the Bowl Game Association contract was unnecessary, as stadium staff were familiar with suites and past revenue streams.
"Stadium staff could have begun selling suites for all stadium events at that time, retaining most of the revenue and thus offsetting a larger share of the suites' O&M costs than was possible under the Chargers Agreement," the report says.
City staff also didn't have authority to issue contracts to Fox Sports and the Bowl Game Association without first opening a competitive bidding process, the grand jury found.
Staff assumed a competitive process wasn't needed for revenue-generating contracts. A city attorney disagreed, according to the grand jury, because city code dictates contracts over $25,000 require a bidding process. City staff approved the contracts anyway in September without receiving additional quotes, citing a need to sell advertising before a busy fall event schedule, the report says.
"The grand jury does not believe these justifications are sufficient to support use of the sole-source procedure," the report states. "The certifications relied on the short time before the Aztecs season began and the U2 and Coldplay concerts, but did not explain why the city had been unable to act more quickly when the suites and advertising had reverted to the city in January and the naming rights in May."