Sports Complex Presents Fiscal Curveball
The City Council ended 2012 with a vote supporting the exploration of building a new softball complex at either the former Singleton Landfill site or at the County Fairgrounds. The Singleton property is located within city limits and is owned by the city of San Jose, while the fairgrounds site is located within an unincorporated pocket and owned by Santa Clara County.
The Measure P bond money that was approved in November 2000 by 78 percent of voters would fund construction of the proposed sports facility. The usage of these funds is restricted by state law, which stipulates that Measure P funds can only be spent on purchasing land or the construction of park facilities. In other words, Measure P funds cannot be used to operate and/or maintain the proposed softball complex. This is important to note, because any new or expanded facility funded by bonds may require ongoing financial support that would be drawn from the city’s general fund.
Since the 90-acre Singleton property is a landfill, options for development of the site are limited. Landfill sites are seldom utilized for farming or housing and rarely support tall buildings due to geotechnical considerations. Such land use proposals would face legal challenges and are unlikely to move forward. A new sports complex, on the other hand, would be a legally acceptable use for the land and the resulting facility would add to San Jose’s recreational offerings.
The clear advantage of choosing the Singleton site over the county fairgrounds site can be seen when one follows the money: Revenue from sales tax and the ground lease at the Singleton site would go to the city of San Jose. Unfortunately, no revenue would flow to San Jose if the county fairgrounds site were selected. For this particular reason, I am hopeful that the Singleton site is chosen if the project moves forward.
Regardless of which location is selected in the end, the city needs to approach the proposal review process in a comprehensive and diligent fashion. Legislators must look towards a positive outcome that is notable not only for its overall success, but also for its fiscal prudence.
The softball complex needs to be self-sustaining, and the projections provided by city staff need to be realistic. I say this because advocacy from staff along with some councilmembers threw the city a financial curveball in the not too distant past. This curveball contained flawed projections and led to the approval and subsequent spending of tens of millions of dollars subsidizing both the Los Lagos and Rancho Del Pueblo golf courses, as well as the Hayes Mansion.
The city continues to pay millions of dollars each year from the general fund to subsidize these facilities, instead of using this money to hire police officers or repaving streets.
The city should lease the Singleton property to a private company rather than having city staff operate the complex. The 60-acre Twin Creeks Sports Complex located in Sunnyvale operates in a similar fashion. The private company should manage the sports complex by assuming responsibility for their own human resources and procurement needs, without involving the city.
In addition to revenue collected from the ground lease, the city should derive a portion of the facility’s net income. The complex will have on-site food and beverage sales and a retail center. The council should also allow opportunities for advertising revenue.
In order to ensure that the city has adequate visibility, our finance department should have real time access to the private company’s accounting software. (This is similar to the arrangement currently in place between the city and Team San Jose regarding the management of the San Jose Convention Center.)
I prefer net income to gross receipts, because the city should experience first hand the impact of any city ordinance or policy that may limit profit margins on private business.
A state of the art sports complex has the potential to become a destination in and of itself. Such a facility would draw more people to the area and lead to greater consumer spending for local business. However, we cannot be blind to the fiscal liabilities that new facilities may create for the general fund.
Softball requires that players follow the rules of the game. The city should also be required to follow the rules of fiscal pragmatism when this item comes up for a final vote in approximately six months.
Pierluigi Oliverio is a councilmember for San Jose’s District 6.