Politicians don’t often admit they have no idea what they’re doing. So it came as a surprise when San Diego Mayor Kevin Faulconer did just that earlier this month when announcing his partnership with county officials to negotiate with the Chargers.

“The city and county don’t have the in-house legal and financial expertise for a major stadium development deal and negotiation,” a Faulconer press release said.

Stadium Nuts and Bolts logoBased on the city’s history of deals with the Chargers, Faulconer’s right.

Starting in earnest with the decision to renovate Qualcomm Stadium two decades ago and give the team a new lease, the city has fumbled the ball again and again, leading to millions of dollars in losses and debt, a decrepit stadium and the team threatening to walk away before the lease runs out.

There were many to choose from, but these are the top three follies from the city’s negotiating history with the Chargers.

The ‘Ticket Guarantee’

In the annals of infamous City Hall decisions, this is a contender for the worst. The ticket guarantee got its name because the deal with the Chargers worked like this: The city would guarantee that the Chargers would sell 60,000 tickets for each game. If not enough fans bought actual tickets, then the city would have to make up the shortfall, at taxpayers’ expense.


We Stand Up for You. Will You Stand Up for Us?

The ticket guarantee, which sprung out of lease negotiations in the mid-1990s, overlapped with a period of horrendous Chargers teams. Not a lot of fans paid their own way to games and the city bought the excess tickets and gave them away. The bill –and anger from taxpayers – quickly added up. When the Chargers decided to raise ticket prices in 2002, for instance, it meant the city owed the team more money when no one bought them.

After every game, the media would dutifully report the cash sent to the Chargers to subsidize an empty stadium. Sometimes the number would top $1 million per game. All told, before the ticket guarantee was ended as part of lease renegotiations in 2004, the city paid the Chargers $36 million.

The Americans With Disabilities Act Lawsuit

Part of the reason the city renovated Qualcomm stadium in 1997 was to add seats and luxury boxes to host a Super Bowl in 1998 and make the Chargers happy. When city leaders did that, they forgot about people in wheelchairs. Ex-Union Tribune columnist Gerry Braun put it this way in a column:

As it remodeled, the city was required to bring the stadium into compliance with the Americans With Disabilities Act. City leaders met this legal obligation in the same spirit they met their obligation to fund the city retirement system. I believe the term of art in public-administration circles is, “Let’s not and say we did.”

Soon a lawsuit was filed, and the city was required to rip out seats and install wheelchair ramps. The Chargers balked at the lost revenue from fewer seats in the stadium. So the city now has to pay the team each year to make up for it.

Over the last eight years, this payment totaled $10.5 million.

The Case of the Disappearing Rent

The 2004 lease renegotiations ended the ticket guarantee, but it also had loopholes for the Chargers to escape paying their full rent.

The team’s rent is supposed to be $3 million a year. But plenty of caveats knock that number down. Among the craziest: The city pays half the property taxes on the Chargers headquarters in Kearny Mesa.

On game days, practically all the money made in the stadium, like the sales of popcorn and beer, counts as part of the team’s rent, a city financial official told me.

Along with the ADA settlement, the rent credits are the biggest reason the city has ended up owing the Chargers money at the end of every season since 2007.

    This article relates to: Chargers Stadium, Government, Quest

    Written by Liam Dillon

    Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

    39 comments
    Joe Jones
    Joe Jones subscriber

    Personally, I hope the city plays hardball on this issue. Having said that, the vitriol against the Chargers is utterly pointless. They are a business entity. They have the right to ask to ask for the moon if so desired. The city has the right to say "no." Elected officials may make stupid decisions, but not so many when it comes to their personal political futures. Giveaways take place for the simple reason that politicians perceive, rightly or wrongly, that the majority of voters wish them to act in a certain way. You'd do better railing against Charger fans who are registered to vote.


    And by the way, let's dispel the myth that the NFL is a tax free non-profit. The League office (administrative arm only) is non-profit. The 32 franchises all pay taxes. 



    Dean Plassaras
    Dean Plassaras

    @Joe Jones  I think you have to reframe the issue from vitriol or hard ball negotiating tactics. Here is how you have to think about it:


    The issue we face is whether to build a new stadium. The owner is ignorant of stadium ownership issues because he never owned one. He only plays in them but this does not qualify him as a stadium expert. Equally ignorant seems to be the city in this matter because it subcontracts the operation of the stadium to 3rd parties and has had a consistently negative experience in terms of profitability.


    Therefore we have 2 entities that are not experts in the stadium business yet these 2 entities have embarked in a contest of delivering something outside their area of expertise.


    The only way to resolve this issue competently is to call in the experts. You do so by requiring a feasibility study paid for by the owner to address the viability of such undertaking. Feasibility studies are usually 250-300 pages long and examine everything from defining the market, possible sources of funds, financing and profitability. They look something like this (even though this relates to an easier form of collegiate stadium vs. the NFL type stadium that is a bit more complex). Only the owner could provide and pay for such study because it answers questions critical to him and also reassures the host city that this is not a rainbow chasing exercise:

    http://www.unlv.edu/assets/unlvnow/pdf/VegasStadiumReport-Sept2014.pdf

    BTW, a citizens advisory committee is not a qualified substitute for a feasibility study because most issues are technical in nature and require experienced and competent professionals to put them into proper perspective. Those comprising advisory committees are eager volunteers but could not be trusted in making the right judgments which are beyond the sphere of their professional competence.

    Bill Bradshaw
    Bill Bradshaw subscribermember

    @Dean Plassaras @Joe Jones 
    Dean, it’s interesting that this Las Vegas analysis you cite as a model, completed last year, shows the cost of a DOMED stadium with a 50-55k seating capacity and a fair number of luxury boxes and suites is estimated to cost $832.6 million.  Spanos’ estimate in the $1.5 bil range, approaches TWICE that amount, for an open air stadium I believe.  I wonder what this company would conclude about San Diego?

    The other thing that strikes me about comparing the two cities is the nature of the visitors.  Sure, both cities are big tourist destinations, but it’s been shown that the attendance at Chargers games is mostly locals and L A/Orange county people.  I’m sure a study would show that our visitors come to do vastly different things than visitors to Vegas, who arrive spring-loaded to attend “events”. 

    David Benz
    David Benz subscriber

    @Bill Bradshaw Metlife stadium in New Jersey is a $1.6 billion 100% privately financed 2 team shared stadium.  It's the template for Los Angeles.

    Bill Bradshaw
    Bill Bradshaw subscribermember

    @David Benz @Bill Bradshaw Reality check- We're talking about a Chargers' stadium and what it might cost here.  Here's some recent data on population in three major metropolitan areas:

    1.  New York-Newark-Jersey City  20,092,883

    2.  Los Angeles-Long Beach-Anaheim  13,262,220

    17.  San Diego-Carlsbad  3,263,431

    I agree L.A. and New York are somewhat comparable on what they can do. We aren't in that conversation. 



    Arizona Bread
    Arizona Bread subscriber

    @David Benz @Bill Bradshaw  I agree David.  The NFL is clearly embracing two team stadiums in markets that can support them.  LA is one such market. 

    One piece of evidence is the Raider’s PowerPoint recently posted by Dean Plassaras.  While an older document, it contains charts referencing the Raider’s sharing a stadium with the 49’ers. 

    Another piece of comes from something Bill Bradshaw wrote about weeks ago.  The NFL revenue model is changing.  Owners now need to make mega-bucks directly from their stadiums.  Doing so requires more elaborate and more expensive stadiums.  Hence, the need to share construction and operating costs with another team. 

    Incidentally, the more money an owner needs to pull out of his stadium, the more resistance he generates from the public to pay for his stadium.  That will drive more private financing.

    Third, is the plainly obvious business reason every fast food chain in American has known for decades: find a way to monetize idle and costly space and equipment.  Two teams in one stadium means 16 weeks of games instead of eight.  Twice the revenue for what doesn’t amount to twice the expense.

    Last is the arrival of Goldman Sachs.  They’ve shown with MetLife Stadium that a football stadium can be a profit center for a certain class of investors given the right set of circumstances.  As an expert and highly determined private sector company, they’re going to do everything possible to build their “stadium investment” practice. 

    When it comes to the future of the Chargers in SD, our city may be nothing more than a victim of a dramatically changing business model combined with the bad lucki of being close to LA.

    Steven Croft
    Steven Croft subscriber

    The politicians always cater to those with deep pockets. It is kind of a special club that can manipulate the process at others expense. In the chargers case having an owner in the club they get what they want done without paying for it or taking any risk plus come out hundreds of millions ahead with no need to provide any return benefit or even be obligated to the City. There is no intention in this process for things to be equitable there is an extensive history of deals that benefit those who shouldn't need to be subsidized and I am sure this will follow suit. The City needs to stand up.and stop underwriting a business that probably has more resources then the City itself. If they did the same thing with Wall-Mart as they did with the Chargers there would be an uproar. 

    Bill Bradshaw
    Bill Bradshaw subscribermember

    The Chargers’ performance on your second “Folly” is so revealing of the current ownership that it demonstrates why this team should just go away.  The ADA lawsuit was a result of stupidity on everyone’s part, unless you believe the Chargers didn’t bless all the modifications done for their benefit.  Any reasonable business partner would have shared the cost of the mistake.  Not the Chargers!  They not only continued to demand payment for empty seats their own ineptitude had created, they demanded payment for seats that no longer existed!  Unconscionable, and please don’t tell me “that’s business”.

    Richard Rider
    Richard Rider subscribermember

    The forth blunder is related to the third and first blunder.  As I recall, the Charger ticket guarantee was good for only 3 more years when it was cancelled and replaced by the loophole ridden measure that cost us much, MUCH more -- while totally freeing up the Chargers to leave.

    The blunder is that we panicked.  Mayor Murphy and the city council couldn't handle the heat of three more years of the Charger ticket guarantee.  

    All we had to do was sit tight, and we would have finally recouped (over many years) all of the Charger ticket guarantee costs and actually collected rent annually.  At that point (7 years into the 10 year Charger ticket guarantee), we should have done NOTHING.

    At the end of the ticket guarantee, the Chargers would have started paying 10% of all ticket sales to the city.  As it turns out, with the new deal (widely praised at the time), the team pays little or nothing.

    richard brick
    richard brick subscribermember

    It seems that there have been a lot of closed door meetings about building a stadium for a billionaire owner. When I see "closed door" I know what ever comes out of these secret meetings will not be good for the tax payers of the city.


    If a stadium is such a money making edifice why aren't the big investors jumping all over at this chance to make money?


    It would be nice to know exactly how much money the Chargers generate to the city. All the pro stadium fans always say that having the Chargers is a benefit to the city's bottom line. Lets see the real numbers. Same goes for hosting a SB, where are the cold hard facts that shows how much real money is put into the city coffers.


    After reading this article I wonder how those millions of dollars that went to the Chargers could have been used to improve things for the tax payers.

    John Polhamus
    John Polhamus

    I'm thinking that Carson is looking like a highly desirable option. Let Carson foot the bill., the Chargers won't be that far away, and the NFL will be able to get out of what it considers a small market. Good riddance. I for one am sick and tired of being blackmailed by the NFL, a league I do NOT support, full of playboy millionaires with rap-sheets who are anything but suitable role-models for American youth. Get out, Chargers, you were charming once, but your act has staled and your day is done. Let San Diego start valuing it's native community and its various facets, not a fake community of professionals, rented from around the country on a short lease. Good riddance.

    Dean Plassaras
    Dean Plassaras

    @John Polhamus  - Carson is not financeable. Carson couldn't foot the bill even if they wanted to. Carson is an unbelievable joke for those who don't understand the business of financing stadia w/ 0% public contribution. Even if you paid to move the owner there he can't move because the whole thing is absurd.

    David Crossley
    David Crossley subscriber

    @Dean Plassaras @John Polhamus  --The most amazing thing to me is the Chargers claim that if the Raiders back out of the Carson deal, the Chargers will go through with the Carson "plan" on their own.  I don't even know how Fabiani can believe that BS.

    David Benz
    David Benz subscriber

    @David Crossley  The 2 team shared stadium is very doable in either Carson or Inglewood but the 1 team scenario is a joke.  Average PSL revenues of the last four teams in present value terms will cover half the construction costs in Carson.  Naming rights and 2 NFL G-4 grants/loans will cover most if not all of the rest. 2 teams will relocate to LA within the year, that's obvious to everyone who understands finance and the NFL.

    It cracks me up that our resident spammer is completely ignorant of the Jets and Giants 100% privately financed $1.6 billion stadium.

    David Crossley
    David Crossley subscriber

    @David Benz @David Crossley  --I could see Inglewood, but I can't see Carson ever happening.


    And in regards to the G-4 program--do teams that relocate even qualify?  I was under the impression that teams who relocate are not eligible for a G-4 loan.

    David Benz
    David Benz subscriber

    @David Crossley Eric Grubman has stated that the Chargers and Raiders would each qualify for a NFL G-4 grant/loan for their Carson stadium.  LA is already the Chargers secondary market because of the NFL's 75 mile radius TV rules, it's not a true relocation.  The NFL also set a precedent of not treating a team returning to their previous home market as a relocation by not charging the Raiders a relocation fee to return to Oakland.

    The $400 million is definitely available, and it's free money as long as the "waived club seat premium Visiting Teams' Share and “Incremental Gate VTS” (defined below) during the first 15 seasons of operations in the new stadium"  cover the annual payments.  I know for a fact that the 49ers, Giants, and Cowboys waived VTS covers their entire G4/G3 annual payments.

    There's also been rumors of an update to G-4 that would provide more than the current $200 million per team.  G-3 was $150 million per team.

    David Benz
    David Benz subscriber

    @David Crossley What's your issue with the Carson site?  Carson is a much better stadium location than Inglewood with easy freeway access and space for tailgating.  


    People get hung up on it being a former landfill not knowing a bunch of stadiums have been built on former landfills including Metlife stadium and the Broncos' stadium.

    David Benz
    David Benz subscriber

    @Dean Plassaras Wrong Dean, you really don't know anything about the NFL or stadium financing.  You should read more and post less.

    David Crossley
    David Crossley subscriber

    @David Benz @David Crossley  --A previous article in VOSD states that the Chargers and Raiders would NOT be eligible for G-4 loans since the move is outside the league's mandated 75-mile territorial radius.  The "secondary market" term is apparently for TV blackout purposes and nothing more (but since there are no blackouts beginning next season--and probably beyond, I would think the "secondary market" term is irrelevant.).  The article was from Feb. 24th.

    David Benz
    David Benz subscriber

    @David Crossley  Your secondary market comments aren't based in reality since the NFL is on record saying they view southern California as one market.  Also, Carson is only about 5 miles out of the Chargers current primary market as defined by the NFL. The Chargers could move to Anaheim without an NFL vote because it is within their current primary market.

    Eric Grubman stated the Carson project is eligible for NFL funding, believe who you want but I believe Grubman and the other owners statements.  They aren't likely to penalize the Chargers over 5 miles and they already set the precedent of not treating a team moving back to a previous market as a relocation.   The blackout rules are only suspended until this whole relocation process is finished.


    The NFL rules are only there to protect the owners, they will do whatever they want if they want 2 teams in LA.

    David Crossley
    David Crossley subscriber

    @David Benz @David Crossley--The Rams move to Inglewood, and the Chargers are in deep trouble.  The Carson site then immediately becomes part of the Rams territory, which would preclude the Chargers from getting any G-4 funds for the Carson project.  And the Raiders also would get no G-4 funding, as they would also be ineligible due to their relocation (assuming they go through with the project they have proposed with the Chargers in Carson).  Unless, of course, the Raiders still claim that LA is still their territory, which would be comical.


    The blackout rules are suspended for one year, but it has nothing to do with any relocation process, and everything to do with the FCC and their ruling to eliminate blackouts.  I doubt that blackouts will be an issue in the future in the NFL.


    It also sounds like you are not interested in the Chargers staying in San Diego.

    David Benz
    David Benz subscriber

    @David Crossley Nope, you are completely wrong about the blackout rules.  The NFL still has the right to blackout games, the FCC ruling changes nothing except who is responsible for the blackouts.

    "Elimination of this rule, however, may not end all sports blackouts: sports leagues may choose to continue their private blackout policies through contractual arrangements with programming distributors."

    http://www.fcc.gov/guides/sports-blackouts

    http://www.forbes.com/sites/maurybrown/2015/03/23/nfl-to-drop-tv-blackout-policy-for-2015-16-season/

    MLB has blackout rules that have no FCC backing, it's purely up to the leagues.

    LA has to broadcast Chargers games by NFL rules and LA is subjected to Chargers blackouts. They lifted the blackouts for this season only because of the Chargers, Raiders, and Rams lameduck seasons.

    The NFL is only going to chose one stadium site, Carson or Inglewood.  I'm not at all interested in the Chargers staying or going.  They can stay if they want to pay for their own stadium in San Diego.  It's clear you want the Chargers to stay and that desire is making you irrational.  The facts are easily available, Grubman has stated G-4 funding is available for the Carson stadium.

    Why do you continue to ignore the fact that the NFL has set a precedent with the Raiders that a team returning to its previous home market is not treated as a relocation?  You also haven't presented one reason why the NFL would chose the Inglewood site over Carson.

    The Sunday commute to Carson or Inglewood is easy, Chargers fans better get used to it.

    David Crossley
    David Crossley subscriber

    @David Benz @David Crossley---You are correct that the NFL may still choose to blackout games in the future, but I doubt they ever will again.  And again, the blackout lifting has absolutely nothing to do with any teams relocating.  I also expect in the next few years that MLB will also relax some of their blackout policies, but that isn't directly relevant to this discussion.  Feel free to find me any league statement that claims the reason for the blackout policy being lifted has anything to do with possible team relocation.


    And a team can move without permission, as some of the NFL owners have already stated, as that precedent has also already been set.


    And on whether I want the Chargers to stay--that's big swing and a miss on your part.  What they do is up to them.  I would like them to stay, but if they move?  Life goes on.


    And on an actual curious note, is there any statement by Grubman saying that G-4 funds would be available for the Carson project?  You claim he has said that, but I have searched and can't find any such statement.  If you could produce a link to that statement I would appreciate it.

    David Benz
    David Benz subscriber

    @David Crossley Post links to back up your baseless claims, I gave you a link that explains that lifting the blackout is related to the 2015 lame-duck season.  The NFL isn't going to come out and say what you want them to say, that's obvious.

    Nobody believes you don't care if the Chargers stay or leave, you post on every Chargers story here and at the UT.  You were spamming the results from the rigged LA times poll to try to claim there isn't any interest in the Chargers in LA.

    “A stadium project can be eligible for league financing provided the project and its sponsors meet certain criteria,” NFL senior vice president Eric Grubman told the Register on Friday. “A Carson project would be eligible and could apply if it met those criteria.”"

    http://www.ocregister.com/articles/stadium-651853-raiders-carson.html?page=2

    Fabiani and Davis have said that G4 funding is available for Carson.  Moving back to a former home market isn't treated as a normal relocation.  The Raiders are the only team who moved since the AFL-NFL merger that were not charged a relocation fee.  The 6 other moves were all charged relocation fees.

    "A few months later, Al Davis, who owns the Raiders, moved his team from Los Angeles to Oakland and wasn't assessed a relocation fee."

    http://www.bizjournals.com/stlouis/stories/1997/10/06/story1.html?page=all

    David Crossley
    David Crossley subscriber

    @David Benz @David Crossley--The NFL isn't going to come out and say what you think I want them to say because it's not true.  You may think what you wish.  And the fact that you don't believe me as to whether the Chargers stay or go is on you.  I really don't care, and I don't care whether you believe me or not.  I only mentioned the LA Times poll as that was the only one I had heard about at the time.  By the way, I eat spam.  I don't post spam.


    Grubman said that the G-4 funds were available if the project met certain criteria.  I am sure you know what those criteria are--I don't--but Grubman didn't say the project met that criteria, only that G-4 funding would be available IF it met the criteria.


    I don't think any team moving to LA will be charged a relocation fee--including the Rams.  That's how bad I think the NFL wants back into the LA market.

    Elmer Walker
    Elmer Walker subscriber

    Let's not assume the City was not aware of these outcomes. Maybe they wanted to unduly enrich the Chargers and drafted the contracts to do so. That would leave them subject to less criticism than just giving them an almost rent free stadium. 

    John Polhamus
    John Polhamus

    @Elmer Walker I agree completely, Elmer. If you have a building that won't conveniently fall down, the only way to get rid of it is to abuse it. I wonder if the City itself can be sued for "demolition by neglect" of a valuable civic asset? Under no circumstances, however, do I think that the rapist NFL should be rewarded with a new building. By withholding Superbowls, after they insisted on the Stadium Expansion to begin with in order to award one, they have manifestly contributed to the decline of the building through the non-accumulation of funds that would have helped to repair and enhance it.

    Elmer Walker
    Elmer Walker subscriber

    @John Polhamus @Elmer Walker  Wow! A conspiracy theory. I like that and it is conceivable. The NFL has rape and pillaged taxpayers for many years, and for that they get to be non-profit. 

    David Benz
    David Benz subscriber

    @Elmer Walker We know that Goldman wanted to be a state senator and was looking for Spanos' financial backing.

    bgetzel
    bgetzel subscriber

    The lesson to be learned from all this is obvious: The Chargers and the supporting business community have always gotten what they wished. Money talks in politics, and it has always been so here. Curiously, there do not seem to be sufficient local fans who care. Over the years, frequently, the Chargers have not sold-out home games (Hence, the price tag on the ticket guarantee) and TV blackouts used to be common. Here is a thought - The Chargers should raise ticket prices sky high, so the die-hard, wealthy fans and supporters would pay  a greater share for building the stadium than the general public. "You want it - You pay for it"!

    Dean Plassaras
    Dean Plassaras

    Yes, but here is the thing. No doubt, the city has cut horrible deals with the owner at city's complete disadvantage.


    However, the city and owner are stuck with each other for the foreseeable future. Therefore the city has 2 choices. Either let the owner stew in the same Q for the next decade so that the owner could  learn his lesson of who is calling the shots  or give the owner the space to pursue his Carson nonsense with a predictable crash in the end.


    Under either scenario the city must develop a thick skin and stop obsessing with the countless stadium stories which amount to nothing better than town gossip.


    This daily pre-occupation with the insignificant and unimportant proves that Heraklitus of Ephesus (a Greek philosopher  circa 500 BC thought to be the inspiration for Socrates) was true after all when he said:


    Βλὰξ ἄνθρωπος ἐπὶ παντὶ λόγῳ ἐπτοῆσθαι φιλέει.
    A stupid man loves to be puzzled by every discourse.
    SOURCES--Plutarch, de Audiendo 7, p. 41. Context:--They reproach Heraclitus for saying, "A stupid man loves,"'etc.

    Omar Passons
    Omar Passons subscribermember

    While this is an issue I have to push myself to really get into, I appreciate the thorough coverage.  As I read, I kept hearing that scene in Goodfellas in which Ray Liotta's voice over is talking about the terms of repayment for certain money owed.  The sanitized version is that it doesn't matter what is going on with the business, the owner must pay what he or she owes.  I wonder if the last bastion of leverage in a deal like this for the City is just to say we'll get a deal done, but that deal is going to be at a much bigger annual lease payment number and there will be no out clauses for rocky situations or bad weather.  Maybe.  I'll always wonder what the same amount of public money could do if spent spurring innovation by augmenting transportation systems so kids in various far off communities get to the mesa for technology opportunities. Or spent turning the Mission Valley space into a tech playground/outdoor river and art park with massive high speed Internet, 3-D printers, coding academies, etc.  Maybe what Mayor Faulconer needs to do is shift people's attention from the stadium issue by announcing plans to do our own back-up planning.  Much the way the Chargers have taken to discussions with Carson, maybe the stadium group needs to announce that the City has also hired a consulting firm to evaluate how to turn the Mission Valley Qualcomm site into a public center of art, technology and opportunity that returns to San Diegans a major space at the foot of a trolley line along the San Diego River.