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San Diego and the Chargers Prepare for Negotiations

It was announced on Tuesday evening that the Chargers and San Diego officials will begin their stadium negotiations next week. Let's see where everyone stands going into negotiations.

Rendering of proposed new stadium in Mission Valley
Rendering of proposed new stadium in Mission Valley

Well, it only took a week.

Everyone in San Diego can now stop freaking out about why the Chargers didn't publicly comment on the financing framework released by the Citizens' Stadium Advisory Group (CSAG) last week.

Why Didn't the Chargers Comment on CSAG's Plan?

There really was no reason for the Chargers to comment publicly on the proposal, other than to acknowledge its completion.

Frankly, they had a more important task at hand - rescuing their proposed Carson Stadium project.

The Chargers, through the hiring of former 49ers and Browns Executive Carmen Policy and some well-placed "anonymous sources" reporting at the recent NFL Owners Meetings from Jason La Canfora, have done a marvelous job of reversing the negative press which had begun circulating around the proposed Carson Stadium project - so much so that the perceived momentum has swung in Carson's favor.

In the meantime, everyone was concerned about their lack of comment on CSAG's plan.

In my opinion, the Chargers understood that any positive comments about the plan would be interpreted as a softening of their "we have to go to Los Angeles" narrative.

On the other hand, negative comments would cause San Diego to strike a harder tone in negotiations with the Chargers, and CSAG's framework has lots of things the Chargers want to keep.

Furthermore, according to CSAG Spokesman Anthony Manolatos, the Chargers and the NFL had input into the final recommendations, in response to a rumor the Chargers tried to kill CSAG's plan...

Based on all the above information, I think we can reasonably guess that there really wasn't much reason for the Chargers and the NFL ownership to comment on the plan.

Because they already knew (or had a solid grasp of) what was in it.

Also, all the players involved understood it was a starting point, and not a final proposal. And as far as starting points go, in my opinion, it was pretty solid.

If the Chargers and the NFL had hated CSAG's framework, they surely would've let everyone know by now, because it would only strengthen the team's case for moving to Los Angeles.

Further Flexibility During Negotiations

During the NFL Owners' Meetings, a couple of other items were quietly approved. According to Daniel Kaplan of the Sports Business Journal, these items concerned team debt limits and ownership stakes.

As far as I've been able to figure (based on this Kaplan article from the last debt ceiling increase), this change allows NFL franchises to carry more debt, which is secured against the value of the franchise. Additional debt incurred beyond this point would be transferred to an NFL-appointed holding company, and higher interest rates would apply. This does not seem to affect the amount of money which can be loaned from the NFL's G4 Stadium Loan Program.

The NFL also has exemptions in place allowing teams to assume extra debt during stadium construction projects. So, while not a boon of good news for the Chargers, it does make things easier for the team.

This is huge for Mark Davis. If the tweet above is accurate, this may make it possible for Mark Davis to sell a significant portion of the Raiders franchise, in order to secure the revenue necessary to get a new stadium built in Oakland, as reported by Fox Sports' Peter Schrager:

If the Raiders were to bow out of the Carson Stadium project, it would become a much higher risk-reward proposition for the Chargers to go it alone, and would likely result in losses for the city of Carson (See Exhibit B, Appendix II, Page 102) in most of the first 30 years of existence, before performance rent begins. Furthermore, it kills the biggest selling point for the Carson Stadium project - a silver bullet which solves both stadium situations in San Diego and Oakland.

Lastly, we have a case where CSAG essentially pulls the old Monopoly "Bank Error In Your Favor" card. In this Voice of San Diego article by Liam Dillion, an economist found that CSAG had undersold the amount of potential revenue generated from team rent by approximately $80 million. CSAG Chairman Adam Day acknowledged the error in the article.

That would change the amount of bondable revenue, based on potential rent, from $173 million to $253 million.

The Issue Isn't Only Money... It's Also Time

Even if the financing plan is agreed on, the question isn't just money. The question is also time. And unlike CSAG's framework, there appears little-to-no flexibility in regards to the NFL's desire to return to Los Angeles.

The NFL wants a solution for Los Angeles late this year. Inglewood's proposed stadium project can break ground in early December of 2015, and the NFL would likely need to give them an answer by that time.

I've said that San Diego should make the best deal it can for 2016, even knowing it's risky, because the odds of winning a Special Election before 2016 are not as good.

Assuming the Chargers are honest about staying in San Diego and a deal is reached, and assuming the NFL is intent on returning to Los Angeles in 2016, the best possible outcome for San Diego would be for the NFL to choose the Inglewood Stadium project. This would allow the Chargers and San Diego to prepare for a 2016 vote. If it passes, the Chargers stay, and if it fails, the Chargers go to Inglewood.

Besides the reservations the Chargers have about successfully winning a Special Election, and besides the potential problems involved in ramming through a project of this magnitude without sufficient time for thorough review, there are serious time constraints if a Special Election is going to be held.

According to this article by David Garrick in the San Diego Union Tribune, a Special Election would need to be held by January 2016, as the Registrar of Voters needs to prepare for the June 2016 primary. That said, the Registrar of Voters would also need four to five months of advance notice to prepare for a Special Election.

For arguments sake, let's say the NFL needs an answer by November 30th. That means a deal has to be reached by no later than the end of July.

For those reasons, a Special Election should only be held if the Chargers are 100% going to Los Angeles in 2016 (either by winning Carson or going to Inglewood), unless a deal is secured in San Diego before that time.

Wrapping Up

As San Diego enters into negotiations with the Chargers, there will be some upsides.

First of all, both sides will be working off of CSAG's financing framework, which has input from all of the parties involved in brokering a deal. Second of all, the framework is flexible, so there will be some room for give-and-take. Thirdly, barring a major announcement, we can ignore Los Angeles for the next 2 months.

On the downside, there's not a lot of time. If the Chargers insist on a Special Election, there will be not more than 60 days to reach an agreement with the city of San Diego.

San Diego has their shot to keep the Chargers. Let's see if they can make the most of it.