Dean Spanos' perspective on Chargers stadium search

One of the biggest issues in this whole stadium drama has been the lack of any real comments from Chargers' CEO Dean Spanos.

Unfortunately, Spanos has given Special Counsel Mark Fabiani free reign, and the result has been a stew of half-truths, mudslinging, and contradictory statements which has made it impossible for anyone to know what the Chargers' true intentions are.

That's not necessarily a slam on Fabiani - as a Public Relations and Political guru, that his job. It's what he was hired to do. The nastiness of his campaign is absolutely a projection of the situation the Chargers find themselves in - a battle for control of Los Angeles. San Diego is simply collateral damage in that fight.

So, it's worth a moment to look past Fabiani's brutal and effective tactics, see where Dean Spanos may be coming from.

Where Does Dean Spanos Actually Stand?

These are the factors I think are playing through Dean Spanos' mind:

The patriarch of the Spanos family, Alex, turns 92 in September and suffers from dementia. Without being mean-spirited, it's fair to say the family has to start making plans for how to handle his passing. Considering that Alex Spanos and his wife owns the controlling stake in the franchise (37%) the family will be on the hook for estate taxes on that part of the franchise. The Chargers, according to Forbes, are valued at $995 million (as of August 2014). This means the Spanos family is paying estate taxes on approximately $370 million when Alex passes away (if the ownership stake is transferred to the rest of the family). I'm no tax expert, but according to the rates listed here, I'd suggest this is roughly equivalent to $147 million.

Of course, this becomes moot if the Spanos family decides to form an irrevocable trust. (h/t to: Beau Lynott)

Now, let's take a look at the costs applied to the Chargers by the plan presented by the Citizens' Stadium Advisory Group (CSAG).

• $300 million in contributions by the Chargers.
• $81 million in money plus interest from the $200 million contributed via the NFL's G$ Stadium Loan Program.
• $173 million in rent payments over 30 years.
• Responsibility for cost overruns associated with delays and overruns. Cost unknown.

Let's call it a minimum of $550 million.

This is where Fabiani's all-out assault on San Diego's attempts to navigate around (or hastily comply) with the California Environmental Quality Act (CEQA) makes more sense.  I personally believe that Fabiani's strategy was deliberately intended to embarrass San Diego (and thereby improve their case for Los Angeles). However, the concerns regarding risk to the Spanos family make total sense.

They don't have the money to gamble on multiple lawsuits delaying a stadium project.

This is why the Spanos family is pursuing the downtown option, with a tax increase. This provides a guaranteed revenue stream from which to get the stadium built, without exposing the family to risk at a time when the family simply can't afford to take that risk.

Furthermore, the major initial outlay of cash may be why Spanos doesn't want the Mission Valley plan, at least not as it's currently pitched.

I think, based on the Spanos family's current net worth, they'd be have to borrow that initial $381 million from Goldman Sachs - the only other thing they could do to raise that kind of money would be to sell approximately 38% of the franchise - which amounts to a controlling interest.

I'm speculating here, but I think it's also possible Goldman Sachs has told the Spanos family they won't get the same loan terms on a stadium built in San Diego without those guaranteed revenue streams (i.e. a tax increase). Since San Diego (as a market) can't provide those guaranteed revenue streams (non-existent corporate base, high-transient population), the move to Los Angeles makes more financial sense.

Now, let's revisit the estate tax issue. Let's speculate the value of the franchise goes to $2.5 billion in Los Angeles. This means the family will have to pay approximately $362 million in estate taxes when Alex Spanos passes away.

With a new stadium in place, and guaranteed revenue streams in Los Angeles, this bill becomes much easier to pay. Especially when they're on the hook for about $730 million for the Carson Stadium Project (if the Raiders go with them), and none of that $730 million is coming out of their pocket. It will be paid using money generated from PSL sales, Naming Rights, Sponsorships, etc.

Author's Note: The $730 million includes only the costs related to the construction of the proposed Carson Stadium. This figure does not include a Relocation Fee, tenant costs at a temporary venue in Los Angeles, purchasing land and building a new headquarters, and other associated moving costs because there are no reliable figures to use as a reference.

Would you rather:

• Pay $730 million as you go in Los Angeles on a project which is largely immune to CEQA-related lawsuits, when your franchise will be valued at $2.5 billion?

-or-

• Pay at least $550 million as you go in San Diego, with the threat of lawsuits hanging over your head, when your franchise will be valued at $1.5 billion?

I submit this is why the team is all-in on Carson for 2015, and will only consider San Diego as a fallback option in the event the Inglewood site is selected by the NFL Owners. The Chargers' best chance to get Carson lies in their ability to prove that San Diego can't get anything done, and doesn't have a solid plan in place. That's their narrative.

In Closing

While I and many others may detest the campaign waged by Mark Fabiani on behalf of the Spanos family, it's pretty evident that the move to Los Angeles makes perfect sense for the Chargers.

Dean Spanos, based on multiple factors, simply doesn't have the flexibility to make a deal under the terms currently proposed by San Diego. Further, until / unless Carson is not an option, there's no incentive for Spanos to pursue a deal in San Diego.

Ultimately, based on some of the factors listed above, the decision to stay in San Diego or go to Los Angeles rests in Dean Spanos' hands.