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STADIUM TALK: What do the Chargers actually want?

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Do the Chargers want to stay in San Diego or do they want to leave for Los Angeles? It's not actually that simple.

I keep getting this same question from people that know how closely I follow the San Diego Chargers and the stadium negotiations: "What do the Chargers actually want? I can't figure it out. Do they just want L.A. and there's nothing San Diego can do?"

Here's my answer, as complete as I can give it....

You are asking the wrong question, or at least limiting yourself to the wrong potential answers.

It's not that the Chargers want Los Angeles or San Diego. What Dean Spanos wants is simple, and Mark Fabiani has been telling us for over a decade what it is. The team wants a new, state-of-the-art NFL stadium that doesn't potentially bankrupt the team's owner.

That's it. That's all.

Sure, it gets more complicated than that. The team is willing to kick in more money towards a Carson stadium than one in San Diego, but that's because the value of the franchise (and the stadium as a home to large NFL events) goes up significantly if the team can own the second largest market in the country.

They're also willing to kick in more towards a downtown San Diego option for similar reasons. Whether or not San Diego wants to admit it, Mission Valley is not a draw. A San Diego Super Bowl would be mostly centered in downtown, as it has been in the past, with the game being essentially the only thing that brings the focus to the stadium in Mission Valley. It would be more of a boon for the city than it would be for the team.

I'll gloss over this quickly, but the Mission Valley site also has a ton of issues. Traffic down there is already a nightmare. The environmental issues would make it difficult to build around it, and the space to do so is limited (due to the river, freeways, and existing development).

Petco Park got to expand downtown around the stadium, and essentially own the East Village area, and there's really no limit to how much they can grow and benefit from the area around it. The Chargers are (in their own way) competing with the Padres for the title of San Diego's Most Beloved Sports Franchise, and part of that is doing what the Padres did but better.

Keeping Options Open

Mark Fabiani has stated several different times now that his goal is not a stadium in San Diego, Carson or Inglewood. His goal is a stadium. He's paid by the Chargers to make sure they're playing somewhere nice and not bankrupting themselves in the process.

Until they're actually officially dead, Fabiani is keeping all options open for the Chargers to make sure that he can leverage them against each other....and to make sure that at least one chair is open when the music stops playing.

The only reason it seems like he's favoring Los Angeles is because Los Angeles doesn't need him or the Chargers. They have the Rams and probably a dozen other teams that would love to move to L.A. sometime in the next five years. San Diego doesn't have that same leverage. They need the Chargers, and Fabiani knows it.

Where the Mayor Screwed Up

Look, I like the CSAG group. I like all of those guys a lot. I think they did a good job, but I also think the Mayor put them in a no-win situation.

When the CSAG presented their stadium plan for Mission Valley, it was flawed. They admitted as much! This was not supposed to be a full proposal, but rather "a starting point for negotiations." Considering it took them four months to put together, with much fanfare (and a big press conference) when they announced, I'm not sure if the Mayor understands how negotiations actually go. They usually start with sitting down in a room together.

This would be like if the Chargers, as a way to start negotiations with Eric Weddle, gave him a low-ball offer ($5 million a year for two years) in a press conference to the whole of the San Diego media. Then, when everyone pointed out that he's worth closer to $10 million and probably wants four or more years, the team says "Well, this is just the start of negotiations." It's silly!

Due to the task they were given and the way they were told to go about it, CSAG got no assistance from the Chargers. We want to call the Chargers the bad guys for this, but they're actually not! If the Chargers interacted with CSAG and gave them some guidance, it would likely be their stamp of approval on the project, closing potential options in Los Angeles. Because they knew the big announcement was coming, their only option was to respond to it once it was out.

A starting point for negotiations should be figuring out deal-breakers and baselines. The Mayor should have met with the Chargers and figured out what types of things they would not be willing to do (or not able to afford) to get a stadium, then he could have had someone put together a starting point based on that. Instead, he did it backwards, and embarrassed the city in the process.

Financing

Let's do some quick, stupid-guy math on that CSAG proposal.

  • The Chargers were asked to contribute $300 million.
  • The Chargers were asked to pay $173 million in rent.
  • The Chargers were asked to split $60 million in estimated PSL sales with the city/county, so that's another $30 million they're kicking in.
  • The Chargers were asked to share in the cost of operation and maintenance of the stadium, so tack on another million or so dollars per year.
  • The Chargers were asked to assume the cost of construction overages, which I'm estimating to be another $100 million (JMI's estimate for overages on a downtown stadium were about $120m).

So now we're over $600 million that the Chargers are potentially putting towards a new stadium in Mission Valley.

Flawed stadium site aside....the stadium proposed was a bit "bare bones" itself. The seating capacity is listed as somewhere between 65,000 and 72,000. There were no mention of luxury boxes and they're missing from the artist renderings (which is important because they affect construction costs and revenues in a pretty big way). There is no roof of any sort (because they said it would cost an addition $150 million), leaving out any chance of getting any sort of indoor event (such as the NCAA Basketball Tournament).

So, to quickly summarize, Mayor Faulconer wants the Chargers to pay over $600 million for a bare bones stadium in a part of the city that has no real room for expansion or growth. Is that a lot or a little? Let's find out!

Comparisons

Let's add in about $100m in construction overages and say the Mission Valley stadium is about $1.25 billion to build (not including development of the land around it). Let's assume that the Chargers are being asked to kick in $600 million for that. That's roughly 50%.

The city/count pay for half and the Chargers pay half. This seems fair, right? Well, on average, NFL teams are usually only on the hook for 35% of the cost of their new stadium. Asking the Chargers to compete with the rest of the league, while paying more for their stadium and losing the Los Angeles market? That doesn't seem fair. No wonder why they weren't satisfied with the CSAG proposal.

It's worth nothing that, in addition to wanting to grow the city like the Padres did, the Chargers would also like a deal similar to what the Padres paid for their stadium ($153m for a $456m project). The city is the one that most benefits from a new stadium, especially one downtown, so the team wants them to put up about 2/3rd of the money.

Are you wondering what Jerry Jones and the Cowboys paid for their 80,000 seat stadium with state-of-the-art everything that has been lauded as the best stadium in the country? Only $525 million of the $1.2 billion in total construction costs.

As best I can tell, the 49ers chipped in about $500 million towards the building of Levi's Stadium in Santa Clara (which has roughly the same capacity that the Mission Valley stadium would have but maybe a few more bells and whistles).

The Indianapolis Colts paid....wait for it....$100 million towards the building of Lucas Oil Stadium. They do pay rent though, to the tune of $250,000 a year. That deal has been a nightmare for the city.

The only recently-built stadium that saw a team kick in as much as CSAG is asking the Chargers to kick in? MetLife Stadium, which is basically the working blueprint for the Carson stadium project. Two teams, two loans from the NFL, one big shared loan with the bank that gets paid back with PSLs and revenues.

It appears that CSAG is asking for about $100 million more from the team than they probably should have, but maybe this is one of those things that was built into the proposal high with the intention of negotiating down.

A Dead End

As a resident of San Diego and a long time fan of the San Diego Chargers, I don't want the team to end up leaving and playing somewhere else. That being said, I understand their rejection of the CSAG proposal and the San Diego Mayor in general.

This is basically what Eric Grubman was upset about when he came and met with the CSAG. Why were they building a flawed plan, presenting it to the public, and not bothering to ask the Chargers what the team's potential "deal breakers" were? It was a recipe for failure, and in the end, it failed because the group ended up asking for so much from the team (comparatively) that it came off as an insult rather than a starting point for negotiations.

Maybe it was the Mayor's way of saying "We can't pay for 65% of a stadium, we can only pay for 50%." Which, you know, is fine. However, that's also why Mark Fabiani is now pushing for the Mayor to call on the hoteliers to get involved. A third party raising money towards the stadium is only going to help things, but the hoteliers aren't going to be on board to support a stadium in Mission Valley that is surrounded by condos and big box businesses.

So....downtown?

Probably.

Truth be told, the Chargers are already likely pushing the limits of their budget, and are "overspending" when it comes to what NFL teams spend on these stadium things.

What San Diego needs is a big idea mixed with some big action. A downtown stadium with a retractable roof would get the Chargers back to the table, especially if their investment isn't going up as a result. The only way to do that is with the backing of the hoteliers, and the only person who might be able to make that happen (Mayor Faulconer) doesn't seem interested in trying.

Sorry...

I know the picture I'm painting is rather bleak, and this isn't so much of a strong argument being made as much as it's a Sunday morning rant in response to a question that nobody seems to understand.

Jeff Siniard will be back at some point with some actual, thoughtful stadium information. In the meantime, it's worth noting that Jeff has been right all along...

Task forces are awesome for politicians, for one main reason: It allows the politician to present the illusion of taking action on an important issue without actually doing anything about it. I can't convey how disappointing this announcement is.

San Diego Chargers Stadium Update: Hoteliers vs. Spanos (1/16/2015)

The simplest way for the City of San Diego (City) to pay for a new stadium is to raise taxes in order to cover the public contribution. However, California law requires a 2/3rds supermajority vote to pass any tax increase for specific purposes.

In light of the extreme difficulty of passing a tax increase, the best tax to target in San Diego is the Transient Occupancy Tax (TOT), which is applied to persons staying at hotels and resorts for a limited (i.e. less than  30 days) time. The current TOT tax is set at 10.5%, which is lower compared to many other cities in the United States.

According to the City's proposed FY2015 budget, the City receives $174 million in revenue from the TOT. Of that $174 million, only $91.14 million reaches the General Fund. Without impacting other services, and assuming an added cost of about $20 million/year over 30 years, the TOT would have to be raised from 10.5% to at least 14% to completely cover the public cost of a new stadium.

In addition to general public anathema to raising taxes for anything, this proposal would find bitter opposition among hoteliers, who would much rather see any increase in the TOT be put towards a contiguous Convention Center expansion, which is expected to cost between $550-600 million.

How to Pay for a new Chargers Stadium in San Diego (2/16/2015)

Editor's Note: A previous version of this post incorrectly stated that San Diego State's rent for the Mission Valley stadium would be $21 million per year. It is, in fact, $1.25 million per year up to $21.6 million overall.