[Elvis]

http://www.boltsfromtheblue.com/2015/6/ ... ually-want

STADIUM TALK: What do the Chargers actually want?

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)

[kayfabe]

Totally on board with this post (though I sense a bit of Fabiani ass-kissing
by pointing out some mayor Falcouner faults in order to maybe get the Chargers
back to a one-on-one SD bargaining table...). But the article's implication
is that the Carson move is more bluff than leverage and I'm all over that
too -- as evidenced by some of my earlier posts and as this article implies...
Spanos/Fabiani need leverage and if there isn't any, they'll just make it up.

Because really there's no argument that Spanos can make for the Chargers to
move to LA that the Rams can't make better: SD is near the bottom in overall
team valuation, but the Rams are dead last; SD actually makes more money
(40 mil) per year than the Rams currently do (16 mil), and San Diego doesn't
even pay rent to Qualcomm in the current setup. The Rams fan base is already
established in LA, San Diego's isn't. And whichever team (or teams) move
to LA will automatically vault to the top three in team valuation (the current
estimate is to between 2.5B-3.5B), but the Rams value would increase more
because they have more to gain. So Fabiani brags at the Carson meeting that
the Carson financials are tidy, that stadium can be built now, and it can
be ready in 2019. In a vacuum that sounds impressive until you realize that
Kroenke can have his ready in 2018 if shovels meet ground in December 2015,
And is Spanos' move is a money grab, well, Stan to LA is an even bigger one.

So now if you're the Chargers and you're trumped at every turn then what do
you do? You find your strengths -- and really at this point it's only Dean
Spanos' better relationship with the NFL owners where Spanos trumps Stan
(though there's certainly some debate whether that's even true or not and
whether the relationship between Stan and Dean is a lot more amicable than
either is letting on), and then try to eliminate everything else through some
PR stunts (Carson), deflection from Kroenke's advantages (CEQA! Lawsuits!),
and false equivalencies (when did San Diego and Oakland become friends again?).
Throw in an artificial time deadline (the August meeting), point everynone to
that shiny object (neglecting the usual October midseason owner confab and
scheduled December meeting) and voila, you now give the impression that you
have sway with NFL owners and we need answers, stat!

But you don't, because the owners aren't dumb and they all live and breathe
money. And while Mark Davis/Stan/Spanos are being driven by expiring leases
and crappy stadium deals, the NFL and the rest of the owners are taking
more of a John Wooden approach. So sorry Chargers, not gonna work.

Which is why this article and the Mike Florio one that Elvis also posted
tonight (if Florio's not just makin' stuff up) is encouraging.

The problem I have is that I think Spanos is playing this thing completely
wrong; you don't fashion your game plan around hail mary passes, which is
Carson; you go with what you really want (downtown SD) which is the Nash Equilibrium
(if you're familiar with the book/movie "A Beautiful Mind" it
can best be summarized as the scene where every guy goes after the SECOND BEST
LOOKING woman in the bar). Otherwise you risk snookering yourself into the
Prisoner's Dilemma, which is what I think is a real possibility: you end up
worse off than if you had taken the original deal in the first place. Yes
the rewards are better, but you're ignoring the just-as-likely risks. There's
absolutely no chance the city of San Diego approves a tax of any kind on any
stadium, so why then cut off the City Council last week at its knees? The
Chargers could've just let a ballot measure proceed for Mission Valley, have
it bomb at the ballot box then have plenty to go back to for the downtown
site with a City Council that would get more creative. Refusing to play
in Stan's Inglewood stadium is arbitrary on Spanos' part; he could just
as easily have that as a fallback position and extract plenty of profits
that way. And I've contended all along that Kroenke is going to have to pay
off both Mark Davis and Spanos...and Stan wouldn't mind that at all to be
playing in a Charger-less Los Angeles (Raiders in Inglewood doesn't matter
in this equation).

So why not just go right to this end result if you're Spanos? Meet with Stan,
ask for the 400-500 mill extra for your downtown San Diego stadium knowing
that the tax base isn't there. He'll pay it I bet. And the NFL G-4 stadium
loan program (up to 200 million) might be negotiable too, if the NFL treats
it similarly to other loans they've forgiven on a prorated basis if teams
don't switch owners or move to other cities. So yeah I know it's not how
both Met Life and Santa Clara were financed (yet another Fabiani shiny object
from last week's Carson meeting, and as the author of the post implies those
two are VERY similar financial models) but those weren't three teams
fighting for two spots; certainly some assymetrical ReLo fees could take
care of that. Any payoffs between owners themselves: so Stan pays Spanos;
Stan gives another couple hundred mil to Mark Davis for the opportunity to
be a tenant in Inglewood, deal done. Shiny new stadium in downtown San
Diego, financed with <35% Charger money, so NFL front office G-4 forgiveness,
and a nice pile of coin from Kroenke (along with usual PSL fees, shared
parking and concessions, rent, forward loans, etc.). Deal Done.

So when (not how) does this kayfabe end and the match start? Or is it already
going on, but all behind the scenes? I suspect the latter: it's always the
quiet ones you need to worry about and both Stan and Mark Davis have held their
cards VERY close to their vest so far. Fabiani/Spanos on the other hand...

...are probably blowing it every time they open their mouth. Which is a lot.
And they act like they're the one's pulling the strings, but really their game
of chicken is looking a lot more now like they're just caught in a serious
Prisoner's Dilemma.

And the Chargers will have only have themselves to blame if years from now
the Rams/Raiders are tearing it up in Inglewood and the Chargers are still
living year-to-year in a rent-free Qualcomm.

[Hacksaw]

Great post kayfabe. IThat is an awful lot of jack for Stan to have to come up with. Half a billion to Spanos-Davis would annoy me just so that they go away. i'm not sure the league would make him pay that much. That's practically extortion their little Charaide(r) .

[Elvis]

+1 great post.