|Wednesday, August 30
Updated: August 31, 5:30 PM ET
Charged issue: Money for nothing?
By Darren Rovell
No dude in San Diego is giving up on the Chargers' chances to turn it around this year and have a gnarly season. That's because the more the team loses, the more of his tax dollars the city pays the team.
In May 1995, the San Diego city council signed a 10-year deal that would soon become one of the most controversial issues in the city for years to come. The agreement stipulated, among other things, the city's $60 million contribution to the renovation of Jack Murphy Stadium, which later would become Qualcomm Stadium.
New scoreboards, more skyboxes, as well as 14,000 more seats and an extended lease, would keep the Chargers in San Diego for at least 10 years. The council was, in a way, merely fulfilling its obligation as a pro sports city -- making necessary financial contributions for the privilege of having a team.
But some think it is the "ticket guarantee" part of the deal that has made the Chargers as much of an enemy to their city as Raiders owner Al Davis is to Oakland. In the agreement, the city guarantees that if the Chargers don't sell a minimum of 60,000 tickets, it would purchase the difference.
It was a huge risk on the council's behalf. If attendance was good, the city would stand to make a nice profit off the team because of the sharing of parking, concessions and the ticket tax. But if the attendance were bad, the city would be paying the Chargers more for unsold tickets than the team would pay for rent.
"This was a risk-reward agreement based on performance," said Bruce Herring, deputy city manager of San Diego. "In the years the Chargers do well, they pay the highest rent in the league. When they don't, they fall somewhere in the middle."
Herring said the deal is not all bad, although the public might see it that way simply because the city's purchase of unused tickets is a strange way of giving it a sweet rent deal.
But cities often have contingency plans that increase or decrease rent based on attendance, according to Matt Freedman, editor of Team Marketing Report. "It's the business of pro sports, where a high majority of stadiums are publicly funded," said Freedman, who cites the Chicago White Sox as a team with rent based on attendance.
The Chargers' annual rent to the city, not including what they make from the "ticket guarantee," is approximately $5.7 million. Under the guarantee, the Chargers have paid a rent average of $1.5 million in their better attendance years since 1996. In the team's tougher years, the city has paid the Chargers -- by buying unsold tickets -- for using the building.
Scott Barnett, executive director of the San Diego Tax Payers Association, said although there are many complaints, the whole deal is a good one. "The volatility of the ticket guarantee in isolation is not good public policy," Barnett said. "But if you look at the entire deal, we believe it is a good balance for the city and the Chargers."
However, because the Chargers have not reached the playoffs since the agreement was signed and attendance has been poor, the city has had to buy more tickets from the Chargers.
Ron Roberts, a San Diego Councilman and leading mayoral candidate, said the city put itself in a bad position by entering into the agreement that pays the Chargers, regardless of their performance on the field.
"It's bad public policy to give anyone a blank check," Roberts said. "(The Chargers) say, 'Here's what's going on' and they tell the city how bad they did this year. It's basically a reverse incentive-rewarding the Chargers handsomely for doing poorly -- so that any kind of season is a good season."
Chargers executives have said in the past that the team has done a lot of marketing, but ticket sales have decreased because the 60,000-seat minimum lifts the NFL blackout and less people come to games when it is on TV. A spokesperson for the Chargers was unavailable for comment.
For four years now, community members have expected politicians to take a stance on the much-debated issue, along with their usual positions on taxes and education.
"I don't think there is any upside," said Brian Maienschein, who is running for San Diego city council. "If they are winning, they should be making money for the city and the team anyway."
Some even think the ticket guarantee has taken away all motivation for the Chargers to market themselves.
"There was nothing in the ticket guarantee agreement that gave the Chargers any true economic incentive to sell tickets," said Bruce Henderson, a former city councilman. "That is other than in the sense that it's nice to have extra money from the concessions."
While Barnett admits that "every game they lose creates a financial liability to the city," he believes that if the Chargers start winning soon, the city will make its money back. But Barnett points out that making money on the Chargers, given historical precedent, is idealistic.
"What people forget is that the Chargers, for more than 30 years, have been subsidized by taxpayer money and for only three years did the city make money on football in San Diego," Barnett said.
While Qualcomm went through renovations in 1997, it's only a matter of time before the Chargers ask for a new stadium, as the 34-year old relic still has many broken parts.
The 1995 agreement also has one supposed loophole, which allows the Chargers to move if they wish -- as long as they give San Diego the first offer to match.
Although Mayor Susan Golding said at the time that the deal would guarantee the Chargers in San Diego until 2020, it only definitively extended their lease until 2003 due to an out-clause. If the team chooses to leave, it must pay 60 percent of the city's outstanding debt on the stadium, which after the 2003 season will be approximately $37.7 million, according to the San Diego Taxpayers Association.
"When I read the agreement, eight or nine months after it was signed, I cried," Henderson said. "I cried because I want a pro sports team in San Diego, but I read the agreement as driving the Chargers out of San Diego."
While an NFL presence returning to Los Angeles appears to be around the corner, the Chargers have never mentioned the word "move." But Henderson thinks the Chargers eventually might have no choice. The ticket debacle has hurt public opinion of owner Alex Spanos, making funding for a new stadium more difficult to pass.
"When Spanos said he was willing to spend on the stadium in 1995, there was tremendous public support," Henderson said. "But in the year 2000 when he announces he wants a new stadium, the overwhelming majority of people are now saying, 'Well, then move out of San Diego.' "
Roberts said that the Chargers alienated their community by not renegotiating and making it easier on the city. "It's like the Chargers are saying 'We don't give a damn. A business deal is a deal,' " he said. "In this way, they have largely turned their backs on the community."
But for now, as long as the Chargers continue to lose, the deal they signed with the city council in 1995 is looking like a gem.
Especially now that the team raised ticket prices by $4 this year.
Darren Rovell, who writes on sports business for ESPN.com, can be reached at firstname.lastname@example.org.