NFL Passes a Threat to San Diego Through a Hole in Charger Contract
The people of San Diego could almost be forgiven for thinking in 1995 that they cut a sweet deal to keep the National Football League Chargers.
In return for their spending $60 million in borrowed funds to refurbish Qualcomm Stadium, they received the Chargers’ commitment to remain in place for at least 25 more years. The team, which had appeared in that year’s Super Bowl, looked like a premier property. Its president, Dean Spanos, spoke glowingly of how “honored” the Chargers were to be part of “the San Diego community.”
It wouldn’t be long before the city discovered what many other communities across the land had learned: The NFL has a way with a poisoned chalice that would leave Lucrezia Borgia speechless with admiration. Not only have the Chargers fallen far off from Super Bowl quality, but the 1995 deal has cost San Diego millions of dollars -- without eliminating the threat that the team might depart anyway.
Instead, the city woke up the day before Thanksgiving to hear it was being sued by the Chargers to force a renegotiation of the original deal. The team wants enough prime city-owned land to build an entirely new stadium and a high-end housing development. The implicit threat is if they can’t renegotiate, they’ll move.
“When it comes to sucking money out of a community, the NFL has got the greatest racket going in the country right now,” says Mike Aguirre, a local political figure who has criticized the Chargers deal from the start.
NFL lease contracts are full of more holes than the Charger defensive line. The team’s renegotiation demand, for example, is based on a so-called trigger clause that says the lease can be reopened if the team’s financial condition takes a turn for the worse. In a 1997 letter to season-ticket holders, Spanos said the clause would apply “only in the case of severe financial hardship for the team -- defined by very narrow, specific, and confining conditions.”
Yet it seems that those conditions aren’t so narrow or confining after all. The clause can be triggered if the team’s player salaries and benefits exceed 75% of the average NFL team’s take from gate receipts and national TV contracts, a level that by some estimates is in the range of $90 million to $100 million.
In their lawsuit, the Chargers claim that their 2002 spending exceeded the trigger point by $4 million, or about the retail cost of one Doug Flutie. Chargers spokesman Mark Fabiani acknowledges that this does not necessarily mean that the franchise itself is losing money, which most people would probably consider the minimum definition of “severe financial hardship.” But Fabiani complains that a nationwide stadium-building craze has dropped the Chargers and their aging Qualcomm Stadium to near the bottom of the league revenue ladder. “Some would say that if you’re at the bottom of the league, that’s a financial hardship,” he says.
Isn’t this the usual NFL baloney? In any closed system of 32 teams, somebody has to be at the bottom. And given the pace of innovation in pro sports in squeezing revenues from fans and host cities -- more luxury boxes, richer concessions, scams like “personal seat license” fees for season-ticket holders -- it’s certain that even those teams with the most lavish contracts at any given moment will be eventually surpassed by other franchises. NFL Commissioner Paul Tagliabue pushes this process along by promising Super Bowls to cities that build new stadiums and threatening to withhold them from those that refuse.
The very point of a long-term contract is to lock in financial terms. If not, then how come the same team owners who insist on renegotiating their leases every couple of years throw conniptions when a star player asks to renegotiate his contract merely because he’s produced a standout season?
Anyway, the real trapdoor in the 1995 lease was the so-called ticket guarantee. This required the city to cover the gap by which ticket sales fell below 60,000 seats per home game (not counting about 10,000 luxury box and suite seats), in effect guaranteeing sellouts.
At the time, this seemed a minor detail. Even though the NFL is a league in which teams routinely emerge from nowhere to become playoff contenders, then vanish back into obscurity, no one imagined that the Chargers might not remain the fans’ darlings indefinitely. The 1994 season, which ended with a Super Bowl loss, turned out to be the high-water mark. It hasn’t recorded a single winning season since.
As the on-field performance sagged, the ticket guarantee became an albatross. In 1999 and 2000, the city spent more money on tickets than it received in rent from the Chargers. After the 2001 season in which the Chargers stank up the league with a record of five wins and 11 losses, the team unilaterally raised single-game prices by $10, or more than 20%. And why not? If the fans didn’t buy, the city would eat the loss. The cost of the guarantee promptly soared to $6.1 million for 2002.
Overall, the city has collected a net total of only $4.3 million since 1997. Meanwhile, taxpayers spend $5.4 million a year to pay off stadium renovations.
One reason for this huge shortfall is the absurd way the city put the guarantee into practice. The original idea was for the ticket guarantee to be a sort of bookkeeping exercise: At the end of every season, the city would calculate how far sales had fallen short, subtract the appropriate sum from the Chargers’ annual rent and bill the team for the balance.
It was plain that this subtly cheated the citizens. The thousands of tickets remaining unsold each week meant that Chargers game telecasts were getting routinely blacked out in the San Diego area. (NFL contracts stipulate that a home game can be telecast locally only if it’s technically a sellout.) Mortified that local taxpayers were paying millions a year for unsold seats but couldn’t see the games on TV, the city started acquiring the unsold tickets and distributing them to needy institutions.
This policy ended up hurting everybody. It hurt the Chargers because instead of netting the full value of the guarantee against its rent due, the team had to fork over one-third of the total to each visiting team, under league rules that provide for such a sharing of the paid gate.
It hurt the city because the purchases removed any incentive for fans actually to visit Qualcomm. Once it became evident that every home game would be televised, even more San Diegans stayed home.
“The purchase of the tickets was a catastrophic decision,” Fabiani says.
Fabiani insists that the Chargers are determined to stay in San Diego, but lots of people are suspicious. It probably didn’t help that in an April letter to Mayor Dick Murphy asking to renegotiate the lease, Dean Spanos mentioned Los Angeles three times in seven paragraphs.
Still, there is a local theory that this is all bluster, and that the NFL likes keeping the L.A. slot vacant, since the threat of relocation to Southern California has been a useful cudgel to use against other franchise cities foolish enough to resist its demands. Of course, if the Chargers moved to L.A., the league would still have a pretty good weapon in hand. It could always threaten to relocate some mutinous community’s franchise to San Diego.
Golden State appears every Monday and Thursday. Michael Hiltzik can be reached at golden.state@latimes.com.
