Chargers' greed-driven L.A. move puzzling given several reasonable options to stay
Despite reasonable options, yet another pro sports franchise moved due to greed
Chargers owner Dean Spanos announced Thursday he was moving the team to Los Angeles, ending 56 years of NFL football in San Diego.
The reason the Chargers are leaving, we're told, is that the Spanos family couldn't find a favorable deal for a new stadium in San Diego. In November, local voters resoundingly rejected a ballot measure that would have raised hotel taxes to help pay for a new stadium and convention center. That left Spanos, we're told, with little choice but to uproot the team to L.A.
"Please keep it here," Spanos reportedly told his fellow owners at the league meetings last month. "I don't want to go to L.A. I want to stay."
Spanos' desperate plea notwithstanding, the Chargers owner had other options on the table, options that would have kept alive five and a half decades of tradition in San Diego, and potentially proven nearly as lucrative as the team's move two hours north on Interstate 5.
It's not that his hands were tied. It's that Dean Spanos is either one of the most clueless owners in sports history, or one of the greediest, laziest and most stubborn owners in sports history. Which is saying a hell of a lot.
Let's leave aside the pie-in-the-sky plan to bag $1.15 billion in taxes for the stadium-and-convention center gambit and focus on a proposal made just a few months earlier. Last spring, the Chargers proposed building a $1 billion stadium in San Diego. Spanos claims the move to Los Angeles was unavoidable without a significant tax handout.
Let's do some math based on that $1 billion plan, and see if he's right:
- The Spanos family owns 96 percent of the Chargers. A source in the sports banking industry said investors he and his colleagues have talked to are "lining up" to buy into NFL teams (even if they are minority stakes), especially in billionaire-laden California.
- In September, the Pegula family paid $1.4 billion to buy the Buffalo Bills. Given how team valuations have soared in the NFL, we can safely assume the Chargers would fetch at least that much if they were sold tomorrow; let's use a conservative estimate and peg the Chargers' value at around $1.5 billion.
- At a $1.5 billion valuation, the Spanoses could have sold a one-third stake in the team for $500 million and still maintained majority control of the team, with room to spare. That's halfway to paying for a $1 billion stadium. (In fact, the Spanos family could have sold all but 5 percent of the team to a series of investors and still maintained the controlling interest in the team, thanks to a rule passed in 2015 designed to aid family-owned franchises.)
- The NFL guarantees $200 million toward construction of any new stadium for any team. Last January, NFL commissioner Roger Goodell offered to up the ante to help keep the Chargers in San Diego, pledging $300 million. We're now at $800 million in available money for stadium construction.
- The most recent naming rights deal in the NFL for a new stadium belongs to the Dolphins, who inked a $250 million pact with Hard Rock. Even if the trend of escalating costs for naming rights were to slow, it's tough to imagine the Chargers seeing significantly less than the Dolphins' number for a San Diego stadium that wouldn't open until the end of this decade.
- Just like that, a sparkling new yard in San Diego is fully funded, with land valued at $180 million donated by the city to boot. All that without a dollar in new taxes, or any member of the Spanos family reaching into their own pocket.
Of course, the Spanoses would stand to make a lower percentage of the team's profits if one-third of the franchise became owned by other parties. But the dollars that stood to be made from a new stadium were substantial. Surging revenue from mega-concerts, Final Fours, All-Star Games, Super Bowls and other big-ticket events has powered gigantic profits in newer facilities like Arlington's AT&T Stadium, aka JerryWorld.
San Diego might not have the same potential as the Dallas Metroplex when it comes to revenue potential from suites and other premium seating. But a setup that would have guaranteed 100 percent of profits going back to the owners offered immense potential, especially with a relatively modest stadium construction cost compared to the $2.6 billion being plowed into Rams owner Stan Kroenke's Inglewood Death Star, would have offered huge financial upside.
That upside could be fulfilled both in terms of day-to-day revenue and a big boost in the team's valuation. Add in the enormous (and shady) advantages sports team owners gain by hiding revenue from the rest of the league through the use of shell companies and a wholly owned, privately funded stadium in San Diego figured to greatly enrich the already outrageously wealthy Spanos clan.
Instead, the Chargers are gone. At first glance, you can see some of the reasons why. Rather than having to build a stadium themselves, the Spanoses get an instant boost in team valuation by moving to the larger, more lucrative market. They also get to rent the future Inglewood stadium from Kroenke for the token sum of $1.
Unfortunately, nothing in life comes free. The family will pay a massive relocation fee for the right to go north, a total of $650 million over 10 years. That largely cancels out the boost in the franchise's paper value.
Meanwhile, it's Kroenke that reaps the biggest rewards from the new development, including revenue driven by big-ticket sports events and concerts, plus the proceeds from shops, residences and other developments on a site three and a half times the size of Disneyland. In addition to the financial letdown of that setup for Spanos, the Inglewood project throws an extra F you at him because of how that plan played out. It was Spanos who reportedly came up with the idea for the Inglewood project, only to have Kroenke and his unlimited supply of Wal-Mart money swoop in and take it from under him. Given how thoroughly Spanos now loathes Kroenke after losing the battle for Inglewood, this will be the most painful $1 ever spent.
There's one other major factor in play here, one which could turn the entire L.A. saga into an even bigger pain in the ass for the league: Angelenos might end up not giving a damn about the Chargers. With Southern California and UCLA maintaining their large and rabid fan bases, and the Rams holding the first mover advantage (as well as actually owning the damn stadium in question), the Chargers could end up being the fourth-most popular football team in Los Angeles.
Considering the fates of the Rams and Raiders the last time two NFL teams tried to split the market, it's worth wondering if the Bolts could survive as a potential fourth banana this time. The major luxury suite revenue the Chargers hope to reap during home dates in Inglewood might not come to fruition if corporations don't perceive the team's games as a hot spot to entertain clients.
If you're an avid bettor, Dean Spanos still stands a better overall chance of making more in L.A., even with all the potential land mines involved. But the very real possibility of ending up with egg on his face means he could easily end up losing out in this deal, even if it comes in the form of humiliating defeat rather than financial setbacks.
The only guaranteed winners here are the people of San Diego. That might seem like a tough sell right now, with hordes of fans already taking out their anger after the Spanos screwjob. But the notion of taxpayers bankrolling stadiums for billionaires has always been one of the biggest grifts this country faces. Study after study shows that cities usually don't benefit financially when new stadiums are built.
The swarms of new jobs promised by team owners? For the most part those are temporary gigs in construction and part-time jobs on game days, in far smaller numbers than what teams promise. The supposedly massive dollars spent on entertainment? Simply a reallocation of resources away from entertainment dollars being spent on something other than a live sporting event. The notion that a few-percent tax hike on visits by out-of-towners isn't a true loss for locals? A dishonest dodge that ignores the infinite ways a city could more productively use tax dollars of any kind.
All of that leaves aside the broader moral dubiousness that comes with lining the pockets of America's wealthiest individuals. Ponder the notion of taxpayer welfare for sports team owners and you have a rare policy that people on both sides of the political aisle should be able to band together and hate. Conservatives should balk at the fiscal irresponsibility of the enterprise, especially considering the huge debt service that comes with multi-decade stadium financing deals. Liberals should lament all that money going into the pockets of ultra-rich men, instead of to roads, schools or any number of projects that stand to provide a greater benefit to a greater number of people.
Right now, sports leagues and owners benefit from a system that relies on the grass always being greener in another city. So when local citizens and their elected officials reject handouts for billionaires, there's always another city waiting to bail them out. The end result is a lot of jilted fans. When news of the Chargers' departure hit, messages of empathy streamed in from jilted fans of other defunct franchises, with Seattle SuperSonics, Hartford Whalers and Montreal Expos fans lining up to offer hugs and encouraging words for San Diegans.
Sports team owners don't give a damn about any of us. As the Spanos family showed, they won't even accept a highly attractive offer to honor more than a half-century of history, when there's potentially a few more bucks to be made elsewhere.
So the best we can do is root for these scams to fail. We can hope that Spanos' team won't even fill a soccer stadium that would rank as the 108th-largest in college football while he waits two years to pay rent to his arch rival. We can hope that Angelenos will soundly reject this new band of interlopers. And we can hope that one day, every city will stand up to the greed and lies of sports teams and leagues and reject this never-ending shell game.
Until then, hold your head high, San Diego. You did the right thing. Good riddance to bad rubbish.
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