Monday, July 3, 2017

How San Diego Helped Push the Chargers to Los Angeles

Over the last couple months, the stumbling ineptitude of Mayor Kevin Faulconer has cast new light on the Chargers' last year in San Diego. I still maintain Dean Spanos is primarily at fault for the Chargers relocation to Los Angeles, but it seems more apparent than ever that Faulconer (among others) helped to push him out the door.

Just to be explicitly clear, Dean Spanos is the primary reason the Chargers are in Los Angeles.

As I outlined in January, Measure C was perfectly designed to give Spanos the political cover he needed within the National Football League to execute his option on Los Angeles. Further, it's plainly obvious Spanos could've made a deal in San Diego by putting some of his own skin in the game, as opposed to doing barely more than then minimum required and expecting taxpayers to shoulder the rest of the burden.

Having made that point, it has also become clear the political establishment in San Diego, headed by Mayor Kevin Faulconer, was virtually as hard-headed, short sighted, and possibly compromised by alternate options in trying to reach an agreement to keep the Chargers in San Diego.That's what I want to explore in this post.

I know there are many people who simply want this issue to die off (it's as painful and maddening for me to write it as it will be for many to read it). I still believe it's crucial to document what's happened, before party spin doctors and political consultants start attempting to whitewash events - especially if recent California gubernatorial scuttlebutt is accurate. And if San Diego is ever going to have a chance at another professional sports team, it's high time to understand the failures of the past.

So, let's take a trip back in time after the jump.

Original Sin

More than ever, it's obvious that the original mistake which started the Chargers and San Diego down the path to separation was then-Mayor Susan Golding and Alex Spanos agreeing to the expansion of then-Jack Murphy Stadium in 1995. While it's true that San Diego got 2 additional Super Bowls out of the deal, it was also 100% publicly financed, and when you include the training complex in Murphy Canyon, the cost was close to $100 million dollars. At this point in the 1990s, a new stadium would likely have cost between $200 million and $300 million dollars.

By the time the expansion was completed, the stadium had reached 30 years old. There shouldn't have been any surprise that Paul Tagliabue expressed the team's (and league's) desire for a new stadium less than 6 years after the expansion. It shows the decision to pursue an expansion was appallingly shortsighted. And while both sides are to blame for a lack of vision, I'm not going to blame the Spanos family for doing what businessmen do, and that's accept free money.

Throw in a rent agreement which disincentivized the team from putting a quality product on the field (i.e. the Ticket Guarantee), lease terms which relegated the Padres to secondary status (prompting them to pursue Petco Park), and a clause giving Spanos the right to make deals with other cities and allowing San Diego only the right to match or exceed the terms, it's no wonder the situation soured.

Author's Aside: Spanos made a crushing mistake by not partnering with then-Padres owner John Moores on a deal for new stadiums in the 1990s - he likely could've rode Padres President Larry Lucchino's coattails to ballot success in 1998.

As a cherry on top, the team sued the City over the stadium in 2002 - with an eye toward getting a new stadium built as a result - the Mission Valley Plan which died in 2005. What happened was a rent renegotiation which essentially paid the team to play at Qualcomm Stadium, and the opportunity to exit the lease every year, beginning in 2008. As a reminder, the old lease would've generated much more revenue during the glory years of 2004-2009, and the lease would've left the City the option to match any deal until 2020.

Of course, by that time, San Diego had been hit by a Pension scandal (initiated by the same administration which negotiated the stadium expansion deal), followed shortly thereafter by the Great Recession and therefore was in no financial position to do anything stadium related until 2014.

By this time, the Chargers had almost made the deal with AEG for Farmers Field in late 2011, already started sniffing around the Carson site in 2013,  and held preliminary discussions with Rams owner Stan Kroenke regarding the Inglewood site late in 2014.

Then we had the disaster which was the Los Angeles Relocation Derby of 2015-16.

What Could Have Been

The last good chance for a deal between the Chargers and San Diego was an ill-fated meeting at Chargers Park on February 22, 2016. Attending the meeting were team officials including Dean Spanos, Special Counsel Mark Fabiani, and Special Advisor Fred Maas. On the other side were Faulconer, County Supervisor Ron Roberts and other public officials and representatives.

By all accounts, even contemporary ones, the meeting was (charitably) described as unproductive. Given the dead-on arrival nature of Measure C, it's also evident that meeting was the last realistic chance for a deal to which might have had a chance with voters in San Diego. Here's a summary of funding sources suggested by the team, of which the $200 million from the City and $150 million from the County were proposed by Faulconer and Roberts themselves in August of 2015:

  • $200 million in San Diego City General Funds (requiring a simple majority vote of San Diego city voters in November 2016).
  • $150 million in San Diego County General Funds (requiring majority votes by the County Board of Supervisors).
  • $200 million in funding, from a complement of tourist-based taxes, included in the countywide Citizens’ Initiative sponsored by the Chargers and a community coalition (requiring a two-thirds vote of San Diego County voters in November 2016).
  • $300 million in loans and grants from the National Football League (already committed by the NFL).
  • $350 million from the Chargers.
  • The Chargers will guarantee all cost overruns.

What puzzles me is that Faulconer (and Roberts) flatly rejected the team's offer sheet, and that they weren't interested in negotiating further. It's puzzling because it was public knowledge the Chargers would be seeking at least $500 million in public money over 1 month before this meeting; in fact, it was known before the team officially announced they were staying in San Diego for the 2016 season.

As I wrote at the time (though my cost estimates were off - I didn't have the term sheet), Faulconer essentially gave the Chargers a "Take It or Leave It" offer. And it's worth repeating for emphasis: Faulconer, Roberts, and other City officials knew for more than a month the Chargers would likely be asking for more money than San Diego had offered. Given the team's repeated interest in the Transient Occupancy Tax (TOT), that element shouldn't have surprised anyone either.

Yet they refused the deal out of hand, and according to both Maas and Roberts, no alternatives were presented. For instance, since Faulconer wants a TOT increase for a contiguous Convention Center Expansion, why not combine the additional Mission Valley proposal funding with the contiguous expansion. When you compare Measure C with my suggested alternative proposal, the alternative would've theoretically done the following:

  • Put the Tourism lobby and the Chargers on the same side.
  • Reduced the overall TOT increase, thereby firming up Tourism lobby support.
  • If Project Labor Agreements were reached, local Union support would've been assured.
  • Avoided the need (and cost) of a Special Election.
  • Secured the fans and city's favored stadium site.

Just to be clear - I'm not saying that Spanos/NFL couldn't have or shouldn't have stepped up to fill in some or all of the gap. 

I am saying Faulconer's flat refusal to continue negotiations made it really easy for Spanos to grease the skids for his departure to Los Angeles. 

Furthermore, given the nature of the desperation deal proposed in January 2017, there's every reason to think that the County's commitment was less than ironclad - their number dropped from $150 million to $75 million without explanation. And if SDSU was willing to put in $100 million for the desperation deal, why weren't they involved in early 2016, when it would've reduced the perceived gap to $100 million and made concessions more possible for both sides?

In any case, following Faulconer's flat refusal, and with time running short on crafting a Citizen's Initiative for November 2016 and facing the almost certain likelihood of electoral failure with Measure C, the Chargers set about doing just enough to prove to the NFL they had done their best and had to go to Los Angeles.

Put simply, if you're Faulconer and you're serious about trying to keep the Chargers in town, you don't make this kind of offer unless one or more of the following is true:
  • You don't think the Chargers/NFL are serious about leaving for Inglewood -or-
  • You think the Chargers have already decided to leave and are trying to retain their existing San Diego fanbase.
  • You have a Plan B which you think is as good as (or better than) Plan A.
  • Your political future depends on the perception you won this fight, either in fact or on principle.

As it turns out, Faulconer had already had the first of many meetings with FS Investors for what would become SoccerCity in January 2016. There's continued chatter about Faulconer being the best Republican option for Governor in 2018, though he's said thus far he will not run.

What follows is conjecture on my part...

It seems evident to me at this point that Faulconer and his political aides had already decided that they were only going to keep the Chargers in San Diego on their terms. The political narrative benefits him either way: the team stays under a fairer deal than most cities get, or the team goes because they were (in fact) greedy. And if there's a legitimate Plan B which is arguably better than Plan A, then why not play hardball.

There's one huge catch, though. If you dump Plan A, then you damn well better deliver on Plan B. Because everyone is watching.

Why This Matters Now

Just for the sake of keeping the timeline straight, SoccerCity was announced a few weeks after the Chargers announced their departure for Los Angeles, on February 20.

Author's Aside: SDSU's absence from an early Mission Valley deal, only to offer $100 million in the desperation deal speaks volumes about how they regarded the SoccerCity plan, long before their feelings became public knowledge.

As we've seen over the last several weeks, the plan for SoccerCity was far less of a sure thing than it initially appeared to be. Its almost certain defeat is a crushing blow for Faulconer, who gambled heavily on SoccerCity being his legacy in San Diego following the Chargers' departure.

Just for fun, there's even the specter of chicanery involved with the fast-sinking SoccerCity, as a confidential memo was apparently leaked to FS Investors. This alleged leak happened prior to a City Council meeting deciding when SoccerCity's election would be held. If it's revealed Faulconer or someone affiliated with his office leaked the memo, it's merely the latest in a never ending series of stains on San Diego's Mayor Office.

However, the Chargers debacle and the SoccerCity debacle is less interesting for what it reveals about Faulconer and more interesting for what it reveals about San Diego in general.

First of all, yet maybe least importantly: nothing is going to get done with this Mayor in office. The word on the street years ago was that Faulconer wasn't a leader so much as someone who follows the lead of others. This is not the guy you want running a campaign for a new stadium, or arena, or anything else - and as we've also seen recently, the political capital he believed he had was used up in the failed attempt to force SoccerCity and the Convention Center expansion onto ballot for a Special Election later this year.

Going further, and more important for the long-term future, this series of failures reveals San Diego is a City trapped "in between worlds." Here's what I mean:

  • San Diego is too large of a city to be run by a single overpowering interest group, such as the Tourism Industry.
  • San Diego has multiple interests in the city who all wield enough power to veto each other, but none of them have the power to do things unilaterally. These interests include (but aren't limited to) the Tourism Industry, Biotech Industry, UCSD, SDSU, unions, and the US Military.
  • These interests are too powerful in San Diego to concede terms to other interests, which also prevents coalitions from being formed (the Convention Center expansion vs. Convention Center annex is a textbook example). Paradoxically, these coalitions are formed in larger cities because corporate money and more interests helps spread the power base thinner (i.e. I can't stop them on my own, so I'd rather get half a loaf than nothing at all).
  • Because of its dependency on the Tourism Industry and US Military, San Diego tends to be a high transient community, with large pay scale gaps between service-sector jobs and the limited number of higher paying jobs.
  • San Diego does not have the concentrated corporate wealth to force sports league and owners to do business on its terms the way Los Angeles, Silicon Valley, Chicago, and New York can.
  • San Diego is a top 10 city by population, but a top 30 market in terms of regional size (on par with Portland). These means there's limited appeal to potential future owners because the market is small, there's not a big corporate presence, and there's the presence of Los Angeles, Mexico, and rural Southeast California on the edges.
  • For better or worse, San Diego has a provincial mentality (especially as it regards the rest of California). As nice as the weather is, the "if it's not good enough for you, then leave" mindset is not conducive to deal-making.

Until these dynamics change in some fashion, San Diego will remain an alluring but hollow jewel as far as professional sports are concerned.


  1. The 2016 meeting between Dean and Faulconer, if anything, pointed towards Dean already eyeing LA. Faulconer didn't want to increase public-funding of the stadium -- and the tax increase was never going to pass, ever.

    The CHARGERS, not Faulconer, should've ponied up more instead of asking the city to do so, considering the same owners then turned around and put up -- what was it, $650M? -- to move to LA. Granted, I understand the reasoning: increased value, larger market, etc. but Dean was the one who shut down the negotiations. He never came back: he let Fabiani do his talking -- someone who should do less talking, anyway. Plan C was done out of desperation and Dean likely already knew the city wouldn't put up more money.

    It takes two to tango and Dean left Faulconer doing a solo.

    1. I wrote this in January...

      I did say this in this post...

      "Just to be explicitly clear, Dean Spanos is the primary reason the Chargers are in Los Angeles."

      And later on in this post...

      "Just to be clear - I'm not saying that Spanos/NFL couldn't have or shouldn't have stepped up to fill in some or all of the gap."

      Obviously, Faulconer didn't want to pony up more money. My issue with Faulconer was that he simply walked away from the table without offering any plausible alternatives. It's one thing to negotiate, then decide the other side is unreasonable, as opposed to sitting on your original offer for 1 month, knowing where the other side was starting, and simply saying take it or leave it.

      Lastly, remember the issue of taxes raised via Citizen's Initiative is under review by the CA Supreme Court? Had a tax plan for MV been proposed like I suggested, it might have faced reduced opposition, reached a 50% +1 threshold and then been subject to whatever decision the CASC made later.

      My whole point was that Faulconer not coming prepared with an alternative eliminated that possibility. There's no way to know if it could've worked, and it almost certainly wouldn't have done worse.