Council OKs proposed lease for Chargers

April 27, 2004

Ticket guarantee would be wiped out

By Ronald W. PowellSIGN ON SAN DIEGOStaff Writer

April 27, 2004

San Diego City Council members yesterday approved a proposal for a new Chargers lease at Qualcomm Stadium that would wipe out the controversial ticket guarantee and pave the way for the team to drop its lawsuit against the city.

The proposal would allow the team to leave San Diego as early as the end of the 2008 season as long as the team paid off $57.7 million in outstanding bonds the city issued to expand the stadium in 1997.

Council members called the proposal imperfect, but far better than the existing lease.

It was approved 7-2, with Toni Atkins and Donna Frye voting no. Frye said more time was needed to consider the complexities of the proposal, and Atkins decried it for not offering enough protection for taxpayers.

Attorneys for the city and the Chargers will have 45 days to forge an agreement acceptable to both sides. If consensus is reached, the lease amendment will go back before the City Council this summer in two public hearings before a vote is taken on its final passage.

The Chargers have reviewed the plan and team special counsel Mark Fabiani said it is largely acceptable to the team’s ownership.

Yesterday’s action does not directly affect the lawsuit the Chargers filed against the city in November. However, both sides say they are hopeful a resolution will be reached.

The city and the Chargers have been negotiating since March 2003, when the team exercised the “trigger clause” in its lease to try to work out a deal for a new stadium. The talks were due to expire May 1, so there was increased urgency to reach an accord.

A coalition of business and labor, including the San Diego Regional Chamber of Commerce and the Fans, Taxpayers and Business Alliance, prodded the city and the Chargers to rekindle negotiations and brought forward the framework for the proposal approved yesterday.

Many members of the coalition were among the 32 people who addressed the council, the vast majority supporting the proposal.

Among the speakers were Chargers head coach Marty Schottenheimer and a fan dressed in a Chargers uniform with a lightning bolt mask. He called himself Bolt Man.

The proposal has high stakes for each side.

The city hopes to improve its financial picture through adjustments to the contract. The Chargers want to strike the ticket guarantee and other unpopular aspects of the existing lease to improve public relations as the team presses forward with its plan for a new stadium.

“This is about money, about the bottom line to the taxpayers of San Diego,” said City Councilman Michael Zucchet, a member of the city’s negotiating team on Chargers issues. “This is not about football.”

Said City Councilman Scott Peters: “It takes the (financial) risk of a bad football team off our city.”

Council members said there would be several benefits, with each carrying a corresponding down side. The pros and cons include:

 Removal of the ticket guarantee, which is expected to save the city money.

Under the existing lease, the city is obligated to ensure that the team receives revenue equivalent to the price of 60,000 general admission seats for every home game through preseason 2007. Since 1997, when the guarantee went into effect, attendance has been down. The city has paid the Chargers $36.4 million for unsold tickets.

Over the same period, the team has paid $42.9 million in rent, meaning that the city has netted about $6.5 million in rent from the team since 1997, or about $1 million a year.

Without the ticket guarantee, some Chargers home games might not be televised. Under National Football League policy, games not sold out 72 hours before kickoff are blacked out in the local area.

 Establishing a set rent policy for use of Qualcomm.

The city’s proposal would set the Chargers rent at $2.5 million a year, more than the net rent it has been receiving but far short of the annual $5.7 million bond debt the city must pay for the 1997 expansion of Qualcomm Stadium. The city issued $78 million in bonds for that project.

Since the team’s rent has not covered the bond debt, the city has dipped into the general fund to pay about $34 million on the debt since 1997.

The city’s proposal would have the Chargers paying a flat $2.5 million a year in rent through 2013; $3 million a year through 2016; and $4 million through 2020.

The existing lease would require the team to pay more than $70 million above the city’s rent proposal through 2020, with annual rent escalating from $7.2 million this year to $9.9 million in 2020.

 Ending the Chargers’ lawsuit.

The city wants to save money on legal fees by having the Chargers drop the lawsuit against the city.

In its suit, the team contends it has met the financial threshold that allows it to renegotiate the 1995 lease at Qualcomm Stadium or leave town. City officials disagree, saying the Chargers have not presented enough information to show that they have reached the financial threshold required to trigger renegotiation of the lease.

But the city has already spent nearly $2 million in legal costs and does not want to roll the dice and spend more money on a lawsuit it might lose.

 A termination fee if the team elects to leave town.

The Chargers can begin shopping the team to other cities beginning Jan. 1, 2007. If the team left at the end of the 2008 or 2009 seasons, it would have to pay off the $57.7 million balance of the bonds for the stadium expansion.

But if it leaves after that, the team pays a sliding scale that drops from $24 million at the end of the 2010 season to $3.2 million at the end of the 2019 season, when the city would still owe $30 million on the bonds.

Atkins said taxpayers should not have to pay the $30 million balance at the end of the contract.

“They (the Chargers) should be required to pay off the bonds in any event,” Atkins said.

In meetings held around San Diego, the Chargers are campaigning for a new $400 million stadium on part of the 166-acre Qualcomm Stadium site. The team said it will pay for the stadium, but is asking the city to finance $175 million in public improvements for the project.

To pay for the stadium, the Chargers have asked the city to give the team’s ownership 60 acres at the Qualcomm site to develop into more than 6,000 housing units, a hotel, parks, offices, shops and restaurants.

The city has not taken a position on the proposal. Mayor Dick Murphy has said the city will work with the Chargers after the lease and lawsuit issues are resolved to come up with a stadium proposal to put before voters.



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