Back Story: Chargers stadium is serious business

This week’s San Diego Indepth features a Q&A by U-T business columnist Dan McSwain on  Measures C and D — two complex ballot initiatives for a downtown Chargers stadium. In the today’s back story, McSwain discusses what he’s learned from covering the stadium debate.

Q: Why did you decide to write about San Diego’s stadium debate?

A: You could say I was drafted, to abuse a football metaphor. As a business columnist, I generally steer clear of sports and politics.

That all changed when the Chargers said in January 2015 they were pondering a move to the Los Angeles area. Above all, the National Football League is a business. So when my boss asked me to look at the financial considerations, I was in familiar territory.

Q: What did you learn that surprised you?

A: I didn’t realize before that the NFL is operated much like a partnership, with all major financial decisions made collectively.

This is why Rams owner Stan Kroenke couldn’t just move from St. Louis to Inglewood without first convincing most of his 31 fellow owners. And it’s why Chargers chairman Dean Spanos couldn’t build a stadium in Carson with the Raiders — the NFL didn’t permit it.

For San Diego, the league’s power structure also explains why Spanos probably couldn’t just pay for a new stadium in Mission Valley or downtown, even if he wanted to.

For years, the NFL has enjoyed public funding for stadiums in smaller markets. The league is loath to build in such markets, however profitable, without getting close to half the cash from taxpayers. Since 1995 only in New York and, now, Los Angeles, has it given a green light to construction using 100 percent private funding.

Q: Does the league need taxpayer help?

A: Decidedly not, but that doesn’t stop politicians from offering subsidies. Just Friday, the Nevada state legislature voted to raise taxes on hotel stays to contribute $750 million toward a $1.9 billion stadium for the Raiders in Las Vegas.

The team doesn’t have NFL permission to leave Oakland, but casino billionaire Sheldon Adelson is offering $650 million, reducing the Raiders’ share to just $500 million. For perspective, the Chargers and NFL are offering, via Measure C, $650 million toward a $1.8 billion hybrid stadium and convention center.

Forbes recently estimated that the average NFL team was worth $2.34 billion, up 19 percent in a single year. The magazine valued the Chargers at $2.08 billion, up 36 percent, mostly because the league said the team could build a stadium or move to L.A.

Such booming values owe to a long streak of rising revenue from national broadcasters. Broadcasting and most licensing fees are shared equally among the 32 teams. But the individual owners get to keep local revenue from luxury suites, which are more numerous and luxurious in new stadiums.

Put it all together, and the average team earned $91 million on $380 million in revenue, a healthy 24 percent profit margin.

Q: What makes Los Angeles so special?

A: It’s the nation’s second-largest television market, and the region is home to plenty of the large corporations that buy time in expensive stadium suites.

That’s why Kroenke is willing, alone if necessary, to pay $2.66 billion to build a lavish Rams stadium in depressed Inglewood.

Sports economists agree that half the L.A. market is more valuable than all of San Diego’s, so the Chargers stand to earn more as Kroenke’s tenant than remaining at Qualcomm Stadium or moving to a new one downtown.

Nevertheless, Spanos has signaled with Measure C that he prefers to stay in San Diego — with public help. And the NFL seems happy to let the Chargers stay, if only so other teams can leverage an empty slot in L.A. during the next round of stadium upgrades.

But if Measure C fails, don’t be surprised to see the Chargers loading moving vans. (619) 293-1280 Twitter: @McSwainUT

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