The Morning Report
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Statement: “City currently receives about $2.5 million in rent annually from the Chargers,” says a city document provided to Mayor Kevin Faulconer’s Chargers stadium task force.
Analysis: In theory, the Chargers have to pay the city of San Diego rent each year to play at Qualcomm Stadium. In reality, it’s the city that pays the Chargers.
Over the past seven years, the city has paid the Chargers a total of $3.3 million despite a lease agreement that requires the team to pay the city.
There are two reasons for this. The Chargers annual payment due to the city gets eaten away by a series of rent credits, which drastically reduces the team’s bill. Then the city pays the team each year as part of a settlement to a 2006 American with Disabilities Act lawsuit at Qualcomm. The result is that the city has owed the team money – an average of about $500,000 a year — after every season since 2007.
Let’s break down how this all works:
The team’s lease calls for an annual rent payment of $3 million plus more for home playoff games. (It was $2.5 million up until last year, which explains the statement in the city document given to the stadium task force.)
But that number drops quickly when you factor in other details. The Chargers get to count lots of things toward their rent. The team’s property taxes, some parking revenues and the city’s suite at Qualcomm all decrease the rent payment. Most significantly, the team gets to count a percentage of all the beer, popcorn and other concessions sold at games toward its rent.
“They pretty much get all revenues during home games with small exceptions,” said Tracy McCraner, the city’s financial management director.
All these rent credits cut what the team owes to the city from $3 million to typically under $1 million every season. When you throw in the ADA settlement, which has averaged about $1.3 million a year, the city comes out as the net loser.
This shows the city’s losses each year since 2007. The city did turn a $20,000 profit in 2006, and the 2014 numbers aren’t available yet.
The claim that the Chargers pay the city $2.5 million each year in rent is misleading. Yes, there’s a rent payment in the team’s lease with the city. But when you factor in the team’s rent credits and the ADA settlement, the city owes the team money every year.
This situation highlights two significant issues that shouldn’t get lost in new stadium discussions. Beyond what the city pays the Chargers, San Diego taxpayers subsidize Qualcomm Stadium operations to the tune of $10 million-plus each year. So even without a new stadium, a lot of taxpayer money is already going toward football here.
The city’s failure to collect rent from the Chargers also shows the importance of hammering out the details in any new stadium deal. Over the past two decades, the Chargers have repeatedly crushed the city in stadium negotiations – ticket guarantee anyone? If city leaders want the team to pay rent at any new stadium, they better figure out a way to ensure they actually get it.
If you disagree with our determination or analysis, please express your thoughts in the comments section. Explain your reasoning.