San Diego Chargers make $3.3M profit rather than paying $23M in rent

SAN DIEGO -- The San Diego Chargers were paid nearly $3.3 million by the city to play at Qualcomm Stadium from 2006 through 2013, thanks to rent credits awarded to the team by an arbitrator, along with a settlement that helped to make the stadium compliant with the Americans with Disabilities Act.

Without the ADA settlement and rent credits, the Chargers would have owed the city nearly $23 million during that span, according to figures provided by the city.

The current lease was negotiated in 2004, months after the Chargers sued the city for the right to renegotiate their lease and free them to either pursue a new stadium or leave town. The city was desperate to get rid of the ticket guarantee, letting the stadium fall into disrepair despite the remodel seven years earlier.

In February 2001, the city settled a lawsuit by a disability activist by agreeing to make $5.3 million in modifications, including removing 985 seats. The Chargers then demanded to be compensated for seats lost or obstructed because of the ADA changes.

"I'm not trying to blame anybody or characterize what we inherited, but based on what we inherited, our leverage was practically zero," said Michael Zucchet, who as deputy mayor was in charge of negotiations with the team in 2004. "The Chargers held all the cards and they had filed suit, and were acting like they are now, quite aggressive."

Final figures for the 2014 season haven't been calculated. Rather than pay $3 million rent, the Chargers likely will make around $250,000, according to city estimates.

The Chargers are threatening to move to Los Angeles if they don't get a new stadium.

"The payments to the Chargers are the direct result of two mistakes made by the City of San Diego," said Mark Fabiani, point person on the stadium issue for the Chargers. "First, the city's stadium renovations failed to comply with the Americans with Disabilities Act. Second, the city attorney at the time refused to settle the matter with the Chargers and instead insisted on binding arbitration, only to have the arbitrator rule decisively against the city. All payments from the city to the Chargers are calculated according to a formula established by the arbitrator."

An advisory group appointed by Mayor Kevin Faulconer has already recommended that a new stadium be built near the old one in Mission Valley, not downtown as the Chargers want.

The advisory group is due to announce its financing recommendations sometime next week. The group has said it is trying to find funding sources that are agreeable to the voters, the city and the team.

A spokesman for Faulconer said the mayor would not comment on the Chargers' lease.

Whether the Chargers stay or go, their bank account has been enriched during the past two decades through their deals with the city.

The city's Financial Management Department provided figures that show that before rent credits and the ADA settlement, the Chargers would have owed $22,700,874 in rent from 2006-13. Instead, the city paid the Chargers $3,266,813.

The last time the city made money from the Chargers was 2006, when the team paid net rent of $20,369. Income from two home playoff games was just enough to offset the rent credits and ADA money.

The Chargers receive the city's cut of concessions plus various credits, including property taxes and the cost of printing parking passes and a luxury suite for Qualcomm.

Before the lease was renegotiated in 2004, the Chargers had received more than $36 million in rent credits from a controversial ticket guarantee approved as part of the deal that expanded the stadium in 1997.

Two former city officials say they hope Faulconer does a better job in negotiating with the Chargers than his predecessors, if the team stays in San Diego.

"When it comes to the Chargers, it's a political hazard zone," said Mike Aguirre, the former city attorney who sparred with the Chargers when they first started asking for a new stadium in the early 2000s.

What helped the Chargers the most was that the old lease required the city to maintain Qualcomm as a "state of the art" NFL stadium.

Jack McGrory, who had been city manager in the mid-1990s, said stadiums are like shopping malls in that they need upgrading every seven to 10 years. He pointed out the upgrades the Padres have made to Petco Park, which opened in 2004.

Had the city kept up the stadium and let the ticket guarantee run its 10-year course, the original lease "would have been a phenomenal deal for the city" because the Chargers would have been paying one of the highest rents in the NFL, McGrory said.

Information from ESPN.com Chargers reporter Eric D. Williams and The Associated Press was used in this report.