Take heart, Chargers fans. With every day that passes without an announcement from Chairman Dean Spanos that he’s moving the team to Los Angeles, the odds may be improving that the team will remain in San Diego for years.

This result would be hard on non-fan taxpayers. Between debt service and operating losses, the city spends about $20 million a year on Qualcomm Stadium after counting all event revenue. That cost would surely rise for a new Chargers venue that included substantial public funding.

Of course, if taxpayers are losing money, somebody else must be making it in the zero-sum universe of subsidizing entertainment venues. The big question for football fans is whether the current or potential subsidy in San Diego will be sufficient for Spanos to give up his Los Angeles option, which expires Jan. 15.

I can imagine three options for the team in San Diego with varying levels of business risk.


First, the Chargers could just carry on at Qualcomm without spending a nickel in private capital.

Or they could renovate the stadium in return for a lease extension — inspired by the $500 million, privately funded overhaul under way by the Miami Dolphins at the newly named Hard Rock Stadium (where the sponsor agreed to pay $250 million for the privilege).

Or Spanos, assuming he fails to convince fellow NFL owners to approve well more than 50 percent private funding in Mission Valley, could stick to his strategy of the last dozen years, betting that shifting political winds will deliver a higher subsidy somewhere in San Diego County.

At first glance, the very notion of sticking around would seem to defy business logic.


There are just too many entertainment dollars available in Los Angeles over the next 30 years to a National Football League franchise of even minimal operational competence.

The Chargers could expect to boost their operating profit to $250 million a year at a new L.A. stadium, compared to $145 million at a renovated Qualcomm Stadium, according to estimates made last week by Vanderbilt University economist John Vrooman, an authority on professional sports as an industry.

If it panned out, that Los Angeles premium of roughly $100 million a year seems to me like plenty to repay the NFL’s $550 million relocation fee ($650 million if the league takes payment over 10 years).

One big caveat: This scenario hinges on the speculative assumption that the capital contribution from the Spanos family — not counting NFL loans or sales of seat licenses and sponsorships — would be roughly the same in San Diego or Inglewood under the team’s confidential lease with the Rams.


In any case, Forbes in September estimated that merely getting the option to move north caused the team’s value to surge 36 percent to $2.08 billion this year. Vrooman thinks moving to Inglewood could boost the value further to $3.2 billion.

Still, relatively few chief executives actually behave like the profit-maximizing automatons of media lore.

Many thousands of ordinary workers live in San Diego for the simple reason that we like it here. It’s certainly not for the money. Why should Spanos and his family co-owners be any different?

Besides, there are viable business cases for staying put.


The point is best illustrated by the team’s alternative of doing nothing, which any decent strategic planner must consider. The Chargers already have a sweet deal in San Diego.

For starters, the team pays negative rent for the city-owned Qualcomm Stadium. From 2006 to 2015, San Diego paid the Chargers $3.2 million for the privilege of playing there, as $25.9 million in rent credits offset $22.7 million in rent.

Meanwhile, the team’s revenue surged 13 percent from 2014 to $344 million in 2015, Forbes estimates, on the strength of national broadcasting and licensing payments that are split evenly among all 32 NFL teams. Not incidentally, the Chargers’ operating income fell 9 percent, to still-healthy $59 million that was certainly reduced by spending on the failed quest for a stadium in Carson.

Now consider that the Spanos family paid $70 million to buy the team in 1984. For the owners, keeping the Chargers at ancient Qualcomm preserves an 84 percent annual return on that initial investment — not counting an estimated 2,800 percent increase in the team’s market value. Striking oil in the backyard could hardly do better, financially.


That’s not to say staying put comes without business risk. Setting aside a lost opportunity in L.A., the big one is that lucrative San Diego lease expires in 2020.

So Spanos must weigh whether he thinks the city might soon jack up his rent or even evict his team. I’d put this in the unlikely column.

Just last month, four city councilmembers said they could support giving the Chargers a $1 a year, 99-year lease for the entire 166-acre Qualcomm site as part of a negotiated stadium deal. The team would presumably be free to propose thousands of housing units and retail to help pay for a renovation or new stadium.

And San Diego will have new leadership in 2021, when term limits toss Mayor Kevin Faulconer.


Faulconer, let’s recall, has declined to consider more than $200 million in city funding toward a new stadium at Qualcomm, which various groups say will cost between $1.1 billion and $1.4 billion. And NFL executives are skeptical Faulconer can deliver even that, especially since voters just rejected the team’s tax-hiking Measure C in November.

Last week, the rumor mill said that Faulconer’s “offer” was joined by $75 million (down from $150 million last year) endorsed by county Supervisor Ron Roberts and $100 million newly proposed by Elliot Hirshman, president of San Diego State University. This brings the speculative public ante to $375 million, a tad higher than $350 million spurned by Spanos last year.

Of the three, SDSU’s share would seem the most tangible. If the Chargers leave and the university can acquire the Qualcomm site, officials are laying plans for private donations and higher student fees to build an Aztec football stadium that could be shared with a professional soccer team. In April, Hirshman noted that Temple University plans to spend just $126 million for a 30,000 seat stadium in Philadelphia.

Such a fat discount raises the question of downsizing. When it comes to building NFL stadiums, your cheapest seats have the highest construction cost, for reasons of physics and engineering. Cantilevering the upper decks to get closer to the field can triple the per-seat cost compared to the lower deck, architects say.


This explains why Raiders owner Mark Davis proposed a 55,000 seat stadium in Oakland last year, a reduction said to save $200 million compared to the 65,000 seats once considered the NFL minimum.

But, to get a new stadium in San Diego, would Spanos consider foregoing 10,000 seats worth of revenue for the next 20 or 30 years? Not if he doesn’t have to.

The NFL’s siren song for new football stadiums has been driven by the profit potential of adding luxury suites, club seats and lavish concourses to generate revenue that owners don’t share with other teams.

Vrooman, the sports economist, says the trend in smaller markets is clearly toward smaller, fancier venues that favor the steady, high-profit revenue from suites and downplay seats that vary from season to season depending on team performance.


“It is classic monopoly pricing behavior for monopoly teams to charge half as many fans twice as much,” Vrooman said.

In 2004, the Chargers proposed a “state-of-the-art” stadium at Qualcomm costing $400 million. That same stadium today would cost $600 million, using the federal index that measures inflation of commercial construction costs.

So when Spanos and other owners say there’s no way they can build one for less than, say, $1.2 billion, that’s because palatial is the standard deemed necessary by league marketing experts.

In theory, Spanos could privately fund a palace to replace Qualcomm, either downtown or in Mission Valley. But the NFL has little reason to let him.


Far better to move the team outside the area, if necessary. The Nevada legislature recently raised hotel taxes to contribute $750 million toward a Las Vegas stadium for the Raiders, who conspicuously hold the option on Jan. 16 to move to Los Angeles if the Chargers do not.

So far, San Diego taxpayers have shown little appetite for that level of subsidy. If the Spanos family wants to stay here, extending the waiting game or pursuing cheaper options would seem entirely rational from a business perspective.

dan.mcswain@sduniontribune.com (619) 293-1280 ▪Twitter: @McSwainUT