Three years ago in a letter to the San Diego City Council and city attorney dated December 24, 1996, Bruce Henderson warned that the council had made a grave mistake in May 1995 when it approved the now-controversial Chargers ticket guarantee for Qualcomm Stadium. "It makes the city responsible for selling 60,000 tickets a game (6 million tickets in over ten seasons)," wrote Henderson. "Yet, it has the Chargers setting the prices. That gives the Chargers a cost-plus contract. For the ten seasons starting in 1997, the Chargers can raise ticket prices to whatever price required to cover their costs, passing all financial risks to us. If the prices are too high for the fans, the City buys the tickets. We get empty seats. The home games may be blacked out."
Henderson urged the city council to renegotiate the contract between the city and the team, which was then being amended by the city council to provide more amenities for Spanos and the Chargers at the stadium. For his trouble, Henderson and other critics of the stadium deal became the target of a scathing series of editorial attacks by the San Diego Union-Tribune. They called him an "obstructionist" and insisted that local businesses, led by the San Diego International Sports Council, would buy up enough tickets to keep the taxpayers off the hook. The city council ignored Henderson's warning.
In his 1996 letter, Henderson also warned of what he called the agreement's "team shopping" clause. "It creates a compelling financial incentive for the Chargers to leave San Diego before the agreement expires. Starting in the year 2000, the agreement allows the Chargers the chance to shop the team to other cities. If they get an offer, San Diego has merely the right to meet it. It means that the Chargers have everything to gain from shopping the team, again and again, but nothing to lose. It means we San Diegans have everything to lose and nothing to gain."
Today, Henderson's critics at the Union-Tribune, as well as team owner Alex Spanos, scoff at his prediction that the Chargers will soon exercise the team-shopping clause and leave town. The situation seems eerily similar to the way the newspaper belittled Henderson's correct foretelling of the ticket-guarantee disaster. Though the Union-Tribune has begun to report on just how serious the ticket-guarantee mess has become, the newspaper has repeatedly failed to give Henderson and his 1996 prediction their due. Yet despite continued editorial attacks by the newspaper, Henderson continues to speak out against the Chargers' deal. In an interview last week, he warned of a final grave consequence of the city's Chargers agreement: it may be too late to stop the NFL and Spanos from yanking the Chargers away from San Diego and moving the team to Los Angeles.
Matt Potter: You say you first read the city's contract with Alex Spanos and the Chargers in 1996, a little less than a year after it was passed by the San Diego City Council in May 1995.
Bruce Henderson: I read it and almost literally started to cry. I just felt awful as a San Diegan because I found that there were a number of provisions that were going to be very harmful for the city. Of course, the most famous of them is the ticket guarantee.
The Chargers actually make more money if they don't sell tickets than if they do — by about 10 percent. And so there was this disincentive to market the tickets. And then there was this assumption in the agreement that a group of people who were sports fans and had formed an organization called the International Sports Council were going to do the marketing. Yet there was no marketing budget for them, no money provided to them.
The economic incentive in the agreement was for the Chargers to forgo an aggressive ticket-selling policy and let the city just buy the tickets, which is, of course, exactly what's happened. And that's the provision of the agreement that's gotten a lot of attention.
MP: But now you say there's another clause in the deal that could mean trouble on the horizon.
BH: One of the fundamental problems is something that nobody's really focused on yet but as of January 1, 2000, is going to come into play under the agreement. That's Section 31 of the Chargers' agreement, the 1995 agreement, which is entitled "Renegotiation Rights." The bottom line is that, starting on January 1 in the year 2000, if the Chargers find that they've exceeded the salary cap -- the NFL salary cap, which I'm told by the experts is something that the Chargers can easily do if they choose to -- the Chargers are permitted, without any violation of the contract, shopping the team to other cities, any other jurisdiction that would like the team.
Well, of course, we all know the one location that the NFL covets the most in the United States is Los Angeles. I mean, there're about six million TV families up there. I guess, second to New York, it's probably the largest TV market in the United States by far.
MP: When you say "shopping the team," what's that mean?
BH: I believe this is the only NFL franchise that can, without any fear of breaching its contract, start asking people to make offers to them to move their team. So obviously the logical thing, right now, as of January 1, is for Alex Spanos to have maneuvered himself so that he can trigger the salary cap. Under Section 31 of the agreement, if salaries and benefits paid to Chargers team members exceed 75 percent of certain NFL revenues calculated using a per-team average, then Spanos can shop the team to other cities such as L.A. Now, I don't know what the actual numbers are for 1999, but the point is that the experts say that that's fairly easy to exceed the salary cap, particularly if you've got a situation like the Chargers have right now, where they entered into a contract with a very expensive quarterback.