Arbitrators rule for Rams: St. Louis must cough up $700m or let team walk

While the Phoenix Coyotes sale was collapsing in Arizona, an equally momentous event was taking place in St. Louis, where a panel of arbitrators officially ruled that the Rams$700 million plan for upgrades to the Edward Jones Dome would keep the dome a “first tier” facility, while the St. Louis Convention and Visitors Commission’s $124 million renovation option would not. Which means that according to the terms of the Rams lease — which, as Field of Schemes readers will recall, was the result of some of the most awful negotiating by a city in the history of stadium deals — either the city needs to spend $700 million to upgrade a stadium that only cost $280 million a year to build in the first place 17 years ago, or the team can bust out of its lease and move elsewhere in 2015.

This was probably inevitable, given that that godawful lease — as excerpted in the arbitrators’ ruling, available here — defined “first tier” as “the Facilities, taken as a whole, and each Component of the Facilities, respectively taken as a whole, must be among the ‘top’ twenty-five percent (25%) of all NFL football stadia and NFL football facilities, if such NFL football stadia and facilities were to be rated or ranked according to the matter sought to be measured.” In other words, the Jones Dome needed to be considered one of the top eight stadiums in the NFL, and every piece of the dome, from scoreboard to bathroom plumbing, needed to be in the top eight as well, or else the Rams could demand that it be upgraded and walk away from their lease if it wasn’t. What on earth the city negotiators thought they were doing — that hardly anybody would ever build another new NFL stadium after this one? that “state of the art” would only mean painting it new, trendy colors? that they’d be out of office long before anybody noticed what had happened? — isn’t clear, but the upshot is that St. Louis now faces a choice between spending $700 million to replace a 17-year-old stadium, or letting the team it spend big to lure to town walk after only 19 years.

The St. Louis CVC now has 30 days to decide whether to accept or reject the Rams’ plan, with most bets being on rejecting it, since holy crap, $700 million. That doesn’t necessarily mean the Rams will leave, though, just that this will likely be the start of a brutal stadium negotiation battle. As sums up matters:

While the next decision is up to St. Louis pols, Rams owner Stan Kroenke has all the cards. Kroenke has repeatedly stated that he wants to keep the team in St. Louis, so an LA threat may not loom as large as it would for the Chargers, or even the Raiders. Still, AEG’s Farmers Field project should prove an effective stalking horse if Kroenke chooses to use it. Already there is some talk about the Rams moving to a new open air stadium, which could be located downtown or in the suburbs of St. Louis County. The Rams’ real goal may be to get a venue where they have control over all revenue streams, even if it means some sort of private contribution towards the stadium’s cost. In the end, a new stadium may be the only solution that works for both parties, since it wasn’t clear where the Rams would play while the renovations at the Dome happened (the project could take as long as three years).

I’m not sure if “works for both parties” is the best way of putting it, since building an entirely new stadium less than two decades after the last one isn’t likely what anyone in St. Louis had in mind as a “workable” plan. Both sides have leverage here — the Rams have the ability to move, thanks to the NFL’s national TV contract that makes market size for teams pretty much irrelevant, while St. Louis has the team’s proven fan base and the fact that no other cities have “first tier” stadiums ready to go or even in the works. Still, it’s almost impossible to see this whole thing ending without somebody, whether taxpayers in St. Louis or in another city, shelling out hundreds of millions of dollars. All we can really hope is that whoever negotiates the lease this time refuses to put in a state-of-the-art clause, or this could turn into one of those battles that repeats itself endlessly.

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17 comments on “Arbitrators rule for Rams: St. Louis must cough up $700m or let team walk

  1. Being required to match the moving average, or even better, the top 25%, means eternal ratcheting up. Should be obvious and any quick example will prove it.
    It is a common trick for CEOs to ride the salary escalator.

  2. Here we have yet another team threatening the “LA move”. So, let’s look at some basic financial info: new LA stadium – $1.5 to $2.0 billion dollars. Relocation fee to the NFL (the greediest s___’s in the world) say $100,000,000. Giving AEG a “piece” of the team at a discount – another perhaps $100,000,000??? If it weren’t Stan Kroenke, we could add another billion to buy the team and move it to LA, build the stadium, etc…

    Total cost to move to LA: the neighborhood of $1.7 billion to $2.2 billion. I still don’t think any NFL team will ever move to LA under these circumstances.

  3. Or…

    The franchise gains $700+ million in value instantly with an L.A. move (using Forbes’ value of $780M and figuring an L.A. value of $1.5+B).

    -$100M reloc fee (possibly paid by AEG anyway)
    -$450M given to AEG for their 30%

    Still leaves a $150M (or $200M, depending on the reloc fee) gain in franchise value for the Rams owner, plus the likelihood of even greater growth down the road.

    The other possibility is London, which already has a publicly financed stadium. Bottom line is the Rams are toast in STL if the CVC doesn’t cough up the $700M.

  4. Yeah, I’m with Ben on this one. I just don’t see the Rams staying STL absent the city/CVC coughing up the vast majority of the money to build a new stadium.

  5. FYI-
    @ Ben Miller, AEG said they will pay the relocation fee and the cost of construction at Farmers Field. Your numbers are off.

  6. This is moving along exactly as I predicted.

    The Rams and Chargers will both move back to LA to share a stadium. It’s the only way to get a stadium built without a team giving up a big portion of equity. The NFL with come up with a new G-5 program that will cover $250 million of construction costs for each team and each will easily raise another $250 million in PSL sales. That’s at least $1 billion in stadium funding and the common color scheme of blue and gold makes things even easier.

    I’ve been banned from both the Chargers and UT Chargers message boards numerous times because they can’t handle the truth. Can’t wait to see this go down. It’s the only logical solution for both teams’ problems and then the Raiders can use STL or London as a threat. Still think the Raiders move to Santa Clara but the 49ers can’t make any mention of that until they sucker their fans into paying top $ for all of the PSLs, they say they’ve sold 75% so far.

  7. “It’s the only logical solution for both teams’ problems…”

    In the salary-capped, TV-revenue-shared world of the NFL, there aren’t really any teams with “problems”. More like “teams that artificially create drama, hoping they can squeeze some more subsidies out of the locals”.

  8. The Rams were 30th in attendance and the Chargers were 28th. San Diego is unlikely to get a new stadium.

  9. 56.7k (STL) and 59.9k (SD) per game are not a problem. Considering their teams this year, they’re a blessing.

  10. It’s a problem for those who want the teams to stay. If the owners can make more money elsewhere they will leave.

  11. St. Louis made a bad decision when they lured the Rams back to Georgia’s ol’ home town in ’95 (it was ’95, right?).

    It made little sense then. It makes little sense now.

    If they agree to build a new stadium for the Rams just 17 years after they built the last one, they are fools.

    They only question I have is whether the NFL will allow a team to relocate to LA, given the price that market could fetch for one or two expansion teams.

    Ben M: Is there a reason you believe the relocation fee for an LA franchise would be just $100m?

    Raiders II established that the league could charge a relocation fee based on the difference in value between the two markets. Using that metric, an LA relocation fee is likely to be several times the value quoted.

  12. Where does this guy get his information from? Stan Kroenke has never once come out and said he wants to keep the team in St. Louis, let alone repeatedly. And t.v. market size is absolutely just as important today as it ever was. Larger t.v. audiences mean more advertising dollars for local markets and it also results in higher merchandise sales and a bigger revenue sharing stream for everyone. It also increases the value of a franchise dramatically. St. Louis has a proven fanbase? Seriously?? The Rams have ranked at or near the bottom of the league in attendance and revenue almost every year for a decade now. Not only do the fans in St. Louis not go to Rams game, they don’t buy their merchandise either. The Rams need to simply return to LA where they belong.

  13. Sure, ticket sales, advertising revenue and merchandise sales all matter. But the marginal increase in those that would come from moving to LA is dwarfed by the amount every team gets from the TV deal.

    And there’s another $1.9B – per year – coming when a new contract kicks in in 2014.

  14. John Bladen: I was going off the number KK used. I could see the number being higher but it’s tricky because at some point the owner sues and could win a la Al Davis/ Donald Sterling.

    BB Mike: I never said that the new owner would have to pay for part of the stadium. I said that AEG is demanding 30% of the team (which they said). Either way I am thinking that whoever buys AEG may give up on the NFL and lure the Angels to LA Live. Anaheim is a junk market.

  15. As a St. Louisan, I think I’ve got a pretty good handle on the situation. I am 99% sure the CVC will reject the Rams’ offer, and the lease will go on a year-to-year basis starting in 2015. However, I do not think the Rams will leave, given how I know this much about Kroenke:
    1) He moved the headquarters his real estate company THF to the suburb of Chesterfield, and he’s working on redeveloping multiple downtown properties, including Union Station. Moving the Rams will devalue these.
    2) While the LA Rams would become far more valuable, he’ll have to give up a significant share of the ownership to go there, and Kroenke’s other franchises (Arsenal, Denver Nuggets, Colorado Avalanche/Rapids/Mammoth) show that he likes to retain as much control as possible of the team, including the facility they play in. This is the biggest point, as he’s going to want to retain all the revenues and such from wherever he plays, and he won’t get that in LA, where he’ll have to pay such a high fee for relocation.
    This being said, after the lease goes year-to-year, he’s going to propose a new stadium in one of two ways – a suburban stadium with a retractable roof or an open air stadium just north of where the dome is now. The first option is much more likely since Kroenke wants to be able to host as many special events as possible (impossible to hold the Super Bowl in St. Louis outdoors) and he’d be able to control the land surrounding the facility. That will allow him to keep all parking revenues, build a new practice facility for the Rams, and develop the surrounding property like the Patriots did. This will probably cost a billion dollars, a third which will be on the hook for the public, and two thirds of which will be covered by Kroenke and an NFL loan. Any more public money, and it will probably fail in a vote. Public will be on the hook to develop infrastructure, and will likely give tax breaks on land.

  16. There is a huge difference between what the Rams want and what the CVC can offer. The only options I can see is for Stan to either come up with the stadium rebuild cash himself or build his own stadium. The value of the Rams remains about the same. If the team relocates to LA the value of the team goes up to over a billion. The revenues the team can rack in goes way up also. The team would be playing in one of the finest venues in the world in LA. It’s a no brainer in my opinion.

  17. Rob, You need to realize the Rams could move to LA and share a stadium there without giving up any equity.

    A single team in LA doesn’t make sense but 2 in a shared venue like Jets/Giants would make perfect sense. You double the funding and retain all the same revenue.

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