NFL considering half-billion-dollar L.A. relocation fee, could put off decision until 2017

Of course, whether or not St. Louis and Missouri approve $500 million or so in subsidies for a new Rams stadium, there’s still the little matter of the NFL approving which team or teams it will allow to move to Los Angeles. And despite rumors that the league was getting close to a decision, Ian Rapoport of the league-owned now reports that the L.A. situation is in “gridlock,” and while the “hope” is that a league vote could come by May, it might not take place until 2017.

What’s the holdup? It’s always possible that this is just a matter of the owners’ cabal not being able to decide which of their brethren’s move plans they want to approve, or that they’re waiting to see what city officials in St. Louis, San Diego, and Oakland ultimately approve. (Though if so, why leak it to the media when a looming deadline is more likely to create a sense of urgency for those voting on stadium plans?)

There’s one other wild card, though, which is that, according to a report last week in Sports Business Journal, NFL owners are looking to get $500-600 million in relocation fees from any team moving to L.A. Given that the best guess is that a relocated L.A. team would see its revenues rise by a present value of maybe $500 million or so, taking on well over a billion dollars in stadium debt plus another half a billion in relocation fees seems like financial suicide.

So to the existing game of chicken between the owners of Rams, Chargers, and Raiders and the three cities that want to keep them, add in an overlay of an additional game of chicken between the L.A.-seeking owners and the NFL over how much cash they’ll have to cough up to the league to be allowed to move. I can see where this might result in gridlock, yes.

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24 comments on “NFL considering half-billion-dollar L.A. relocation fee, could put off decision until 2017

  1. This is yet another trump card in Kroenke’s hand. Though it almost doesn’t matter. The minute a shovel goes in the ground for the Inglewood Stadium (and it will, even if NFL owners try to block a Rams move), the Goldman Sachs deal in Carson will fall apart for the Chargers & Raiders.

  2. @Neil…Question: If teams move, they can’t dip into the NFL’s help-me-build-my-stadium fund, correct?

  3. So right now the estimate for Kroenke’s project is $1.86 billion. We know that stadiums NEVER come in on budget. No large construction job does. So lets say it winds up being a cool $2 billion. Add a $500 million relo fee on top of that. So the team would have to rise in value by $2.5 billion over what it is in St Louis just to break even. How many teams are even worth $2.5 billion? Maybe the Cowboys and the Patriots. So he is trying to say that the LA Rams value is equal to the value of the Cowboys + the St Louis Rams.

  4. Neil, who gets the relocation fees monies – the NFL and/or is it distributed among all the non-moving owners?

  5. There’s not really a difference between those two — the NFL may have given up its non-profit status, but it still doesn’t really keep any money at the end of the day.

  6. Kroenke owns the team that 2/3 of LA wants to move there (probably 80 percent if you count only the people with money, jobs and influence). He has an impeccable stadium project in a struggling, minority-run town that is rebuilding itself, near the booming west side and already with the Forum and a casino next door, office space a couple of miles from the NFL offices, and a rail-line coming to the door. It is fully funded, entitled and loved by the neighbors and everyone else who has commented on it.

    The next best offer is from two broke teams who admit to being focused on their home cities, with no land owned, no funds, small interest from the LA market, no proven leadership, and looking in a relatively remote location that the mayor has said ” It’s Contaminated Land”.

    Suppose next week Kroenke informs the NFL that he is about to publicly announce that he has finalized temporary arrangements for two years at the Rose Bowl and will be playing there in 2016 while building Inglewood. He would graciously like their permission to move.

    What does the NFL do? Wait for the announcement then say “no” and risk outrage from what few people in LA have any respect for them? Shouts of racism and that this wouldn’t have happened in a white town? Plus delaying the LA process for a year or more with multiple lame ducks, no certainty that the Raiders or SD will ever come or be successful if they do come (SD is preferred by 4 percent of Angelinos)? Knowing that they will have to defend their move in court for years and could get a look from the DOJ? And even if they win, what would be their status in LA for the foreseeable future?

  7. There’s also this: “Kroenke, according to multiple people familiar with his maneuvers and proposals, is willing to help the Chargers and/or Raiders stay where they are. That could also be the outcome of a brokered deal that averts war over L.A. and allows Spanos to say he chose to give it another go in San Diego.”

    Honestly, I think this was Spanos’ goal all along anyway. The Chargers would have never been successful sharing L.A. as the clear B team to the Rams or the Raiders.

  8. The other NFL owners don’t care what people in L.A. think of them, don’t have a problem with delaying a year if it might end up creating better leverage for stadium subsidies in the various cities involved, and almost certainly isn’t worried about a DOJ investigation. If they want to block a move, they can just say, “You’re welcome to move as soon as you hand over [outrageous number of dollars to be determined] in relocation fees,” which if this report is to be believed, is exactly what at least some owners are considering doing.

    As for the quote from the Kevin Acee column about paying off Spanos to stay in SD, 1) Kroenke’s already $1.8B in the hole plus relocation fees, there’d be no reason for him to move to L.A. if he had to give money to Spanos as well, and 2) it’s a quote from a Kevin Acee column, so really enough said.

  9. No sources, Neil. But anyone who’s flown into LAX recently can see that a stadium is about to go up at the old Hollywood Park site and anyone who followed the 49ers stadium quest knows that Goldman Sachs is only going to finance a stadium if they aren’t on the hook for revenue shortfalls.

  10. @Neil…wouldn’t delaying a year or charging an outrageous relocation fee decrease leverage for the NFL in the sense that it looks like the NFL is making it harder on teams to move and therefore giving more leverage to the cities. e.g. would I rather pay $500M to relocate or contribute another $100M on my side of the re-build-in-my-current-city-stadium-equation.

  11. Not to mention that it would encourage Kroenke to pull an Al Davis and say to hell with league approval.

  12. Not necessarily. You ever run an eBay auction? There’s a fine line between giving bidders time to run up the price and having them lose their sense of urgency.

    And I don’t think the NFL is too concerned about Kroenke pulling an Al Davis. The league has built itself a lot of options it didn’t have in 1981.

  13. Could we acknowledge that the “town-hall” meetings the NFL held in St. Louis, San Diego and Oakland were the NFL’s way of smoothing the road for another LA relocation delay? With all the begging and crying the fans displayed how could the league be so “heartless” to move a team when their fans so badly want them to say.

  14. Gee, where are all those guys who said a relocation fee of anything more than $200m was ridiculous?

    Not posting today I guess…

  15. … Anyone still think an expansion fee (if it comes to that… which is looking less likely unless the NFL makes it happen) of $1.5Bn is ridiculous?

    Aqib: There is some precedent for the numbers you are talking about.. it was an expansion (Houston – which would have been LA if the stadium deal could have been worked out…), but the price McNair paid was in the neighbourhood of the most valuable franchises in the league at the time (not the top, but in the conversation) in 2002.

  16. Its pathetic that a pragmatic solution appears unable to be reached. Roger Goodell has no backbone. His leadership skills are nonexistent, and he is unlikely to develop a consensus among the NFL owners deciding the relocation to LA issue.

  17. Just an observation: I don’t disagree with the other posters that the Kroenke/Inglewood plan was the more viable of the two for a lot of reasons. “The Rams are the team LA wants” isn’t one of those reasons, but hey let’s toss that in for good measure.

    However, given that St Louis is, according to your other posts, about the cry uncle and hand half a billion to the Rams, this seems in no way inconsistent with pushing to 2017. At the end of the game, sometimes you kick the ball on 3rd down in case there’s a bad snap (can I get a job as a sports writer now?). Meanwhile it gives the other teams, who are less far along time to squeeze their cities.

    If I was a betting man, I’d say in 2017 or 2018 San Diego will cave to the Chargers and suddenly the NFL in LA will move to 2018 or 2019. Oakland will be harder nut to crack so 2020, 2021, 2022….Maybe in this game of chicken the NFL will blink and build a privately-funded stadium on LA but I wouldn’t bet on it.

  18. Who said over and over around here that if anyone moves, the rest of us will want to wet our beaks? Yup, moi. Why should one member of our mob get so much gravy while the rest of us just sit around and watch? That’s not how it works in the Club of 32. Our t.v. deal nets us all the L.A. cake we need. You wanna move there and make out like a bandit? The other banditos expect a cut. That’s how it is in the real world.

    Anyway, when we telegraph the obvious via Rapaport (or via pretty much everything I’ve generously handed out here for years), I’d say don’t fight the obvious with fairy tales of L.A. stadiums. Just get used to it being paradise without a pro football team.

  19. Aqib – just going from memory but as I recall, little or nothing.

    The private contribution angle is not really the point I’m making though, if that is what you thought?

    What I am saying is it is not unusual for a league to demand an expansion fee that is in line with, for example, the average of the top 6-8 franchises already in the league. It is a relatively recent phenomenon that fees are set based on the individual markets… it used to be that when a league decided to expand the fee was set first and the candidates vetted. They no longer think inside that particular box, of course.

    What percentage have NFL franchise values risen, on average since 2002? 140%? 170%? 250%?

    Multiply the $700m figure by that number.

    I don’t think the NFL is going to expand now that one of their “preferred” newish owners is angling for LA. But if they do choose to go the expansion route (let’s say they don’t feel the stadium subsidy offered, if any, is suitable and refuse any/all relocation requests), they are unlikely to consider any financial contribution the owner makes toward a new stadium as a reason to reduce their expected expansion fee.

    If an owner (current or new) wants to be the LA owner badly enough to pay $1.4bn for a stadium, why would the league let them off with a reduced expansion fee? Clearly they’ve got the NFL in LA jones bad…. and the money to sate Piggy (and friends) almost insatiable appetite for public funds.

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