St. Louis committee okays city share of $477m Rams subsidy, NFL says “still not enough, maybe”

The St. Louis board of aldermen’s ways and means committee voted 7-2 yesterday to approve a Rams stadium subsidy bill, sending the legislation to the full board. And while a final vote is still a week away, the writing seems to be on the wall, especially since board president and key swing vote Lewis Reed has gotten on board with the plan, seemingly in exchange for a minority-hiring package for stadium construction workers:

“We know that when we empower kids and give them the opportunity for careers it can dramatically change lives,” Aldermanic President Lewis Reed said.

Of course, St. Louis could give a lot more kids opportunity for careers by spending $400 million on pretty much anything other than building a football stadium, but hey, let’s not split hairs here.

The final plan is for a $1.01 billion stadium, with funding broken down like so:

  • $250 million in state money, including both hotel tax money and state tax credits.
  • $150 million in city money, part from the city’s share of hotel taxes, part from existing taxes on Rams parking, tickets, food, drinks, and souvenirs.
  • $77 million in future operating and maintenance costs, to be paid for by the city.
  • $200 million from the NFL’s G4 stadium loan program.
  • The rest from Rams owner Stan Kroenke, who would get to use personal seat license payments and naming-rights fees to pay off most of it.

Reaction to the vote was swift and all over the place, depending on the person’s position on subsidizing almost half of a bilion-dollar stadium for a billionaire whose team just got its last new stadium at public expense 20 years ago:

  • Rams stadium task force chief Dave Peacock said that “there’s obviously a lot more to do,” but that “this is a proud day as an American to see this process play out.”
  • Alderwoman Megan Green tweeted that “the deal cutting, bribery, and [corruption] at City Hall will never cease to amaze me,” and added: “I’ve had loved ones offered bribes for my support. I’m not alone. Campaign finance reports will be interesting…” She also said she’s been in touch with the FBI about her allegations.

Assuming the city bill is approved, both Kroenke and his fellow owners will have separate decisions to make on whether to take what’s on the table in St. Louis or move the Rams to a new $1.8 billion stadium (with little in the way of public subsidies) in Los Angeles. The day before the vote, NFL VP Eric Grubman went on the radio to fume about how it’s not fair to argue against subsidizing the Rams just because of how rich Kroenke is (actually reasonable: the better argument to make against the subsidy is that its only purpose is to make Kroenke richer), and also to say that this offer still might not be sweet enough:

“St. Louis will fall short of having a compelling proposal that would attract the Rams,” Grubman said. “To that end, and I don’t mean to oversimplify and I’m certainly not going to negotiate the individual points: The stadium is going to cost more than is at the drawing board at the moment, the funding has declined and new taxes are being proposed to the Rams.”

Is that supposed to mean that Kroenke won’t take the bait and sign the deal, or that other NFL owners won’t block him from moving to L.A. if this is the St. Louis offer (Grubman also said the San Diego and Oakland stadium proposals are even less compelling), or just that this is how you haggle? Grubman didn’t say, and it’s entirely possible he doesn’t know.

He also noted that an offer good enough to keep the Rams isn’t the same as an offer good enough to keep the NFL, hinting that the league might let Kroenke walk and then try to take up the St. Louis offer for a new team (Oakland Raiders? An expansion team?) later on. But, you know, all of this has a lot of spin to it right now — that’s literally Grubman’s job — so reading too much into any statement is probably a mistake. More game of chicken to come!

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71 comments on “St. Louis committee okays city share of $477m Rams subsidy, NFL says “still not enough, maybe”

  1. I read somewhere that the state legislature recently sent a letter (signed by the majority of both houses) to the governor opposing public funding without a referendum.

  2. I love the phrasing “St. Louis will fall short of having a compelling proposal that would attract the Rams.”

    I think from now on people should use exactly that sort of phrasing when they want public spending for things that are already some place. For example we could say “the new highway in Bentonville, AR will fall short of having a compelling proposal that would attract Wal Mart” or “the lowering of capital gains taxes will fall short of having a compelling proposal that would attract the New York Stock Exchange to the United States” or “the new social security spending will fall short of having a compelling proposal that would attract old people to America.”

    The possibilities are endless.

  3. What a crappy proposal for the public. And to replace a 20 year-old stadium. II wonder how long this stadium (if it built) will last. 20 years from now, will it be considered too big, or not on wheels or no roof (or if it has a roof, not outdoors)? When you are using other people’s money, you don’t have to live with mistakes or quirks. I hope they go to LA on their own dime.

  4. Does Grubman believe himself or does he go home every two weeks and sit at cry in front of a mirror looking at himself, his enormous electronic pay stub and a bottle of booze?

  5. That Megan Green is a tough one. Here we are ladling gravy all over the local pols and she won’t take the scratch. Then you call up her sister and uncle and they won’t either. What is this world coming to?!?

  6. Regarding Grubman, fyi as long as we put fresh dirt in his coffin once a week, nothing seems to phase him.

  7. When a group of complete morons continues to pile money on a table in order to bribe you not to take less money to move to another city… Why would you ever say “whoa”?

    Of course its not a compelling offer. If you say it is a compelling offer they will stop piling money on the table in front of you…

  8. I had hoped people learned that governments can’t pick and choose which debts they are willing to pay after we all saw the pathetic Tbaggrz attempt to shut down the federal government.

    Schaaf doesn’t have the power to do what he is threatening to do. His uninformed Tbaggr constituents don’t know any better. How many of these jokers think Obama was born in Kenya?

  9. This proposal will still pale in comparison to what moving to Los Angeles will do for the net worth of the Rams franchise. That’s what Stan Kroenke is going to look at. In order to do that, St. Louis (or Missouri) will have to absorb the costs of the entire stadium and give the Rams free rent for the duration of their stay. However, its not the responsibility of the taxpayers to increase the net worth of a private entity.

  10. “This proposal will still pale in comparison to what moving to Los Angeles will do for the net worth of the Rams franchise.”

    Almost certainly not, especially when you take into account the additional $1-billion-plus in debt he’d have to take on:

  11. Most everyone is going to have an opinion on this subject:

  12. I think the NFL is still acting like “this isnt good enough” so that way Oakland and San Diegos so-called final offers are even worse deals than this one is. If they said “Yeah, this is perfectly fine”, then Oakland and San Diego would automatically make virtually the exact same offers, except for maybe a few changes to fit California laws. However, because the NFL lied and acted like it wasnt good enough, those cities will likely make offers even more damaging to public funds, and this one already wastes hundreds of millions. I think if San Diego and Oakland match or surpass the ass-kissing this offer is full of, then we wont see a single team move to LA, and should we really be surprised?

  13. Prepare for

    Los Angles Rams
    Los Angles Chargers
    St Louis Raiders

    Guess the Rams/Chargers can save cost on the color scheme

  14. NFL owners don’t walk away from $400 million of free money. That’s their Golden Goose. The Rams aren’t going anywhere.

    LA is getting used again like always. Stan’s plan for Inglewood is to build what he always builds, a retail center with a Walmart.

  15. $400 million in free money or increasing your net worth by $2 billion? Kroenke won’t have a tough choice.

  16. The decision is not up to Stan and ftr, taking on $2 billion of debt doesn’t increase Stan’s net worth by $2 billion. SMH.

  17. Perhaps it doesn’t. But moving your franchise from a location where its value is currently ranked near the bottom, to a market that will place near the top of league’s net worth rankings, is surely worth the investment.

  18. No JC, it’s not surely worth the investment. Pick up an intro to accounting book.

    Stan isn’t moving to Inglewood, he’s building a retail center with a Walmart.

  19. ben Pick up remedial Economics, Finance and math books. Spending $2 billion to increase the value of an asset to $3.5 billion is more than $400 million.

  20. Ryan: Your theory sounds reasonable except for one little thing. Neither Oakland or San Diego have a “final offer.” There is little political will for any public spending in San Diego and none in Oakland. Neither the politicians nor the public are making offers beyond “we would like you to either stay in your stadium or build a new one…whatever.”

    …of course, that’s the exact same offer LA is making.

    It’s not an issue of fitting California law. It’s a matter of fitting California voters who are anti-public stadiums.

  21. Ben and JC: Enough with the “Read a book!” already. That’s walking the line of a personal attack.

    Anyway, the Cork Gaines piece JC links to above estimates that the Rams are really worth $1.4B in St. Louis right now. If so, then spending $2B to increase the team’s value to $3.5B would only be a net profit of $100M, which isn’t more than $400M.

  22. Neil: As I’m sure you are aware, that’s a bit of apples-and-oranges comparison. It’s not like the city is just handing him $400M. They are building a stadium, which should in theory increase the profitability of the team. However, by your numbers, he’s still on the hook for paying ~$325M. Using the numbers above, the question is would the St Louis Rams, with a new stadium, be worth more or less than $1.825M ($1.4B + $325M + $100M).

    That said, if the answer is “no” you’ve got to wonder why they don’t just drive up a truck and hand the guy something like $150M of tax dollars and cut out the whole stadium charade. Kroenke and the taxpayers would both come out ahead.

    On the other hand, given the economics of the NFL and the fact national TV revenues are the primary revenue source, I think the idea the team’s value would magically increase from $1.4B to $3.5B just by moving to LA is a pretty implausible claim to begin with. Of course, for the same reason I don’t think anyone is moving to LA anytime soon.

  23. No one believed the NBA Clippers would sell for $2 billion.Perhaps Steve Ballmer paid more that the franchise’s worth. Who really knows? However, most economists will agree that moving the Rams to LA will substantially increase the value of the franchise. It should be noted the St. Louis stadium proposal doesn’t state how much annual rent the Rams will be paying for using the stadium. If that value is market rate (approx $5 million per year), then $150 million over thirty years has to be factored into the additional costs to the Rams. I would assume the Rams won’t be paying rent at the Inglewood stadium. In addition, the ancillary development will provide additional revenue sources to absorb the stadium costs incurred by Kroenke and his business partners.

  24. Scola: An NFL franchise, much like real estate, is dependent upon the location. Its safe to state the value of an asset in California will increase at a greater rate than it will in Missouri. A presumed move by the Rams to Los Angeles will provide an immediate increase in the franchise’s net worth. Over time, the value of Rams franchise will continue to appreciate at a rate presumed to be greater than what can be attained in St. Louis. Most likely, that is what Kroenke and his partners are contemplating.

  25. It goes without saying that in the abstract LA is a more attractive market than St Louis. It is a large and growing market while the city of St Louis has experienced the sharpest population decline of any US city.

    However, taking it from the abstract to the concrete, you have to explain what incremental cash flows a move to LA would generate. With more population perhaps more tickets could be sold. However, ticket sales are kind of a rounding error when it comes to the NFL. You might sell more sponsorships, skyboxes, etc. which are larger but LA is actually not a huge concentration of corporate headquarters the way New York, the Bay Area or even Dallas is. Most of California’s major companies are headquartered in North California. You could sell PSLs (Neil’s case) but that’s a function of very rich people, and LA is middling in median household income. Again it’s not New York or Silicon Valley.

    So where’s the money?

    The comparison to the Clippers is not really convincing. Yes, Steve Ballmer overpaid, but basketball’s revenue streams are much more local. Tickets and local cable deals make up a big piece of team’s income. In that case, LA is rather more attractive. In theory NFL TV ratings might rise with a team in LA but that would accrue equally to all teams. The Rams would only get a tiny slice of that money. Some have argued it might fall as they would get less competitive/interesting games.

    The economics of the NFL make the proposed move unlikely in the short term.

  26. Scola: Yes, I agree with you on the numbers. Really you want to look at all the marginal revenues and marginal costs of each option, and calculate it that way. I was just pointing out that JC’s original calculation seemed to assume a St. Louis team is worth $0, which obviously isn’t true.

    The one other thing I’d add to the problem of L.A. not adding much in the way of local TV revenues for the NFL unlike the NBA is that if the ancillary development is going to be so lucrative, why not just build more of that in Inglewood and skip the stadium? As I’ve said numerous times, if Kroenke thinks he can make money on the Inglewood deal, it’s his money to roll the dice with, but it doesn’t seem like a guaranteed great investment to me in the same way that moving a team to L.A. in another sport would be.

  27. Which probably solidifies the argument of having only one team in Los Angeles. Although there are definite concerns regarding the fickle conduct of sports fans in the region, its overstating to say there are not consistent football followers. For example, both UCLA and USC average over 70,000 attendees for each of their home games. However, its understood you don’t have to purchase PSL’s to watch them play.

    Granted, the corporate presence isn’t comparable to New York or Northern California, but any national entity would seek to have their marquee visible to a regional population which is the second largest in the country. In fact, Farmers Insurance had signed on to be the naming rights sponsor for a purported NFL stadium ($700 million over 30 years) in downtown Los Angeles. Stan Kroenke owns four major sports franchises, in addition to being part of the world’s largest retailer. I see no problems for him obtaining a naming rights sponsor for his Inglewood stadium.

    Realistically, the Rams are the one franchise with the resources for relocating to Los Angeles. The Chargers/Raiders proposal doesn’t pencil out, nor has it been established they would have enough of a fan base to make their project work. Its debatable if the Rams can sell enough PSL’s for the Inglewood project. The number of people in the region suggest it can. Then again, the stadium is part of a large development and it is not going to be the only source of revenue for Kroenke and his partners.

  28. Neil. Perhaps, but where is St. Louis going to get the money? Everyone is questioning the plausibility of the Inglewood project, yet what is going to make the riverfront stadium in St. Louis any more lucrative? Its obvious, there is a greater concentration of wealth in the Los Angeles area. And while all three NFL teams in California still exhibit sold out stadiums, the Rams have continued to showcase one of the lowest attendance figures in the league. Ironically, they play inside of a warm domed stadium. How much would those attendance figures drop during the near freezing winter months when fans have to endure the cold of an open-air stadium?
    As you stated, its Kroenke’s money to spend. Perhaps he knows something that we don’t. Whether the Inglewood project ends up being a great investment, that’s for him to worry about. At the least, the Rams are still a commodity in Los Angeles and his franchise will have less of a difficult time transitioning into the market.

  29. jcpardell: “where is St. Louis going to get the money?”

    Did you miss the headline? Public money. Stadiums are huge money losers but if you can pawn the bill off on the taxpayers, then it’s not your problem.

    LA, and California in general, heck the West Coast in general, wisely rarely squanders money on sports stadiums.

    On the other hand, regarding cold weather, as a native Midwesterner living in California, Midwesterners may have awful public policy but unlike Californians they aren’t weather wimps. Having gotten pneumonia many years ago after a great but frigid game at Soldier Field back before it was ruined, that’s part of being a fan.

  30. Scola: Does St. Louis have that public money? It appears those revenues are being predicated on certain revenue streams which may not materialize. Will that city pay for any revenue shortfalls?
    In the end, Los Angeles is where Kroenke wants to be. I don’t know if what St. Louis is offering will be enough to prevent that from occurring.

  31. I can’t tell if you are being serious. Those are municipal bonds. If your argument is the City of St Louis and/or State of Missouri are not financially solvent there’s lot of money to be made in shorting their bonds. If you believe this I imagine you’d be busy doing so instead of arguing here.

    Will this bite them 10 years from now and make St Louis have to cut far more valuable city services in the way Cincinnati had to? Not unlikely, but the NFL could not possibly care less.

  32. Also, you keep coming back to “Los Angeles is where Kroenke wants to be.” If this is the case then that’s that. From the original Raiders move to LA if an owner really wants to move a team, is willing to spend a bunch of his own money and is willing to go to court, they probably can. Further, unlike Davis and Spanos, Kroenke has enough cash that he can take the risk of moving to LA.

    The question is: Why? There isn’t a solid business case. Kroenke is not Eli Broad. He doesn’t just spend his money because he wants to build things in LA. In fact, he has no connection to LA that I know of. Heck, he is from Missouri but he also has invested in sports teams in Colorado and London so it seems it’s a money-making venture not an act of civic largesse.

    Now for all I know his goal in life has been to hang out in his owners box with George Clooney and Snoop Dogg and he will spend lavishly to make that happen. However, barring something like that, this seems like a pretty transparent plan to squeeze more money out of St Louis, just like what was done in Minnesota, Cincinnati, Seattle and the dozen other teams that have threatened to move to LA over the years.

  33. I have not researched the City of St. Louis’s financial condition. However, no one is going to ever confuse that city with New York or San Francisco. Even with that, neither of those two more wealthy cities were willing to finance a new publicly financed NFL stadium. However, Oakland has subsidized the Raiders stadium for nearly two decades and that was money which should have gone to much more needed services for a city with far greater problems than maintaining a home for an NFL team. I can’t see how St. Louis can logically provide an explanation for extending the bond payments of the current stadium, finance a new stadium, and then state it will never impact their city services.
    For whatever reasons, Stan Kroenke want to relocate the Rams to Los Angeles. As we’ve read, there are many opinions as to whether that decision will be a financial success. Perhaps he doesn’t need the venture to be extremely successful. If its what he wants to do, he should be allowed to do so.

  34. I confess after reading this blog and others for a long time the issue appears no clearer now than some months ago.

    1. On one hand, a lot depends on some still unvalidated assumptions–especially whether Kroenke will be a team player and accept what the vote of the owners says (either way), or whether he’ll be Al Davis and just move. If we say he will–his options are different than if we assume he won’t.

    2. The financial point about St. Louis is absolutely correct (though the still, amazingly, have a decent corporate HQ presence for a city of its size). It is probably not wealthy enough to support three major league teams–BUT, since it is now a state issue with the State governor personally involved, the stupidity over money and the future has even more channels to work in.

    3. I’d say the logical point is that LA would be a “better market.” However, the startup costs and political uncertainty are so high that it may overwhelm the benefits. And while premium seat revenues aren’t huge in the big scheme, the model of “free stadium, no taxes, and all premium revenues to the owners” clearly makes a lot of owners happy. Which again pushes logic right out the door.

  35. Hey like Neil if he wants to move and put down his own money, more power to him.

    Yes, neither New York or San Francisco were willing to finance public stadiums. There is a difference between willing and able. Either could have but we had higher priorities.

    In contrast, Detroit financed a hockey arena while the city was in bankruptcy. Messed up priorities. In fact the cities that have had the worst runs of luck tend to be the first to hand money on sports teams. Call it low municipal self-esteem.

    I hope Kroenke is serious and wants to spend his own money on something that has no business case. However, I suspect this is just another attempt to rip off a struggling city, like the last one and the one before that. Call me cynical.

  36. JC it sounds like you are looking at this as a LA Rams fan and not as a business decision.

    Fleecing taxpayers is the NFL’s business model, they couldn’t care less that this is a bad deal for St. Louis. St. Louis’ Board of Aldermen don’t seem to care either, they are expected to pass this bill by the end of this week. Once the $400 million of free money is secured the owners will keep the Rams in St. Louis. Walking away from $400 million is not a precedent the owners can afford to make.

    You would think LA Rams fans would know the history of their city getting used by the NFL it’s been going on for 20 years. LA is getting used again and the franchise value claims and comparison to the Clippers are ridiculous. First off, Stan would have to sell the team at the estimated value amount for a value increase to matter. There is no TV revenue bump for a NFL team moving to LA because it’s shared equally, the Clippers is an apples to oranges comparison. LA’s fickle fans aren’t likely to generate the revenue numbers that the Cowboys or Patriots extract from their dedicated fan base. No one in their right mind takes on $2.5 billion (stadium and relocation fee) in debt in hopes of increasing their franchise value, under the best case scenario, by only $2 billion. Not going to happen.

  37. Football stadiums are never a good investment. That’s why most NFL franchises don’t want to own them. Fleecing taxpayers has been the battle cry for NFL team owners. The league has no problem with it and will continue to follow that model.

    As for the Rams, the future value of the franchise being in LA is more beneficial to the league. However, the accelerated appreciation of the franchise is short term. The long term increase in value will be measured over the long term. In that regard, being in Los Angeles will have an impact much greater than $400 million being offered by St. Louis. Sure, Stan Kroenke may spend $2.5 billion to watch the Rams increase by $2 billion in the first year. But should his team’s value increase to $8 billion in less than a decade, then the move is worth the investment.
    In regards to the league, having a market presence in the second largest television audience in the nation gives the NFL greater leverage when negotiating future contracts with the networks. That won’t happen if the Rams remain in St. Louis.

  38. To play devil’s advocate, there is a case to be made for the league locating a team in LA based on national TV deals. However, such an argument would be based on, first and foremost, demographics. The one thing the NFL doesn’t want is to have a demographic makeup of fans that looks like MLB: Older, whiter, etc. Baseball was once the national passtime but their TV deals are no longer so lucrative. The NFL could plausibly be playing for the long game, concerned that in a generation another sport, such as soccer or basketball, could replace it at the apex of American sports the way football replaced baseball. A team in LA, America’s Latino capitol, could fit with a marketing strategy to maintain dominance.

    If this was the goal, things would look very different from this. The league, not a single owner, would be leading financing for the stadium. The team would be either be an expansion team or a franchise relocated from the Eastern Time Zone to maximize the number of games in the later TV time slot on Sunday. If a relocated team, it would be one from a very small market such as Jacksonville or Buffalo not a mid-sized one like St Louis. Instead of charging a relocation fee, the league would be subsidizing the LA franchise in hopes of accruing incremental revenue at a league-wide level.

    One could make that case. However, the case you’ve made frankly makes no sense. A single owner taking on all the cost doesn’t make business sense in such a scenario. Furthermore, the idea of a $8B franchise based purely on a geographic move is silly. It ignores the economics of the NFL.

    This doesn’t have any of the hallmarks of a TV contract-oriented move, a demographic play or anything like that. This is a pure shakedown of St Louis taxpayers. The move isn’t going to happen.

  39. “Baseball was once the national passtime but their TV deals are no longer so lucrative”.

    Really? Take a good hard look at the regional sports networks rights fees paid to teams (and occasionally to MLB itself). Add in the staggering revenues being raised through MLBAM as well. In the last four years the distributed revenue to each franchise has risen about $40m. Doesn’t sound like a failing 19th century business to me… and the average payrolls are through the roof as well. The owners certainly seem to believe they are making money…

    Their national tv deals may hold firm (or perhaps even drop, though that is unlikely) going forward. If you only count the national deals though, you are comparing apples to oranges.

  40. The Dodger’s TV contract was a 25 year deal. The NFL deal was for 9 years. And you’re calling apples and oranges on me?

    I didn’t say MLB was not profitable. However, you cannot argue from a demographic, financial and profitability perspective the NFL has not eclipsed it. 40-50 years ago the NFL was small fry compared to MLB. The NFL clearly does not want to fall off its perch the way MLB did.

    That said, if you disagree with my assertion, fine. I was trying to come up with a scenario where a team relocating and building a $2B stadium in LA with private money might actually be plausible. Don’t buy it? Great. There’s no plausible scenario where there is a business case. Congrats.

  41. There are differences in the TV deals.

    The baseball deals build off the phenomenon of per-subscriber charges (also seen in college football expansion) that essentially allow baseball teams (and their frequently team-owned networks) to assess a “television viewing tax” in support of team payrolls. These deals may be at some risk should cable companies be forced to more flexible subscription rates and subscribers say “you know, getting all 162 TB Rays games isn’t worth $150 a year.” That said, the aggregate amounts of money across MLB are huge.

    The NFL has also tried to get the same “tax” (though the NFL network) but mostly depends on national broadcast revenue, which may be more stable in the medium term.

    People have been warning about baseball demographics for at least a generation or more, yet it remains popular regionally as an attendance event and a regional TV event. It does appear to be a less “national” game than the NFL, but comparing even the lowest attended MLB teams of today to the dismal attendance numbers of the 1970s and 1980s (when MLB was supposedly more popular) is no comparison. The sports have different markets and much different marketing.

  42. If Stan Kroenke has the money to spend on a new stadium, that is his prerogative. Most likely, he will recuperate the $2 billion being invested into the project. Frankly, I believe he will recover that value more rapidly in LA than he will investing $300+ million into the new St. Louis stadium project.

  43. JC, the Chargers and Raiders Carson stadium will provide the NFL with all of the same positives as the Inglewood stadium. The Carson plan gives each network a team in the LA TV market with losing any current NFL TV market. You are looking at this strictly from a Rams fan’s point of view.

    The Raiders are irrelevant in the Bay Area TV market. Their home market TV ratings are the worst in the NFL and they bring in less than half the viewers the 49ers attract. The 49ers ratings will jump as soon as the Raiders are removed from the calculations. The Raiders wont be missed.

    San Diego will become LA’s secondary market and very little will change on the TV side of things. I don’t believe the average Chargers fans will stop watching if their team moves 100 miles north. We will see.

    The debate isn’t St. Louis vs LA, it’s St. Louis vs Oakland and San Diego. The NFL can have LA without dropping the NFL’s 19th largest TV market.

  44. Correction:

    The Carson plan gives each network a team in the LA TV market without losing any current NFL TV market.

  45. Again, no one has yet shown where the incremental revenue would come from. The NFL gets fine TV ratings in LA. In fact it gets fine TV ratings in the middle of Montana or Alaska or other places with no team. Further, NBC and ESPN pay as much as the others (ESPN actually a bit more, NBC a bit less) to show a game that isn’t a local game for most of the country vs. CBS/FOX who show a local game. Finally, even if LA increased the TV deal, all owners would get an equal share, not just the owner who dropped $2B which is why I argued even in such a scenario, the NFL, not the owner, would have to pay for the stadium for it to make sense.

    “Kroenke wants it” “Bay Area people don’t like the Raiders” etc. are not business cases. This is like the South Park underpants gnomes. Step 1: Move to LA/steal underpants. Step 2: ??? Step 3: Profit.

    No team is moving to LA. They are trying to extort their cities just like has been done for a couple decades now. Keeping with the cartoon metaphors, when it comes to football LA is Charlie Brown. He never kicks the ball.

  46. Scola, I was strictly pointing out reasons why the other 29 owners would vote for or against either project and not the financial viability of the Inglewood or Carson plans.

  47. Scola, I don’t know if the NFL agrees that they get “fine ratings in LA”.

    “The Los Angeles viewership for NBC’s “Sunday Night Football” is in line with national averages; the Los Angeles ratings for CBS and Fox are about one-third below the national average on those networks.”

    I’m willing to discuss the financial viability of the Carson and Inglewood plans but it will have to be fact based with links. That’s a different discussion than why the NFL would want to have teams in LA or which project 24 owners might approve.

  48. Given that the NFL owners will get paid $500M-$600M in relocation fees and an equal cut of any incremental TV revenues that seems beside the point. The question is whether there is any business case for any owner to put down such a massive investment, and there simply isn’t. If there was the Bengals would have moved there. Cincinnati is an even less appealing market than St Louis and the case for relocation far stronger.

    Again, it’s not going to happen just like it didn’t happen last time though I’m sure the NFL is happy to have help in fleecing the fleecing of St Louis taxpayers.

  49. Scola, you are assuming that Carson isn’t viable without providing any evidence to support your assertion. I’d like to hear your reasons.

    The Giants and Jets privately financed a $1.6 billion stadium, it would be prudent for you to at least recognize that it is possible for two teams to do the same in LA. I don’t know why we are assuming that the relocation fees will be anything close to the $600 million rumor. The Oilers, Ravens, and Rams paid $29 million. The NFL’s guidelines take the cost of the stadium into account and not just the increased revenue. I’ve already looked at the revenue streams and a single team stadium in LA is not realistic. A two team stadium is viable, depending on the availability of NFL G-4 funding.

  50. I’d really love to have anyone show their math here. We can go back and forth with “I’ll work!” “No, it won’t!” all day otherwise.

  51. I am assuming $500-$600M because that is the reported amount. It might be different. However, call me when it becomes negative. Then the math might work.

    The NY stadium was funded by PSLs. To sell PSLs you have to have a lot of wealthy people. Out of the 277 metro areas in the US, New York is #2 in terms of median household income ($59,799). In case you were wondering #1 is San Francisco-Oakland-San Jose ($63,024).

    Los Angeles is #43 ($45,903).

    Simply put unless Wall Street moves to LA that model doesn’t work. Heck, it didn’t work for the 5th most affluent metro area in the US (Minneapolis-St Paul) and no one is proposing it for the 3rd (Washington DC).

    As I say, if they want to spend their own money, god speed, but the business plan of moving to LA doesn’t work. If they can get the fans to pay for it, more power to them. However, there’s little or no incremental revenue and the demographics of LA are at best unproven and at worst implausible for such a financing scheme.

    Not happening.

  52. Also, while I might accept as potentially plausible a league-wide TV-oriented business case, the NFL’s contract isn’t up until 2021. If I figure 2 years to build a stadium, that would mean a team would move in 2019. That should give the three teams time to shakedown their existing cities and even maybe give 1-2 other teams a shot to rip off their hometowns too.

    As I say, tell me when the effective relocation fee goes negative. One owner isn’t going to take on 100% of the risk and 100% of the debt for 3.125% of the TV contract.

  53. Is median income the most important metric, or is it number of people wealthy enough to afford PSLs? They’re connected, obviously, but seems to me you can have as many poor people as you want to so long as there’s a big enough cadre of filthy rich. (The NFL would do gangbusters business in Panem.)

  54. Neil: Fair point. However, how do you measure it?

    I guess the other thing you could look at is the gini coefficient. That would show you income inequality. The most recent numbers I can find are 2012. New York had the highest gini coefficient of metro areas with at least 1 million people (0.5049). The SF area was #5 (0.4898). LA #4 (0.4911). Or to put it another way, LA may have income stratification similar to the Dominican Republic but NY resembles Swaziland.

    However, point taken. That would shoot down the Twin Cities (7th lowest gini coefficient) and DC (2nd lowest gini coefficient) argument I made. You could argue those metros are prosperous but too equal to make PSLs work.

    If you think looking at the gini coefficient is the better proxy for number of filthy rich people than median income, which is plausible, then maybe PSLs could work.

  55. The $500 to $600 million amount is a baseless unsourced rumor. The NFL will not charge that amount if they are serious about returning to LA.

    You must not remember that Wall Street wasn’t doing too well when the Giants and Jets PSLs were on sale. I’ll take 2016-2017-2018 Los Angeles over 2009-2010 New York and your median household income numbers are wrong. You have to post links to your sources.

    $58,869 Los Angeles-Long Beach-Anaheim, CA Metro Area
    $65,786 New York-Newark-Jersey City, NY-NJ-PA Metro Area

    There are more than enough wealthy people in Southern California to match the $725 million the Giants and Jets raised from PSLs. Goldman Sachs’ estimate for Chargers and Raiders PSLs is a combined $800 million, I’d go with a much more conservative $600 to $650 million but it’s not my money.

    “The loan would be paid back using revenue from sponsorships, high-end seating and non-NFL events at the stadium and, in a two-team stadium in Carson, using as much as $800 million in personal seat licenses — upfront payments that allow fans to buy season tickets.”

    A stadium in LA that can be used year round should get at least the $17 mil to $20 a year MetLife is paying in Jersey. I’m ignoring the Farmers $1 B nonsense.
    “But on Tuesday, MetLife took the next step and it acquired the name of the stadium.
    MetLife Stadium joins a region populated by CitiField, Prudential Center and Red Bull Arena. Its deal is for 25 years and is worth $17 million to $20 million annually.”

    The Present Value of $17 million per year for 30 years at 5% (the rate of the 49ers 26 year bonds) = $261 million, the PV of $20 million per year = $307 million

    A very conservative estimate for the PV of PSLs and naming rights for 2 teams is $900 million to $1 billion. Add in 2 $200 million G4 grant/loans and we are up to $1.3 to $1.4 billion. Each team is left with about $200 million to finance. The annual payment on a 26 year bond is about $13.75 million per team. That’s a lot better than the $24.5 million the 49ers are paying Santa Clara and my revenue estimates are far below Goldman’s.

  56. You used MSAs whereas I used CSAs. Hence the difference in numbers. I did so because I needed to include Santa Clara County to come up with something remotely resembling the reality of the Santa Clara stadium. However, in doing so yes LA takes in a chunk of the Inland Empire, though the Bay Area takes in Stockton, and NYC takes in Stoudsburg PA (CSAs are large). Note for gini coefficients I used MSAs because I couldn’t find CSAs and I’m lazy.

    Anyways, they are welcome to try. I’m still not convinced they could sell anywhere near that level of PSLs, but as it’s not my money knock yourself out.

    One thing to note, however, is these PSL-based schemes have been tried three times, in New York, Santa Clara and now in the NBA in San Francisco. In all three cases not only had the teams established fan bases they also at least played in if not won championships when they were putting together the deal (the Giants in NYC’s case, the Jets simply hopped on when their West Side Stadium collapsed). Each sold on upswings in popularity and as Neil has pointed out 49ers fans are unloading PSLs at a loss these days.

    I don’t see the Raiders, Chargers or Rams in this year’s Super Bowl and even if they did they wouldn’t be generating pandemonium in LA since they aren’t actually there. So again, it seems like a really apples-and-oranges situation and quite risky.

  57. PSLs have been used for decades and I specifically left out the 49ers $531.5 million and the Cowboys $470 million from PSLs as outliers.

    My conservative estimate of $650 million is based on the $325 million the lowly Jets raised in 2009/2010. What number do you want to use? Post links.

  58. Any team in a remotely similar market (Houston, Chicago, Philadelphia, etc.). Also any team that is relocating though I recognize that may be impossible as it’s never been done.

  59. Found one. The Houston Texans got $77M in PSLs as an expansion team. New team in a market. LA is more like Houston than it is like NY or SF–in fact recall that Houston beat out LA for that team.

    Now today I’m sure it would be more but that was one team. If you put in two teams you don’t just double PSLs. That’s absurd. No one has any affiliation to either team. The two teams compete against each other for potential PSL buyers, driving down the price.

    So finger in the wind $250M for one team or $350M total for two. Could be wrong, but we’re both just guessing. I think two new teams with losing records and no local fan base raising more than a team in the more affluent Bay Area that had generations of fans and just came off an NFC Championship is absurd. Think Texans, not Giants, 49ers or even Jets. At that range, the numbers fall apart.

  60. ben. The difference between the NY and LA is there aren’t enough football fans crazy enough to plunk down thousands of dollars for PSL’s. The NFL is not a priority for Southern Californians. And the league thinks it can capitalize a moderate want by placing the two teams which are least desired by those who want to see the sport return to LA? How risky is that? That is one of many reasons why the Carson plan won’t work.

  61. JC, I’m from southern California and have lived here on and off for over 40 years.

    The Rams are not popular in LA, there’s a small holdover group of fans but they are insignificant which is why the Rams are never on TV in LA. Every Chargers game is televised in LA and the secondary market rules only require the networks show the away games. KCBS and FOX11 network execs know their market.

    The facebook user-data proves the Chargers are the most popular team in Orange and Riverside Counties, and the Raiders are the most popular team in LA, Santa Barbara, Ventura, and San Bernadino Counties.

    JC, you have to back up your claims with links to real data or they are baseless.

  62. Agree with the Facebook data, but still unlike the NBA data Facebook releases there’s no magnitude data. In short you could have 80% of fans with no other team over 5% or 5% of fans with every other team at 3% each and the data reported would be the same.

    The New York Time article you yourself shared suggested the second case was closer to fact.

    What you can say is assuming no selection bias between the population as a whole and potential PSL buyers the Raiders would be no worse a choice than the Rams. It has been suggested, however, that Rams fans are more affluent than Raiders ones though the supports are weak. Either way, with a fragmented local market in term of team support, per your article, the best way to model it out would be like an expansion team in a similar market, and, however imperfect, the Houston Texans PSL sale is the closest thing to exactly that happening.

  63. You haven’t shown any data to support there will be a significant amount of PSL sales to pay for the Carson stadium. Regardless of what Goldman Sachs believes (they only care about selling the bonds), the Carson project will add risk to a city that has very little money. What we do have is history. I lived in SoCal for nearly two decades. The region will not support two NFL teams.

  64. Scola: From a demographic standpoint, the Raiders fans in Southern California are not going to be from the socioeconimic background which will purchase high priced PSL’s. In fact, their current PSL plan in Oakland proved to be a failure: In addition, given we don’t know the how many Chargers fans are willing to purchase PSL’s, doesn’ it increase the likelihood that PSL sales for the Carson project will fall short of expectations?

  65. As I say, my baseline assumption is no team has an established fan base in Southern California. Objectively the Raiders do have the most fans but for reasons already explained that barely matters.

    None of the plans have a solid business case but as I say, not my money. The only unique knock against the Raiders is Mark Davis is least financially positioned to absorb downside risk. If Stan Kroenke loses a billion dollars he’s out a billion which is no fun, but he’s still got $6B more where that came from. If Mark Davis loses a billion his team gets foreclosed upon and maybe he loses his house.

    Your argument boils down to “Stan Kroenke can do something completely irrational if he wants” which is actually the only point where you and I seem to agree.

  66. Understood. As we can all agree that an NFL stadium is a terrible investment, the discussion has become which team will have the better go at it in the Los Angeles area. I believe one NFL team is sufficient. However, the conundrum of which is a better stadium is, to me, irrelevant. Why? Because when a team is winning, most fans don’t care what the stadium looks like. I prefer the Inglewood project and its near zero taxpayer liability. The Carson plan comes with too many risks whick do not completely insulate a cash poor municipal government from stadium related costs. Honestly, if it were my decision I would have the Rams move into the LA Coliseum where they can modernize the historic stadium and split the expenses with USC.

  67. Houston’s economy in 1999 compares very favorably to LA in 2015.

    $77M is 1999 dollars is $105M today. Thus my estimate of $250M was being extraordinarily generous. Heck, I gave you today’s value for that sale for the SECOND team in the LA market. That too was extremely generous. The real number could be less.

  68. Per Judith Grant Long’s numbers the cost of Reliant (now NRG, right?) was $425M. The public share amounted to $310M.

    The majority of the public share was to come from hotel bed taxes and rental car taxes (there are like five or six total authorities involved in financing the public portion of the stadium), Of the remaining private share, the original term sheet had the contribution from PSLs at only $50M.

    It’s entirely possible that the PSLs were priced not to extract maximum value, but mostly to meet the relatively modest number that McNair was on the hook for. That sounds patently stupid (at least to an economist), but according to the article below some of the PSLs at Reliant/NRG have risen in value by over 800% (2014 number… link pasted below). There could be any number of factors involved, but seeing how the original price of those PSLs was only $600, it’s possible that the Texans left money on the table. For comparison, the lowest price PSL for a Jets ticket was $4000 (couldn’t find one for the Giants, but I have a vague recollection that they were actually cheaper than the Jets’ cheapest).

    In any event, with the predefined contribution from PSLs in the original term sheet, I’m not sure that Houston makes for a good analog.

  69. That’s actually a fair critique assuming McNair was prohibited in some way from pocketing the profits. If that was the case it may have been simply a way of creating some lock-in for future season ticket sales which he could pocket. I have no idea if this is the case but if so, yes, my argument that it is the appropriate comparable falls apart.

    That said, I don’t put much weight in the future resale price. Houston did end up being a very successful franchise in terms of popularity if not always on the field. As you build a loyal fan base prices should rise but you cannot compare a new team in LA to an established one elsewhere. You can, however, compare it to a new one in a similar market.

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