Hey, remember how when New Orleans Saints owner Tom Benson signed a new lease deal back in 2009, it was supposed to be an improvement for the state of Louisiana because instead of the Saints getting paid $23 million a year in negative rent, they’d only be getting $6 million a year? No? That’s okay, it’s been a while. Besides, according to a new report by Forbes’ Dan Alexander, it’s not working out nearly that well for taxpayers after all:
Over 15 years, the term of the lease, the state will pay Benson at least $198 million in increased revenue from the Superdome, $142 million in rental payments on property Benson owns, $10 million in bonuses for bringing the Super Bowl to New Orleans and $2.6 million in tax breaks. Benson will get another $40 million from private rent payments to a tower he bought as part of the deal.
That’s $392 million in extra money over the next 15 years, thanks to the generosity of the state of Louisiana.
Not all the money is actual state subsidies, it looks like: That $198 million in “increased revenue,” for example, is just new profits from the renovated Superdome, some of which will come in the form of fans paying more money for tickets. Louisiana agreed, though, to make up for any shortfall if Saints revenues don’t rise by $12 million a year, a guaranteed-profits deal that makes you wonder why Benson bothered to raise ticket prices at all, if the state will pay him whether he sells tickets or not. (Hey, sound familiar?) Plus, naming rights money (after the first $1 million) is only 50% counted as team revenue for these purposes, so the $5 million or so that Benson is getting each year from Mercedes-Benz to put their name on the state’s building only reduces the state’s subsidy requirements by $2 million a year.
The sneakiest part, though, is how Louisiana agreed to move state offices into a vacant building damaged by Hurricane Katrina that Benson bought, paying him substantially more than market rate for the space. That’s exactly the kind of hidden subsidy that Judith Grant Long has documented is on the rise, but it’s a novel twist — so novel, in fact, that even sports economist Robert Baade, who’s seen everything, boggled to Forbes about it:
“That’s incredible. I‘ve never heard of that one before,” said Robert Baade, an economist at Lake Forest University who studies stadium financing. “There is no end in how creative governments get to supporting subventions. That’s just another form of subsidy.”
The current Saints lease runs out in 2025, at which point you can be sure that Benson’s heirs (the guy would be 98 by then) will be back for an even more creative subvention. But in the meantime, I, for one, take my hat off to the Saints owner, supplying the closing quote of the Forbes piece:
“He’s pretty savvy in terms of figuring out how to maximize his revenue at somebody else’s expense, which is the business of being a sports owner these days,” deMause said. “Whether you consider that to make him a great businessman or a supervillain depends on your perspective.”