Benson to profit by $392m over 15 years from sweetheart Saints lease

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.”

Will the Super Bowl blackout spark calls for more New Orleans stadium subsidies? No, seriously

I happened to be watching the Super Bowl with FoS correspondent David Dyte, so naturally when the lights went out, I made the same joke I haul out every time anything goes wrong at a sporting event, whether falling concrete or the hot dog stand running out of mustard: “Looks like they need a new stadium.”

It turns out someone else had the same idea, only they weren’t joking:

The most recent trend for Super Bowl cities and facilities is to head to newer facilities.  Lucas Oil Stadium in Indianapolis, New Meadowlands Stadium in NY/NJ, Reliant Stadium in Houston, and U of Phoenix being excellent recent examples.

New Orleans has cashed in on their historical calling card as a festive host city.

But in the aftermath of Sunday night’s second half blackout, New Orleans may need a new football stadium before they play host to their 11th Super Bowl.

That’s from Forbes.com “contributor” (which I believe means unpaid volunteer blogger) Patrick Rishe, who if nothing else deserves props for one of the quickest SEO grabs of last night, getting his demand for a new New Orleans stadium out to the world before the third quarter was even over. (Though I’m still waiting for the “What time did the Super Bowl blackout start?” headlines.) Rishe is an economics professor and runs some kind of sports consulting firm, so he’s probably not the most reliable source for stadium demand rumors; even if other actual news outlets are speculating on what the blackout will mean for New Orleans’ 2018 Super Bowl bid, nobody’s talking about a brand new stadium just yet, not when Louisiana just spent $336 million on renovating the Superdome after Hurricane Katrina.

And yet, Miami is talking about it (or another round of taxpayer-subsidized renovations at least), for a stadium that’s 12 years younger than the Superdome. Given that all evidence is that Super Bowls mean pretty nothing for local economies, that New Orleans has way more pressing needs than a new stadium, that the city isn’t exactly hurting for ways to attract tourists in February, that the NFL is going to want to keep going back to New Orleans regardless because rich people like to party, and finally — as recent events have shown — that getting a chance on the world stage can as easily result in global embarrassment as global glory, this would be pretty much absolutely crazy. But then, we’re in the crazy business here.

Mercedes Superdome deal to end yearly Saints subsidies?

As a change of pace, here’s some good news: The New Orleans Saints and the state of Louisiana have announced a ten-year naming rights deal with Mercedes-Benz for the Superdome. No word on how much the carmaker will be paying, but apparently the fact that the dome is set to host the 2013 Super Bowl made them willing to pay more than chump change for a building that 99% of people will still just call “the Superdome.”

And why should anyone other than Saints fans and luxury European car fans care about this? Because as part of the new lease signed along with the dome’s recent $336 million renovation, the Saints and the state split naming-rights proceeds (after the first $1 million a year goes to the team). And while Louisiana taxpayers won’t likely see any cash from the deal, they do get to use the naming-rights money to reduce the annual operating subsidies that the state has been paying the Saints to play in the dome for the last ten years.

So, rejoice! The Saints will soon only be playing rent-free, instead of paying negative rent! And all it cost was $336 million in state-sponsored renovations! C’mon, why aren’t you rejoicing?

Can’t tell the new Saints lease without a scorecard

It’s been three days now since the New Orleans Saints agreed to a new 17-year lease extension on the Superdome, but I’ve been holding off on posting until I could actually understand the deal. Sadly, it seems too complicated for anyone to really wrap their brains around yet, with a crazy number of moving parts, including:

  • The state of Louisiana would pay for $85 million in upgrades to the Superdome — which just got $210 million in renovations two years ago — with the Saints getting the revenues from the new luxury suites and such.
  • In place of the $23 million a year that the state was paying the Saints under the old lease — that’s right, the Saints have actually been paying negative rent — the team will now be paid on a sliding scale based on its revenues, with a cap of $6 million a year.
  • The state will lease 320,000 square feet of office space from the Saints owners, the Benson family, paying $24 a square foot, about 33% over the going rate for downtown New Orleans. The total increase over the agencies’ current rent is expected to be about $2.5 million a year.
  • The Bensons will also buy the New Orleans Centre mall and an adjacent parking garage from the state, lease them back to the Superdome Commission, and share revenues from the facilities.

The upshot, then, is that this seems to be a better lease than the last, awful one that the state negotiated, but still potentially costly to taxpayers. In particular, that $85 million capital outlay could make the deal a “tough sell” in the cash-strapped state legislature, according to several legislators. The legislative session, which convened last Monday, is set to conclude on June 25.

New Orleans running out of stadium money, too

Indianapolis isn’t the only city whose sports facilities are hemorrhaging red ink: The Superdome Commission, which runs both the New Orleans Saints‘ dome home and the Hornets‘ arena, is looking at a $27.5 million shortfall for the next fiscal year, according to the New Orleans Times-Picuyune. Of course, this may have something to do with the ridiculous leases the state agreed to with its teams, where Louisiana taxpayers actually pay the Saints and Hornets more than $46 million a year combined just to play in their state.

“There are not enough monster truck shows in the universe to make up” for the losses, Superdome VP told the state legislature in asking for more tax money to bail out the agency’s budget. While it wouldn’t be quite as simple as underprivileged college students subsidizing the Saints and Hornets profits with their tuition money, that’s pretty close as shorthand.

Louisiana sues Merrill over Superdome bonds

If you’ve been wondering what’s up with the auction-rate bond crisis, it’s still ongoing. In the latest move, Louisiana’s stadium authority has sued Merrill Lynch over the bonds it issued to refinance the Superdome, arguing that Merrill was artificially inflating the market for such bonds, and when the market later collapsed, the state was left with millions of dollars a year in added interest payments. They’ll have to get in line.