Court rules St. Louis Rams PSL contracts still valid, could cost Kroenke $150m+ in payouts (UPDATE: probably not that much)

Well, ain’t that a kick in the head:

A federal judge in St. Louis ruled Wednesday that the Rams must refund deposits to some fans who purchased personal seat licenses during the franchise’s two decades in that city and offer others the opportunity to buy season tickets to games in Los Angeles.

I was dimly aware that St. Louis Rams PSL holders were suing over the season-ticket rights they’d purchased in perpetuity suddenly being worth nothing since there were no St. Louis Rams season tickets to buy anymore (see my brief note here), but I never thought they’d actually win. Nor, presumably, did Rams owner Stan Kroenke, because he is now seriously hosed, to a degree that we’ll attempt to figure out in a second.

First, a primer on PSLs: Initially created as a bonus for fans who bought inaugural Charlotte Hornets season tickets (not only do you get the tickets, but if you don’t want them anymore you can sell your spot on line to someone who does!), they quickly turned into a lucrative way for team owners to raise cash: Instead of first-come-first-serve tickets, offer fans the chance to buy the right to first dibs, with the carrot that they can then re-sell that right down the road to recoup at least some of what they laid out. In some cases with popular teams in cities with lots of fans with money to burn, it’s been lucrative indeed: The San Francisco 49ers managed to bring in more than $500 million from their PSL sales, which is a sizable chunk of change. And Kroenke has been hoping for similar revenue from PSL sales to help pay for his new $2.5-billion-ish stadium in L.A., though he can’t start selling them until next February as part of his relocation deal with the NFL.

So how much will this court decision, assuming it holds up on appeal, cost Kroenke? Of the 46,000 Rams PSL holders, there were two classes being represented — those whose PSLs were initially bought through a broker and those whose PSLs were bought directly from the team — and thanks to differences in the two contracts (whee lawyers!), each group now gets a slightly windfall: Broker purchasers get a refund of their PSL “deposit” (the judge declined to define what that means for now), while direct buyers get to actually transfer their PSL rights to the Rams’ new stadium. And while that may not sound so great — do any St. Louis Rams fans really want to fly to L.A. to see their former team play? — remember, the whole point of PSL rights is that they’re transferrable, so this is now a hugely valuable asset that they can sell, and more important, that Kroenke now can’t.

How much actual money would that cost Kroenke? Now we’re deep into speculation, since we don’t know how many direct vs. broker buyers there were, nor how much Kroenke was planning on selling L.A. PSLs for. Deadspin reported that the ruling will “likely cost the team millions of dollars in returned deposits and foregone profit,” but that’s almost certainly way too low: If there are 23,000 direct buyers and 23,000 broker buyers, say, then refunding 23,000 fans for their St. Louis purchases at $250 each would cost $5 million, while handing over free L.A. PSLs to another 23,000 fans could cost — let’s see, it’s a 70,000-seat stadium, so if Kroenke was shooting for $500 million in PSL sales, then scrapping 23,000 of those would lose him … $160 million, something like that, depending on which seats the judge says he has to set aside for St. Louis PSL holders?

It’s hardly a deal-breaker when you’re spending over $2 billion on a new facility, sure, but still, unexpected nine-digit losses are never fun. However all this turns out, it’s likely to be at least a moderate-sized headache for Kroenke and his accountants, as well as a cautionary tale for both teams writing up PSL contracts and fans buying them: Read the damn fine print, because it could end up being worth a hell of a lot of money.

UPDATES: As a couple of commenters have pointed out, the cost to Kroenke probably won’t be as much as I’d guesstimated: First off, more than 90% of the PSLs were sold by the broker, not the Rams, so that pushes most of the PSL holders into the less-lucrative “you get your deposit back” category. Second, the St. Louis PSLs were set to expire after the 2024 season (the Rams lawyers did something smart, anyway), so even for the L.A. PSLs Kroenke has to now pull off the market, he’ll get to resell them again in a few years. So we’re down in the $15-25 million cost range for Kroenke, which while it’s going to sting, is more of a rounding error for a guy playing in this spending stratosphere.

Kroenke seeks “significant” subsidies for suburban St. Louis development, has zero sense of irony

Deadspin says pretty much all that needs to be said about this story:

Stan Kroenke, Fresh Off Leaving St. Louis In The Lurch, Asks St. Louis For Tax Dollars

The slightly longer version: Rams owner Kroenke and his attorney Alan Bornstein are pursuing an 1800-acre development in the St. Louis suburb of Maryland Heights that would involve retail, entertainment, office, residential and sports (no indication what kind of sports, but MLS is sniffing around, albeit more downtown than in the burbs), and are seeking “significant” tax kickbacks, possibly in the form of tax increment financing.

Nobody on the Maryland Heights council seems to be batting an eye that this is the same dude who just moved the local NFL team just 20 years after it got huge public subsidies to relocate in St. Louis — which is not all bad, since you do want these things judged on their merits and not on how warm and fuzzy local electeds feel toward the development, but also not all good, since see above re: yanking a team not long after it got subsidies. (Twitter has predictably been less kind to Stan.) Meanwhile, at least one local thinks that the location is a terrible place for tax-subsidized development:

David Stokes, the incoming director for the Great Rivers Habitat Alliance, said he thinks it’s “preposterous” that the city would think of allowing such a project in a flood plain and support it with tax money, especially in light of the damage done in parts of the region by flooding in December.

“The idea that you would subsidize 1,800 acres of flood plain development, well, it’s always a terrible idea,” he said.

St. Louis wants to expand convention center after losing NFL, because that worked so well the last time

Coming off the loss of the Rams, St. Louis’ leaders have come up with a can’t fail strategy for boosting the city and its fortunes: Spend hundreds of millions to improve the convention center and domed stadium complex abandoned by the Rams to better compete in the national convention market. Kitty Ratcliffe, head of the St. Louis Convention and Visitors Commission, owner of the center and dome, recently proclaimed, “Our competitors are building, while we’ve been doing nothing.” The chief of staff for St. Louis Mayor Francis Slay weighed in with “We’re looking at this as a boost for the region’s tourism industry.” And they promised a consultant study “in the next few weeks” that would document the needs and set out a price tag.

Here they go again. Thirty years ago, faced with the loss of the NFL Cardinals, then-Mayor Vince Schoemehl and the region’s business leaders promoted a combined convention center expansion and domed stadium as the cure for the city’s ills. The argument by mayoral staffers was that “the City cannot feel like a ‘winner’ if it’s constantly losing things.” The city’s then budget director argued that a combined dome/convention center would be “an exciting world-class building project. We don’t often get this type of opportunity to make an international impact, like the Astrodome.”

Armed with consultant studies that promised a big boost in convention activity from what was supposed to be the country’s fourth biggest convention center, the city, county and state governments plopped down $240 million for a dome that still didn’t have a football tenant. More consultant studies said that what St. Louis really needed was a 1,000-room hotel next door to the new America’s Center complex. The head of the Convention and Visitors Commission in 1999 forecast that a new hotel would boost major conventions from 33 in 1998 to 56 in 2004, with hotel room nights almost doubling, to 800,000 a year. Mayor Clarence Harmon pressed the case for state aid for the hotel as “the foundation of our efforts to revitalize downtown and its is a cornerstone of our overall economic development strategy in the City of St. Louis.”

The new $277 million, 1,081-room Renaissance Grand Hotel opened in 2003 and immediately floundered, with occupancy and rates well below consultant forecasts. Beyond the problem of opening in the wake of 9/11, the hotel never spurred the predicted convention boom. By 2006, there weren’t 54 major conventions, but just 32. And the total continued to sink, so that 2008 saw just 438,000 convention room nights, a bit less than the 800,000 promised. With no new convention business, the hotel proved a total dud, and bondholders foreclosed on it in 2009, finally selling it for a third of debt. The story of the city’s convention business is still the same — 26 major conventions in 2014 and 425,411 room nights in 2014, almost exactly the same as the figures for 1997 and 1998.

Now, lest the city once again be viewed as a “loser,” with more promises of a “boost” for tourism, state and local officials seem poised to throw away more public money.

 

 

Chargers agree to move to L.A., vow to stay put in San Diego, all in a day’s work as an NFL owner

So here’s some things that happened on Friday:

  • The San Diego Union-Tribune reported (in an article no longer online in its original form) that the Los Angeles Rams (we should start calling them that now, right?) and San Diego Chargers had reached agreement in principle on a deal to share the Rams’ new Inglewood stadium.
  • Chargers owner Dean Spanos issued an open letter to fans stating that “our team will stay in San Diego for the 2016 season” and while he has an “option” to move to L.A., “my focus is on San Diego.”

So what does this mean, exactly? Clearly, Spanos has gotten Rams owner Stan Kroenke to agree to give him the rest of the year to lobby San Diego to cough up more money to keep its team — or as Spanos put it in his letter, to “determine the best next steps and how to deploy the additional resources provided by the NFL.” (That’d be the extra $100 million that the NFL is offering Oakland and San Diego as a sweetener for stadium deals, something that was completely unthinkable when it was St. Louis asking for it.) So expect some nasty, nasty stadium talks to continue the rest of this year, with Spanos clearing his throat and glancing in the general direction of Inglewood anytime someone suggests he kick in more of his own money.

The big question San Diego needs to be asking now is at what point Spanos will feel comfortable walking away from the table and going to Los Angeles — which unfortunately is unknowable, since the details of the deal between Kroenke and Spanos aren’t public. In fact, we have no way of knowing if the details have even been spelled out yet — it’s entirely possible that Spanos went to Kroenke and said, “Stan, let’s put out an announcement, I gotta light a fire under San Diego, we can work out the rest later,” and Kroenke grunted enigmatically.

In short, the NFL owners are playing this perfectly, levying move threats while openly proclaiming their love for current NFL cities (the better not to provoke pitchforks and torches) and holding their cards close to their vest. Which shouldn’t be surprising, as this is the business they’re in, but it’s always inspiring to watch evil geniuses at work up close. If the Chargers do end up getting the cash and staying put, it’ll be interesting to see if Raiders owner Mark Davis can pull off the same trick with Oakland.

MLS to St. Louis: Sorry about your football team, you know we play “football” too, right?

It’s official: With the St. Louis Rams gone, every other sport in town (or not in town) is hoping to grab a piece of that $477 million in public stadium money that the NFL team turned down. Just ten days after the Rams announced their move to Los Angeles, MLS commissioner Don Garber sent a letter to Missouri Gov. Jay Nixon expressing his sympathies and offering to provide St. Louis fans with some kind of football, anyway:

Garber in his letter, dated Friday, said he was surprised and disappointed at the Rams’ departure and “in the wake of recent developments” wanted to reaffirm his commitment to considering St. Louis as an expansion city.

“I look forward to working with you, your staff and local leaders to explore ownership candidates and to investigate viable stadium solutions to bring MLS to St. Louis,” Garber said in the letter.

Yeah, like Missourians are going to accept a whole different sport as a substitute for anoth —

A Florissant lawmaker who earlier offered up a sales tax financing plan for a new riverfront football stadium is now saying a similar idea could be used to bankroll a new soccer stadium in St. Louis.

State Rep. Keith English has introduced legislation that would put a tax of not more than one-tenth of one percent on the ballot in St. Louis and St. Louis County. A green light from voters could generate between $10 million and $15 million annually, he said.

Note that this plan would have to go before city and county voters, so would almost certainly fail, especially given that nobody thought a similar Rams vote could pass, and some people actually already liked the Rams. Still, mute those cheers that by losing the Rams St. Louis has at least saved $477 million — there are plenty of other sports leagues lining up for a shot at it. How long before the Cardinals‘ stadium is 20 years old?

St. Louis asks NFL to pay off remaining debt on Rams stadium, doesn’t hold collective breath

St. Louis City Board of Aldermen President Lewis E. Reed has sent a letter to NFL commissioner Roger Goodell asking the league to pay off the $36 million in remaining debt on the Jones Dome now that the Rams are moving to Los Angeles:

12321229_893924624061853_8661786470950347268_nLet’s be clear about one thing: This is never ever ever ever ever going to happen. Reed’s predecessors in public office signed a horrible deal agreeing to build a stadium for the Rams while letting the team move out before it was paid off if they wanted to (and could show it was no longer “state of the art,” which was always going to be a formality), so if Goodell replies to this in any way other than ineffectually trying to stifle a guffaw with the back of his hand, every human on earth, including Reed himself, will be stunned.

That said, as a way of publicly shaming the NFL by saying, “Guys, we built you a stadium, then you yanked our team away before we’d even paid the last installments, you suck,” it’s fine enough. Or would be if the NFL had any capacity for shame. Maybe it’ll at least get St. Louis some public expressions of sympathy.

L.A. debates Rams stadium’s impact on economy, planes crashing

L.A. Weekly has a long piece up about how the new Rams stadium development will affect the future of Inglewood, and answers, “Reply hazy, ask again later“:

We’re talking about roughly 25 events year — a bump for the Inglewood tax base but probably not much of an economic stimulus on its own.

No, the real economic kick will come from the office space/housing/God-knows-what-else components of the project, and we really don’t know the scope of that yet.

Also, the story notes, this could increase the pace of gentrification in Inglewood, or it might not, either of which could be good, or bad, depending on your perspective.

Meanwhile, Bloomberg News has its own long piece about how the FAA is working with the Rams to make sure the new stadium doesn’t mess with radar and cause planes to crash, which is actually a concern. “You’re trying to do the exact same thing that you do with a stealth airplane,” one aeronautics professor told Bloomberg, which doesn’t sound like something that would increase the cost of the stadium at all. It is a really, really good thing that Stan Kroenke is covering the construction costs on this one, because the way things are going, we could conceivably end up seeing the first $3 billion stadium in history.

Billionaire Kroenke borrowing billion dollars to build L.A. stadium, because why not?

Everybody who’s been talking about how Rams owner Stan Kroenke was in the best position to build an L.A. football stadium because he had the most money, you can shut up now:

Rams owner Stan Kroenke is planning to borrow about $1 billion from JP Morgan Chase & Co. to help fund the proposed Inglewood stadium, which could cost nearly $3 billion.

That’s right: Kroenke is getting a big piece of his stadium construction budget by going to a bank, same way as Dean Spanos and Mark Davis would have in Carson. Not because he doesn’t have cash — he’s worth $7.5 billion, though some of that may be locked up in his cherished vintage typewriter collection or something — but because when interest rates are this low, you’d be crazy to use your own money when you can use a bank’s.

For the rest of the construction cost, Kroenke can use $200 million in NFL G-4 money, and whatever he gets from the sale of naming rights and PSL sales once he’s allowed to sell those next January (or once the San Diego Chargers agree to move in with the Rams, whichever comes first), and whatever he gets from either Spanos or Davis if they agree to move in with him, and the remainder will have to come from out of his bank account. Most of the construction bills won’t come due for a while, so he can cross that bridge when he comes to it — in the meantime, he has $1 billion to play with.

In related news, Fivethirtyeight has a good explainer on why moving to L.A. isn’t as lucrative for NFL teams as for teams in other sports. It’d be nice if they tried to figure out how an estimated $500 million increase in team value (per economist Victor Matheson) is supposed to come close to paying off a $3 billion stadium plus relocation fee cost, but I tried to do it and couldn’t make head or tail of it, and Nate Silver isn’t that much smarter than me, right? (Hi, Nate!)

Rams, Chargers close to agreement on L.A. stadium share, say cats

Unsourced reports! We got more unsourced reports about what’s going to happen to the San Diego Chargers and Oakland Raiders!

And sure enough, execs of the Chargers and the Los Angeles Rams (guess we should start calling them that now, huh?) met yesterday, and afterwards issued this statement:

We have concluded our first meeting. We mutually have agreed not to publicly discuss details of this or any future meeting.

Okay, so that doesn’t sound like an agreement is imminent. But it could be! And sources are predicting it, and correct predictions can come from all kinds of sources!

In other news, NFL owners are saying that it was the pretty pictures that Stan Kroenke provided of his planned football theme park in Inglewood that swayed them to approve the Rams move, after initially leaning toward the shared Chargers/Raiders plan in Carson. If true, this is absolutely terrifying — not because the pictures aren’t pretty (as pictures of people wandering hand-in-hand through a futuristic dreamscape go, they’re top-notch), but because it means that NFL owners are susceptible to Calvin’s clear plastic binder. Me, I would have wanted to see some actual financial numbers, even if they were half made-up, but that’s not how these guys roll, apparently.

No, forcing relocating teams to pay off remaining stadium debt isn’t happening, or helpful

And then there’s this, from Deadspin:

Missouri senator Claire McCaskill says that she is drafting legislation that would require professional sports franchises that skip town prematurely to refund the public. St. Louis now has no NFL team, but incredibly, the city, county, and state still owe a combined $152 million to pay off the Edward Jones Dome…

The likelihood of a bill of this nature ever actually being passed, of course, is slim-to-none. But as a senator McCaskill wields enormous influence, and just the threat of legislation could be enough to compel professional sports leagues to do something that would reduce the brazen fleecing of cities and states.

Um, yeah. First off, let’s note (as Deadspin itself acknowledges) that McCaskill supported paying Rams owner Stan Kroenke $477 million toward a new stadium 20 years after building the Jones Dome with taxpayer money, so this is almost certainly playing to the crowd’s anger by threatening Kroenke with legislation that will never come to pass. (McCaskill also suggested that the NFL could be in violation of antitrust laws if it didn’t follow its own bylaws by forcing the Rams to stay in St. Louis, which, what?) Teams moving out of stadiums that aren’t finished being paid off is an easy thing to complain about, but when you think about it, it wouldn’t be any better a deal for St. Louis if they’d sold 20-year bonds and already paid them off faster rather than having another decade to go, so why should team owners’ responsibility to their cities be dependent on what kind of financing tools were used to borrow the money?

Though I should also note that if this somehow did become law, it would provide an easy way to ensure that teams stay put indefinitely: Just refinance every few years to push your stadium debt out into the future, like Robert Moses used to do with his bridges so he could keep on keeping toll money in perpetuity. Shh, don’t tell anyone I said it, maybe we can pull this off!