December 20, 2011
NFL establishes "G-4" stadium fund, there is much rejoicing
Just realized I never recapped last week's NFL owners meeting to formally re-establish the exhausted G-3 stadium fund, as previously pre-announced last summer. And so, without further ado:
- The new loan program — which actually will be called "G-4" — ups the maximum loan level from $150 million per team under the old plan to a maximum of $200 million under the new one. Only projects costing at least $400 million, and with a "private contribution" from the team of at least $200 million, will be eligible for the top loan level
- As under G-3, teams can repay the loan with club seat money they normally would have had to share with the league. They can now also use incremental regular ticket revenue, defined as the difference between ticket sales in the new stadium and average sales in the last three years of the old one.
- "The project must not involve any relocation of or change in an affected club's 'home territory.'" That's in keeping with the old G-3 plan's goal of aiding teams in building new stadiums in their existing hometowns (to avoid the kind of city-hopping that gave us the St. Louis Rams and Tennessee Titans). Still, it's worth noting that this means the Minnesota Vikings, for example, can access $200 million in G-4 loans for a new stadium in Minnesota, but not for one in, say, Los Angeles.
Teams looking to build new stadiums without paying for them themselves are, naturally, thrilled — since this is money that they wouldn't normally get to keep anyway, it's effectively a grant, not a loan. (Unless club seat and ticket sales come in below projections, in which case they're on the hook for the difference.) San Francisco 49ers owner Jed York tweeted that he was confident his team would be first to get a cut of the G-4 boodle, San Diego Chargers stadium czar Mark Fabiani called it "great news for the team and our fans," and Vikings stadium chieftain Lester Bagley called it "good news," though he quickly added the caveat that the Vikings still don't have a deal for the other $800 million it takes to build a stadium these days.
And that's the catch: Most of these teams were counting on NFL funds as part of their stadium deals already, so while the establishment of G-4 comes as a relief to them, it doesn't really do much to fill the funding holes that most of these teams (except for the 49ers) still have in their plans. And while it'd be nice if the teams used this free league cash to reduce their demands on taxpayers, it looks like most of them instead intend to use it to replace their own share of stadium costs.
For more on all this, the San Diego Union Tribune has helpfully posted a document containing a brief summary of NFL commissioner Roger Goodell's press conference and the actual G-4 document language. Highly recommended for anyone who finds discussion of "tranches" to be compelling reading.
July 26, 2011
The NFL's new stadium fund explained (sort of)
With the NFL lockout finally over, the blogwaves are afire with talk of how the league's new collective bargaining agreement will affect various teams' stadium campaigns. We've already seen a report that the San Diego Chargers could get up to $150 million in NFL stadium funds, another that the San Francisco 49ers and Raiders could pool their stadium credits to get $300 million for a shared stadium, and still others that AEG's planned Los Angeles stadium could get a cut. (The Minnesota Vikings could also be in line for funds, though apparently they've already been counting that particular chicken before it hatched.)
So how much money is really available, and where is it coming from? The press reports are maddeningly incomplete and contradictory, but this is, to the best of my knowledge, what's going on:
- Back in olden times, the NFL had a program called "G-3," which allowed home teams to keep the visitors' share of club seat revenues to use to help pay off new stadium costs. Initially implemented to help convince NFL teams to remain in large markets — it was originally concocted, in fact, by New England Patriots owner Robert Kraft, who limited it to the top six media markets, of which he just happened to play in #6 — it was eventually expanded to the whole league. Then the program ran out, and the flow of funds stopped.
- The successor to G-3 — which, sadly, won't be called G-4 — instead takes a 1.5% cut off the top of NFL revenues, and allocates it to stadium projects. (Sources disagree over whether this comes entirely out of the players' share or the owners would contribute as well.) At $9 billion a year in total league revenues, that would imply $135 million a year in stadium credits — though apparently the math isn't nearly so simple, which may explain why this article says only $95 million. Still, that's a huge amount of money, enough over ten years pay off about $734 million in stadium bonds. (It's not $950 million in stadium bonds because payments ten years from now aren't worth the same as payments now.)
- That huge number notwithstanding, scuttlebutt is that only three teams will be allowed to tap the new stadium loan fund, with rumors putting a cap at $150 million per team. That'd mean that from among the 49ers, Raiders, Vikings, Chargers, any team moving to L.A., and maybe the Jacksonville Jaguars, at least a couple of teams would get left out in the cold. Unless the NFL expanded the program again, which it seemingly would have the money to do.
All in all, this is a good thing for both teams wanting to build stadiums and for taxpayers not wanting to put their own money into stadiums, as this is the NFL recognizing that — because of its weird status as a league where the vast majority of revenue comes from national TV contracts — if it wants to encourage teams to stay in big markets and avoid killing the Fox golden goose, it needs to subsidize stadiums with its own money. Of course, it also could end up helping grease the wheels for some otherwise stuck stadium projects that would still involve some taxpayer money — $150 million per stadium doesn't go all that far — so in that sense, not so good. But in the grand scheme of things, billionaires voting to spend some of their own billions on projects to increase their billions is nothing to sneeze at.
March 15, 2011
Could fans sue over NFL lockout?
With the NFL lockout underway, Washington Post columnist Sally Jenkins has returned to the subject of NFL stadium subsidies, arguing: "The NFL owes fans a season. Why? Because the fans paid for it, that's why, and this isn't 13th-century France." Continues Jenkins:
Their world-view was summed up the other day by Dallas Cowboys owner Jerry Jones: "I just spent a billion dollars on a stadium, and I didn't plan on not playing football in it," he said.
Now, that's a funny thing for Jones to say, because as it happens, he doesn't actually own Cowboys Stadium. The city of Arlington does. And Jones didn't spend a billion dollars to build it. Arlington taxpayers passed a bond issue and wrote him a check for $325 million. City sales tax increased by one-half a percent, the hotel occupancy tax by 2 percent, and car rental tax by 5 percent, all of which may hurt the local economy. Jones is merely a tenant, with a lease.
Virtually every one of the league's 31 stadiums was built or renovated with the assistance of public money, about $6.5 billion worth, according to the Sports Fans Coalition. And that doesn't include the indirect subsidies, the infrastructure improvements, municipal services, gift-revenues, and foregone property taxes, which can push the cost of hosting an NFL team 40 percent higher.
Jenkins' solution: "If the fans don't get a fair return on the public funds and favor lavished on owners, here's what they should do: sue. That's right. Attorneys general in every state that houses an NFL team should draw up suits to force the league to play, or repay what they owe us." I'm not clear on whether fans (or taxpayers, more to the point) actually have legal standing to do this, but it would certainly be an interesting case, especially if a municipality were to try to sue to open up a publicly funded stadium to a rival league.
In any case, the column is another fun romp through the world of stadium deals, and includes a quote from me about the Cincinnati Bengals' infamous "holographic replay systems" state-of-the-art clause. Go read it now — the Post needs your clickthroughs.
December 29, 2010
K.C. Business Journal parrots debunked NFL economic impact numbers
It's sports playoff season, which means it's time for another round of stories claiming huge economic windfalls from postseason games. Today's contestant is the Kansas City Business Journal's Krista Klaus:
The Kansas City area is poised to reap a significant economic benefit from the coming Chiefs playoff game in January, the first hosted at Arrowhead in six years.
Estimates of how much money might be poured into the local economy range from $6 million to $20 million.
A study commissioned by the NFL and conducted by Washington-based Edgeworth Economics placed the average economic effect of NFL teams on local communities at $160 million, or $20 million a game for an eight home-game season.
Another study conducted by the University of Minnesota put the economic effect of a single NFL game at closer to $6 million.
A summary of the U of M study is here, and makes clear that the authors merely took the total number of people who came from out of town for a Vikings game (in this case, a playoff game against Dallas last January), multiplied it by the average spending, and came up with a figure of $9 million. There's no adjustment for the substitution effect, however: How many of those people would have gone into Minneapolis to spend their money some other way if they hadn't been blowing it on the Vikings? And did any of those Vikings fans displace other spending — say, people who chose to stay home that day because they didn't want to fight the football crowds on the highways and in the downtown restaurants?
As for the Edgeworth study (which was actually done for the NFL players union, not the NFL), I haven't been able to find the complete study, but the talking points make it clear that the numbers aren't to be taken seriously:
The studies used in this assessment were commissioned to justify a start, increase, or continuation of public funding for NFL stadiums and/or to retain or draw a team to a city. As such, the numbers are based on the League's and facilities' own projections of the economic activity associated with NFL games.
But don't just take my word for it: Read what sports economists told the Atlanta Journal-Constitution about the study last month. Which Krista Klaus could have found out about as easily as me, if she'd bothered to type "Edgeworth" and "NFL" into Google. Guess she was too busy feeding the hamster wheel.
September 20, 2010
Sports bubble watch: NFL fans would rather watch on TV
It's not just the New York Giants and Jets: Attendance is down across the NFL, with average game attendance projected to fall to its lowest level since 1998.
While the media have been quick to blame easy access to big-screen TVs, there's another factor that just might be at work here: The average price of an NFL ticket is now $252. With prices like that — and economic figures like these — you might expect increasing numbers of fans to stay home even if the alternative were listening to the game broadcast on their crystal radio sets.
With sellouts diminishing, Senator Sherrod Brown (D-Ohio) has asked the NFL to reconsider its rules blacking out games with unsold tickets, but so far his plea has fallen on deaf ears. Instead, the NFL has focused on making going to a game more like watching on TV. Only with an extra $252 price tag. Sign me up!
December 02, 2009
Number crunchers: World Cup, NFL stadiums not all they're cracked up to be
It's about time somebody used superpowered statistical analysis for something other than crazy-ass attacks on attempts to reduce carbon emissions. And so, welcome the new book Soccernomics, which according to AP says that building stadiums for soccer's World Cup, as South Africa has been doing amid protests, is unlikely to ever pay back its public costs:
There'll be no economic bonanza, according to Stefan Szymanski, and if experience matches the last World Cup in Germany, spending by visitors will be much less than the South African government shelled out preparing for the tournament.
"The next World Cup will not be an airplane dropping dollars on South Africa," authors Stefan Szymanski and Simon Kuper write in their new book "Soccernomics." ...
"The problem for South Africa is that they have to spend quite a lot to build stadiums," Szymanski said in a telephone interview from London. "Germany could afford this, and it had stadiums anyway. But South Africa is a nation that can ill afford to fritter away a few billion on white elephants."
Meanwhile, the University of Minnesota blog Smart Politics has analyzed the records of NFL teams before and after getting new stadiums to see if Vikings owner Zygi Wilf is right when he argues that a new stadium is necessary for his team to be successful on the field. Their verdict:
Overall, these 22 NFL teams compiled a .462 winning percentage (747 wins, 869 losses, 22 ties) across the five respective years before their new stadiums were built.
In the five seasons after the new stadiums opened, these teams notched a slightly better record, but only four games over .500. With 829 wins, 825 losses and 17 ties, the first five years brought these 22 franchises a collective winning percentage of just .501 in the first five years in their new respective facilities.
Hey, that reminds me of something...
May 22, 2009
Super Bowl heads back to Superdome
NFL owners voted earlier this week to play the 2013 Super Bowl in New Orleans. Stephen Perry, president of the New Orleans Metropolitan Convention and Visitor's Bureau, was enthusiastic, saying, "It's been a long road back, and we feel like this is sort of a final validation that the capacity of the New Orleans' tourism industry is 100 percent back, because we just landed the biggest event there is."
Clearly, the 34-year-old venue has come a long way since the dark days of 2005.
Of course, the cynical might argue that it's not such a feel-good story as you might think.
April 05, 2009
Legislators weigh Indy stadium bailout
WRTV News reports, somewhat dramatically, that Lucas Oil Stadium could close if a state bailout deal is not reached for the Indianapolis Capital Improvement Board. The CIB, which operates the Indianapolis Colts' one-season-old stadium along with Conseco Fieldhouse, home to the Indiana Pacers, is facing a $47.4 million operating deficit, after failing to budget properly for $26 million in annual operating costs for Lucas Oil Stadium.
The consequences of financial failure for the CIB remain unclear. CIB President Bob Grand sounded pessimistic, if vague, saying, "If you want me to give you worst-cases, I mean the worst-case scenario is we could be out of money and the facilities would be, arguably, closed."
The bailout plan includes annual $5 million payments from both the Colts and Pacers, which neither team has agreed to as yet (UPDATE: Since the Pacers would be absolved of about $15 million a year in operating costs, this would actually save the team $10 million a year. -ND), as well as tax increases on alcohol, restaurant meals, hotel stays, and sports tickets.
Politicians are not yet on board with the plan, either. NWI reports that Thomas McDermott Jr., Mayor of Hammond in northwest Indiana, is incensed that a similar finance plan for flood protection levees in his district was blocked in December. "It seems to me that it's more important to build football stadiums than it is flood walls," he said on Thursday.
March 26, 2009
LA stadium developer must crack Walnut
The City of Walnut has filed suit in Los Angeles County Superior Court to block the development of a new football stadium in neighboring Industry, citing insufficient study of the environmental impact.
According to the San Jose Mercury News, stadium developer Majestic initially filed a full environmental impact study for a mixed-use development on the site, and only a shorter supplement to that when the plan was changed to radically different stadium project. The suit, if successful, will force Majestic to produce a completely new environmental study.
Majestic managing partner John Semcken was in no mood for conciliation. "If they think we're going to stop working on football because of little old Walnut, they've got another think coming."
The NFL is not answering questions on the subject, including the biggest one: which team, if any, will play in this stadium?
February 15, 2009
NFL in LA: no team yet, but several stadium options
The City of Industry's Planning Commission approved the latest version of Ed Roski's football stadium plan on Thursday, over the protests of neighboring cities Diamond Bar and Walnut. This passes the project back to the City Council for a final vote. Among the claims made by Roski's Majestic Realty: the stadium will be the greenest in the NFL and will generate $762 million per year. Los Angeles Mayor Antonio Villaraigosa's office, however, has asked the LA Area Chamber of Commerce to endorse no specific site, leaving such unlikely options as Chavez Ravine in play.