Friday afternoon brought an especially weird headline from Bloomberg Business:
Say what, now? I know that the dueling Carson and Inglewood stadium proposals have a whole bunch of financial questions remaining, but really, asking NFL players to chip in? And why on earth would they want to?
The accompanying Bloomberg story isn’t exactly the clearest, but there are some nuggets of information buried in it. The financing vehicle is something called “stadium credits,” a provision of the league’s collective bargaining agreement that allows the league to exclude half of all private stadium costs — and 75% in the case of stadiums in California — from salary cap calculations. There are additional provisions for excluding naming rights revenues, PSL revenues, etc., though there’s also a cap on how much the league can deduct at any given time, equal to 1.5% of total league revenues.
That 1.5% cap is really all you need to understand, because it’s long since maxed out. In short, when NFL players signed the current CBA back in 2011, they agreed to set the salary cap at 1.5% less than they had previously, with the money set aside for stadium costs. (Newballpark.org had a good explanation of this at the time.) That’s money that goes back to the league overall, of course, not the specific teams building stadiums — but it’s what the NFL uses to generate funds for its G-4 program, which lets owners keep money they would normally share with the league and instead spend it on stadium costs.
The end result of all this money-shuffling, then, is that the players give up money to the league in the form of lower salaries, and the league then lets teams draw on it to pay for new stadium costs. It’s not additional money we didn’t know about — both of the L.A. stadiums have been counting on G-4 money all along — but it does clarify that when we hear talk about the NFL’s “contribution” to new stadiums, it’s less out of the goodness of their hearts than because they’ve ensured they can pass the tab along to the players.
Since the effect arrives after about 20 minutes, I can still take Viagra quickly, if after the first caresses it becomes clear that there could be problems with the erection. Overall, despite the side effects a really helpful product. Bought it at http://www.papsociety.org/viagra-sildenafil/.
Except that the Stadium Credit fund is now exhausted, so the league now has to go back to the players to ask for more concessions. (There’s also a clause in the CBA saying that L.A. stadiums can be excluded from the credit, but that’s at the league’s sole discretion, so it’s not clear why it’s even in there — unless maybe someone at the league offices back in 2011 was thinking of denying G-4 money to L.A. stadiums in order to leave more for other projects.) Why the players would even be considering this is an excellent question — sure, a new stadium could bring in new revenues and thus raise salaries, but that’s not going to help players any if they just have to turn around and give it back to the NFL — but union official don’t seem to be asking it, not publicly, anyway:
“When we signed the deal in 2011, we considered our role in growing the game and we review every investment opportunity and proposal carefully,” union spokesman George Atallah said.
In the grand scheme of things for L.A. stadium proposals, this doesn’t matter all that much, as the league has already promised G-4 money, so other team owners will just have to eat the cost of that if they can’t pass it along to players. Still, it’s a fascinating look at how the sausages get made, and a reminder that one of the main skills necessary for becoming rich enough to own an NFL team is figuring out how to make sure someone else always picks up the check.
Neil, you almost had the perfect closing sentence. You just needed, “…and that the check-payers get a great return on their money.” It really is the secret to being a wealthy businessman.
I would’ve added it if it were true, Ben.
It’s hard to believe that a fixed cost of doing business, such as paying for your building, isn’t already 100% included in cap calculations. Especially given the union’s history of negotiating less-than-favorable contract items (see “one-way guaranteed contracts”). I guess owners didn’t see it as a big deal, expecting to continue paying a minority portion of stadium costs.
If we lived in a sane world without subsidies for businesses that don’t need them, of course some of the additional infrastructure cost would come out of the pockets of players. Salaries are what they are because that’s what’s left over after other costs.
Actually, no — the NFL salary cap is based on gross revenues, not net. So if the Buffalo Bills decide to spend $100 million on a “Come to Buffalo in December, it’s not as crazy as it sounds!” ad campaign, that doesn’t come out of players’ pockets. If they decide to spend it on heated seats, though, then it can, thanks to this provision.
If there is already a provision for excluding some portion of “private stadium costs” then it’s not really based on gross revenues. They’ve just negotiated what expenses are deductible for cap purposes. If teams were responsible for 100% of their infrastructure costs, I think it’s safe to assume owners wouldn’t just accept that would come out of their profits.
I think we’re saying the same thing, Keith: NFL owners can’t deduct regular operating costs, but can deduct stadium capital costs. It’s not so much whether this is fair or not – any cap algorithm is fair in its own way – but by allowing the stadium deductions, the union is definitely giving up money.
It’s very similar to MLB’s stadium deduction frol revenue sharing, actually, except there the money comes out of the pockets of other owners, not players. (Except indirectly in that they have less to spend on players, I guess.)
re: the LA ‘exclusion’, wasn’t their a provision in the G-3 fund (or maybe one of it’s predecessors?) that the league could exclude stadia in so called major markets if it chose to?
I don’t know where I remember that from as I can’t find it in any of the info I have, but I do remember the original ‘stadium’ building funds having exclusions so that (in theory) Jacksonville ownership didn’t have to chip in to fund a new Giants stadium in the richest/biggest market in the country.
The original G-3 program was actually the opposite: It was *only* available to teams in the top six markets. That’s because, once upon a time, it was a “subsidize stadiums in big cities so everyone in the league doesn’t end up playing in Nashville” fund, before it became something every owner felt entitled to.
…. so I remembered the opposite of what it actually was…. there’s a George Costanza joke in there somewhere…
“If we lived in a sane world without subsidies for businesses that don’t need them, of course some of the additional infrastructure cost would come out of the pockets of players. Salaries are what they are because that’s what’s left over after other costs…”
Keith, I agree. In fact, I’d say all of the infrastructure (factory/shop/office) costs would come out of the player’s salaries.
Of course, NFL owners wouldn’t “require” $900m stadia if they had to pay for them out of operating revenue, and if there were no market for $900m stadia architectural firms, engineering and construction contractors wouldn’t insist on designing and building them.
So the players wouldn’t be out $35m annually in debt service costs. But definitely $15-20m. Why, that would mean the average team salary would drop from it’s $2m avg (the lowest of all the major sports – even lower than the NHL) in 2013 by $350k or so. That assumes it would be applied evenly across the rosters, which I think we all know would never happen…
NFL players have little leverage and will continue making bad labor agreements. Its the only sport where players are recruited from other sports having never played american rules football. A college coach once said 90% of a team is replaceable.. As long as your big and mobile , and willing to sacrifice your physical and mental health your a prospect to play the game.
That’s probably true for players negotiating directly with teams — owners know that if one guy holds out for more money (or, say, blows his finger off), you were just going to have to replace him in a couple of years anyway. As for the union as a whole, I suspect it has more to do with the NFL being the only sports league I know of that managed to get away with scab players without anyone batting an eye.
You do know how hypocritical this is right? So if I am a NFL football player I would want to reap in any profits realized from the sale of a franchise. yet no one wants to mention that. Just when the NFL owners couldn’t stoop any lower, they seem to find a way. Not only that, but this is a huge indictment on the idiocy of DeMaurice Smith. He clearly doesn’t have a single clue on business negotiations. Then again, only MLB seems to get it right, as they know management is never to be trusted on any level. Even they are starting to slip, as MLB owners are attacking them in a different way. Regardless, professional sports owners are the most capitalistic people on the planet. From a business perspective, I can’t really blame them, especially if you are allowed to get away with it.
But I would believe that the player that holds out for more money has more honor than the player that blows three fingers off his hand via M-80 firecracker. One feels that he isn’t being paid enough and is fighting a billionaire owner that has a ton of money. Meanwhile the other basically threw away his life’s work by being too slow to throw a firecracker. That man, Jason Pierre-Paul could have made a difference in the games vs Atlanta and Dallas.