The ultimate value of the $24 million Baltimore's NFL team has promised to pay for its stadium could amount to a windfall or a disappointment for the state, depending upon how and when it is paid.
The team agreed last week to pay the money during the 30 years of its lease under terms still to be worked out with the Maryland Stadium Authority.
"Obviously, in consideration of what Mr. Modell is doing, we're going to make the terms as favorable as we can," said authority chairman John Moag.
He said he would not go along with the team simply turning over $24 million in the 30th year of its lease. But other options will be considered, including letting the team sell the name of the stadium to a corporate sponsor to raise the money, or establishing a favorable payment schedule that won't begin until the new stadium is up and running and earning revenues.
If the team can push the payments off into the future, it could achieve a significant savings, said Tom H. Regan, an assistant professor of sports administration at the University of South Carolina.
For example, if the team were allowed to make the payment in the 30th year, it could be the equivalent of giving the state $2.4 million this year. That's assuming that $2.4 million earning 8 percent a year for 30 years would grow to $24 million.
"One principle of money is you always want it sooner unless there is some benefit to waiting," Regan said. "It's all about cash flow."
The legislation calling for the contribution, which was approved overwhelmingly by the House Appropriations Committee in Annapolis Friday, specifies that the money can be considered part of the cost of building the stadium's sky boxes.
That arrangement could produce important tax savings for the team, Regan said.
Under such an arrangement, growing common in sports, the team "depreciates" the cost of the boxes as an expense. That means the team would slice the $24 million into annual payments and subtract them from profits before taxes are calculated.
If he were advising the team, Regan said he would recommend making the payment as late as possible but depreciating the cost as quickly as possible, say over 15 years. Under that plan the team could shield $1.6 million a year for 15 years from its taxable earnings -- a potential tax savings of $500,000 a year, Regan said.
Furthermore, if the team borrows the $24 million, the interest on the loan could be listed as an expense, reducing again the corporate taxes paid, Regan said.
The Orioles have a similar opportunity at Oriole Park. Lawmakers balked at paying for the luxury suites and the team ended up paying $9 million, which it borrowed from the stadium authority and is repaying with interest.
Under the football legislation, the stadium authority will provide $2.4 million a year for 10 years beginning in the year 2001 for school construction. But that does not mean the team will necessarily make corresponding payments on the same schedule, Moag said.
The team's agreement with the state allows for the name of the stadium to be sold to a corporate sponsor if both sides agree, something that could become a source of revenue to cover some of the $24 million.
That possibility has raised concerns in Annapolis. Sen. Christopher Van Hollen, a Montgomery County Democrat and stadium opponent, said, "The other shoe has not dropped -- the question of whether Modell will get the rights to sell the stadium name, which could be a bonanza."
Team spokesman David Hopcraft said it may take more than a year to negotiate a formal lease, in which the terms of repayment will be determined.
"There's a million options, and they won't be hammered out for a while. But the football team has pledged to give $24 million over the term of the lease," he said. "We will have $24 million less than we would have had."
Another bill endorsed Friday by the Appropriations committee calls for the state to get any money the team raises from "seat licenses" but does not use for agreed-upon relocation expenses. The team and state agreed that up to $80 million in the one-time season ticket fees could be sold, but the first $5 million goes to the state.
Most estimates of relocation costs exceed $75 million, but there is a chance that a $29 million relocation fee will not have to be paid to the NFL, if legal challenges in other cities prevail.