More pro teams getting new, rich leases on life Baltimore joins trend in lucrative stadiums

THE BALTIMORE SUN

If you think Art Modell got a sweet deal to bring his football team to Baltimore, consider the bounty bestowed on Georgia Frontiere.

The Rams owner moved her team from Los Angeles to St. Louis last year to play in a newly opened, $260 million stadium with a rent so low it won't even cover the city's outlay for hiring ticket-takers, ushers and other game-day costs.

In Jacksonville, Fla., the Jaguars not only will enjoy low rent, but they also won't have to make their first payment for five years, even though the city is picking up all game-day expenses.

And the Orioles are playing under a revenue-sharing formula at Camden Yards that, despite the team's near-record success at the box office, has brought in almost $3 million less than what the state has paid to run the stadium since it opened in 1992.

In a trend that seems squarely at odds with the nation's conservative mood, cities have anted up huge, ongoing public investments for private sports franchises.

Supporters say it is the cost of joining or remaining in the major leagues, and tout the advantages of national exposure, community cohesion and spinoff spending by fans flocking to reinvigorated downtowns.

Opponents say it amounts to a taxpayer subsidy of wealthy team owners and millionaire players.

There's little sign of a slowing. An unprecedented building boom is going on in sports, with more than $2 billion worth of stadiums, arenas and ballparks either opening in recent years or scheduled to be built before the end of the century. Most are being offered on terms so tempting that they raise painful questions of costs and benefits.

"It's a matter of when you sit at the bargaining table, who has the leverage? The teams have the leverage," said Martin J. Greenberg, director of the National Sports Law Institute at Marquette University, who is writing a book on teams' leases.

L And the trend is moving in the direction of teams, he said.

"It's based on precedent. You want whatever the last guy got. When I look at the Chicago Bears' lease of 20 years ago and the Baltimore deal, it's night and day," Greenberg said.

Under terms hammered out during Baltimore's failed bid for an NFL expansion franchise, Maryland will use its tax-exempt borrowing powers to build a nearly $200 million stadium and adjacent parking for Modell's team, formerly known as the Browns. The Maryland Stadium Authority also will set up a $600,000 fund for capital improvements.

The franchise will keep all the profits, except for taxes, and will reimburse the state for the $3 million to $4 million a year required to operate the stadium. The team will act as stadium promoter, booking events during the off-season, paying itself a 10 percent management fee and splitting any profits with the state (the team covers any losses).

"We were in the game, but we didn't make the rules," said Herbert J. Belgrad, a Baltimore attorney who was chairman of the Maryland Stadium Authority when the decision was made to build new stadiums for both baseball and football and lease them on lucrative terms.

Anything less would not have succeeded in returning the NFL to Baltimore, he said. And the state could have lost the Orioles, just as it lost the Colts, if it hadn't replaced outdated Memorial Stadium. The baseball team refused to sign a long-term lease until Oriole Park was built.

Experts who follow trends in stadium leases say the new Baltimore football lease is among the most team-friendly in the business, probably surpassed only by the incentives that convinced the Rams to move.

But neither is exactly in a league of its own. Nashville convinced the Houston Oilers to move to town by promising a $195 million stadium and a rent arrangement identical to Baltimore's. Jacksonville agree to renovate the Gator Bowl and to pay for all the operational costs. The team's rent is low and it can defer payments for the first five years.

Even the Carolina Panthers, financing their own stadium, relied on generous public investments. The team is building its stadium with $140 million worth of seat licenses bought by fans. But the city, county and state government spent $55 million acquiring and preparing the land for it in downtown Charlotte, N.C.

Experts say the St. Louis deal, negotiated with the pressure of competing offers from Baltimore and Anaheim, is probably the ++ sweetest of all.

St. Louis gave the Rams game-day use of their facility, a convention center annex that doubles as a domed stadium. The team pays $250,000 a year, 25 percent of the stadium advertising, and half the game-day operational costs of the stadium.

And the team gets 75 percent of the $1.3 million a year that TWA pays to put its name on the "Trans World Dome" and call itself the Rams' official airline -- meaning the Rams get back more in stadium revenue then they pay in rent.

And that's not all: The team was reimbursed for money lost when spurned fans stayed home in its last year in Southern California and got the government to peddle more than $70 million in seat licenses before the move became final.

The Rams don't even have to worry about poor attendance in their pricey luxury seats: The city and a local business group guaranteed a sellout of sky boxes and club seats for three years and 85 percent of a sellout for the next 15 years.

"It's a very good deal from the team's standpoint," said stadium consultant Marc Ganis, who helped negotiate the deal for the Rams. "I wouldn't say it's better than Baltimore. It's comparable."

St. Louis also had to: pay off $28 million in debt on the Rams' stadium in Anaheim, cover a disputed $29 million NFL relocation fee, pay a $10 million settlement with the league and build a $12.5 million practice complex for the team. Some of the money came from the seat licenses.

Baltimore has agreed to let Art Modell's team cover similar relocation expenses through seat licenses, but there is no minimum sales guarantee of any tickets and the state's investment is capped at $200 million.

"I would say St. Louis is probably the best of all stadium deals. It sets the standard. But Baltimore is not far from it," said Paul Much, a financial consultant with Houlihan, Lokey, Howard and Zukin in Chicago that counts a number of teams among its clients.

Offers that let teams make riches from their stadiums are increasingly important in the NFL, where free-agent salaries put a premium on money that does not have to be shared with other teams.

For the Baltimore team, that money will come in the form of more than $20 million a year in luxury seat rents, food and concession sales, parking fees and stadium ads.

Assuming average prices and the expected sellouts, Baltimore's new team could generate $90 million a year in revenues and more than $30 million in pre-tax operating profits according to a project by The Sun. It will render the team one of the most valuable in sports, just as a similarly lucrative deal at Camden Yards did for the Orioles.

The Maryland Stadium Authority says both stadiums pay for themselves through enhanced tax receipts, although studies have varied on the precise impact.

Much said the public investment is not out of line relative to what is often offered corporations to build factories.

"This is probably more visible. But there are other industries that get subsidies. Look at the farm industry and crop supports," Much said.

Critics say the price is simply too high and the benefits too little.

"You guys have taken corporate welfare to a new limit," said Mark S. Rosentraub, a professor and director of the Center for Urban Policy and the Environment at Indiana University.

He takes a dim view of all public financial inducements to businesses, arguing that they rarely pay for themselves and are mostly unnecessary because the factories would often have been built in the same place anyway.

Sports teams are especially bad investments because of the relatively few jobs they create and because they essentially redirect entertainment spending that would take place in the community anyway, Rosentraub said.

Moreover, the benefits of the spending are concentrated on relatively few people, he said.

Former Orioles owner Eli Jacobs, for example, paid $70 million for the Orioles in 1988, overseeing their move into Oriole Park four years later. He more than doubled his money when he sold the team for $173 million in 1993.

"What you are doing is you are taking that money and dividing it between the owners and the players. You are providing welfare to people who don't need it," Rosentraub said.

But Maryland Stadium Authority chairman John Moag said no city has acquired an NFL team in recent history without significant public spending. And the terms are always sweet.

"The economics of the sport have changed enormously, and stadium revenue is a critical factor in whether an owner not only makes money but breaks even," Moag said.

Pub Date: 3/09/96

Lease comparisons

Baltimore NFL

Rent: None.

Revenues: Team keeps all except taxes.

Stadium operation and maintenance: Team pays.

Naming rights: Under negotiation.

Non-NFL uses of stadium: Team books events, keeps a 10 percent management fee, and splits the profits, if any, with state.

PSLs: team can sell up to $80 million in PSLs; $5 million goes to stadium and the rest can be used only for agreed-upon relocation expenses.

Orioles

Rent: Team pays state: 7 percent of net admission revenues, 7.5 percent of concessions except 5 percent of concessions on club level, 1.7 percent of tobacco sales, 3.3 percent of waiter-served food and catered event proceeds, 2.5 percent of candy and novelties sales, 6.7 percent of cafeteria and deli sales.

Revenues: Team keeps all except that shared with state and ticket tax.

Stadium operation and maintenance: State pays.

Naming rights: None.

Non-baseball uses of stadium: Other than for designated times before and after Orioles games, the state has the right to book events and keep the proceeds.

7+ PSLs: Team can sell them, but doesn't.

St. Louis Rams

Rent: $250,000 a year and team pays 50 percent of game-day stadium costs.

Revenues: Team keeps all.

Stadium operation and maintenance: Team pays 50 percent of game-day costs only.

Naming rights: 75 percent to team.

L Non-game use of stadium: Convention center authority keeps.

PSLs: City had to sell 40,000 before team would come.

Nashville Oilers

Rent: $200,000 to $1 million (depending upon results of PSL sales).

Revenues: Team keeps all.

Stadium operation and maintenance: Team operates stadium and pays costs.

Naming rights: Team keeps.

Non-game use of stadium: Team gets proceeds from 20 non-game dates and first crack at most events.

PSLs: City had to sell $71 million worth before team would come.

Jacksonville Jaguars

Rent: $250,000 a year for the first five years, deferable; $500,000 a year for the next five years; $1 million a year for the next 10; $1.25 million for the next 10.

Revenues: Team keeps all.

Stadium operation and maintenance: City pays.

Naming rights: 50 percent to team.

Non-game use of stadium: City keeps.

PSLs: None.

Cleveland Browns (1974 lease)

Rent: $200,000 a year plus either the city's debt service plus real estate taxes or 10 percent of team's rental income from tenants and skyboxes, 10 percent of stadium advertising and 1 percent of admissions from non-NFL events where no rent is charged.

Revenues: Team keeps all.

Stadium operation and maintenance: Team pays.

Naming rights: None.

Non-game use of stadium: Team keeps.

PSLs: None.

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