Taxpayers fill bill for NFL stadiums Costs: The Redskins' private financing is far from the norm, but even in their case, public money has played a major role.

THE BALTIMORE SUN

The Washington Redskins today unveil a stadium that is remarkable not for its architecture, but for who paid the architect.

The team becomes one of only four NFL franchises to play in a stadium constructed largely with the club's money.

As with most private stadium projects, the Redskins received significant government aid, but less than the norm in a league growing saturated with publicly financed palaces.

All of which raises the question: Why doesn't every team build its stadium?

Experts say NFL teams could, if forced to, pay for their stadiums the way most private companies provide their own offices and factories. But with the demand for franchises greater than the supply, communities stand ready to pay. And team owners stand ready to accept.

"Any of these teams could do it. They make money. The question is: Why do it if someone else is willing to?" said Allen Sanderson, an economics professor at the University of Chicago and frequent critic of public financing of stadiums.

"It's just like you can buy your own car, but if can get someone else to do it, you'd be a fool," he said.

The NFL and its teams prefer to view the projects as

"public-private partnerships" in which both sides prosper. The teams obtain modern venues necessary to keep revenue growing, and the cities receive taxes and other benefits from having a major-league team.

Baltimore felt the price worth paying: The $220 million stadium now under construction downtown for the Ravens is being built and financed by the state, although the team will contribute the equivalent of about $12 million toward construction.

"It's very difficult to structure a stadium deal that does not have a public component to it," said Roger Goodell, the NFL's senior vice president of league and football development.

Outdoor football stadiums do not attract many cash-making bookings other than NFL games and a handful of mega-concerts, religious revivals and other events. As a result, it is hard to make money on them the way you can with, say, an

indoor arena -- many of which are privately developed.

Could all-private financing be arranged? "I suppose it's possible," Goodell said. But with no taxpayer assistance, the financial burden would fall harder onto the other players: the fans, through ticket prices and seat licenses, and the team, by diverting money away from player salaries and into interest payments.

Cutting off the NFL from its taxpayer/stadium lifeline would also hurt it in the competition for fans and corporate support in cities with new, publicly financed baseball stadiums or arenas.

Taxpayers helped Redskins

Even in celebrated cases such as the Redskins, the public role is large. Taxpayers put up $70.5 million for land, sewer lines, highway interchanges and other "infrastructure" necessary to move the Redskins to Landover, five miles from their old location in Washington.

But the $180 million construction budget was financed entirely by private sources. The giant Japanese-based Sumitomo Bank Ltd. and NationsBank of Charlotte, N.C., headed a consortium of four lenders that provided $155 million in loans. Put up as collateral was the stadium and its anticipated revenues, especially from its high concentration of pricey skyboxes and luxury seats.

Team owner Jack Kent Cooke, who died earlier this year, put up the other $20 million as equity. Years earlier, Cooke had also privately financed the Forum in suburban Los Angeles for the use of the NBA Lakers and NHL Kings, which he then owned. Both the Forum and Jack Kent Cooke Stadium were built in record time for the notoriously impatient team owner.

"Mr. Cooke did not want to have to ask the citizens of these communities to pay for his stadium. He felt this was something he could finance and build on his own and do it quicker and have control over the project," said Martin Klepper, an attorney with Skadden, Arps, Slate, Meagher & Flom in Washington, who represented Sumitomo and NationsBank in the deal.

Klepper, who has negotiated similar deals for stadiums and arenas across the country, said most NFL teams probably could finance their stadiums unless they are burdened by debt, operating losses or other problems.

It's too soon to declare a trend, but private money has sneaked into a few stadium deals around the country. Several arenas, such as the MCI Center in Washington and United Center in Chicago, have been privately developed, due in a large part to the economic usefulness of indoor arenas.

The San Francisco Giants are privately developing a new park, using a seat-license program untested in baseball. Even the mostly public football stadiums going up in Cleveland, Baltimore and Cincinnati have large team contributions. However, some of these contributions, when coupled with nearly rent-free leases, are a poor substitute for municipalities that once depended on a team's annual rent to pay off stadium bonds.

NFL's other private deals

Other "private" stadiums benefited from public largess. The land under the Carolina Panthers' $190 million stadium in Charlotte, N.C., was bought and cleared at public expense -- a jail and nursing home had to be relocated -- and a parking garage was constructed nearby for the Panthers. Fans plunked down more than $130 million in season-ticket fees, called permanent-seat licenses, to help finance the job.

When the late Dolphins owner Joe Robbie was turned down in two stadium-funding referendums, he went ahead and built a multisport stadium, now known as Pro Player Stadium, in 1988 in Dade County, Fla. He financed the $115 million with what was then a new wrinkle: club seats -- extra-wide, luxury accommodations that required an annual rental fee on top of a season-ticket charge.

But the public helped, too. Tax-exempt bonds were issued, saving the team tens of millions of dollars in interest. The land was donated by a developer in a swap that enhanced the value of adjacent property.

The New England Patriots' stadium in Foxboro, Mass., was built in 1971 with $6 million raised through a real estate trust -- an investment vehicle similar to a mutual fund. The team now says the stadium is inadequate and wants public financing for a new one.

The Carolina deal, in particular, shows that private financing should work, said Tom H. Regan, assistant professor of sports business at the University of South Carolina. The Panthers privately raised the money despite playing in a small market and taking on the $140 million expansion fee and onerous financial terms imposed by the NFL on its expansion franchises in 1993.

"If the Carolina Panthers can make it go with the burden they have, by God anyone can," Regan said.

The price of luxury

Stadium building is not cheap. Principal and interest payments on a $200 million project would add up to $24 million for 15 years. A team would get an immediate tax benefit by "depreciating" the facility on its books, an accounting procedure that would shield about $7 million a year from taxes, Regan said.

More importantly, a team would enjoy a substantial burst of revenue from the luxury seating, corporate sponsorships, higher ticket prices and costlier concessions. Some new stadiums can generate $40 million or more of this kind of revenue.

The Ravens, for example, are selling 100 skyboxes and 7,900 club seats, which will bring in about $25 million a year, minus a few million given to the visiting teams.

The Redskins packed even more luxury into their new stadium: 15,000 club seats and 200 skyboxes.

James Bailey, the Ravens' executive vice president/legal and administration, said the Baltimore market would not have supported as many luxury seats, making a privately financed deal here less viable. Also, the franchise, formerly the Cleveland Browns, was burdened with debt and the costs of operating the old and uneconomical Cleveland Stadium, he said.

"In our case, certainly, it wouldn't work," Bailey said.

Pub Date: 9/14/97

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