Thursday, May 10, 2012

Home is Where...the Luxury Suites Are

This off season in the NFL has been far from boring.  From the Lebronesque frenzy over Peyton Manning’s football future, to draft intrigue, to the Saints bounty scandal, football fans and the media have had plenty to talk about.  The biggest news of the moment is the drama unfolding in Minnesota over the efforts to fund a new stadium for the Vikings.  A lot is riding on the outcome of the negotiations in St. Paul, and it seemed like a good time to give you some background, plus a primer on stadium financing!


The Hubert H. Humphrey Metrodome, known simply as "the Metrodome," was once the home of the MLB Minnesota Twins and University of Minnesota’s football team in addition to serving as the home field of the Vikings.  Each organization has long felt that the arena was past its prime, however:  the Twins vacated in 2010 and the University of Minnesota Golden Gophers beat their retreat back to campus in 2009. 

For their part, the Vikings have been pushing the state and Minneapolis officials for a new stadium deal for years; the discussions have been heated at times.  While progress has certainly been made (as of Thursday morning, the Vikings owners agreed to pony up $50 million more of the over $400 million they've agreed to pay and the deal had required approval by the Minnesota State Senate), there is a heightened sense of urgency as the Vikings’ lease for the use of the Metrodome expired in 2011.  With the future of the Vikings’ venue undecided, talk of the Vikings being sold and/or relocated to another city—with Los Angeles being one possibility—persists. 

(By the way, see if you can say “Minnesota State Senate” five times fast.)


Generally speaking, there are three ways to finance a stadium:  (1) sale of bonds to the public; (2) a combination of state and private money; and (3) paying entirely with private funds.  Let's examine some examples of NFL stadiums built under each method:

All Public:  Sale of Bonds

Hmm, I wonder why they called him "Curly"?
Iconic Lambeau Field, situated only blocks from the shores of Green Bay, has been home to the Packers since 1957.  Originally named City Stadium, it was renamed in 1965 to honor Curly Lambeau, the team’s founder, player and long-time head coach.  Lambeau Field was the first stadium built just for an NFL franchise.  Under threat from the NFL to move the team to larger Milwaukee, the citizens of Green Bay voted overwhelmingly (70%) for the issuance of bonds to pay for the new stadium.  The cost was $960,000, and the bonds have been paid off since 1978.  Isn’t that quaint?

The Packers have an ownership structure that is not only one of its kind in the NFL, but is unique to all of professional sports in the U.S.  It is a publicly owned nonprofit corporation owned by the Green Bay community.  Stocks were first sold in 1923, and have been sold only five times over the teams history when additional funding was needed; most recently for a renovation of Lambeau Field that took place in the early 2000s.  Under the team’s Articles of Incorporation, the number of shares an individual may own is limited, and shares can neither be sold nor traded, ensuring that no one person or entity can acquire controlling interest in the team.  In fact, the Articles of Incorporation state that if the team is ever sold that the proceeds from the sale, exclusive of expenses, will go to the Green Bay Packers Foundation, a nonprofit that supports various charities and other institutions in the state.

Not only is this form of ownership unique in the NFL, but it can never be duplicated; the league forbids this type of structure, but the Packers were grandfathered in when the rule went into effect.

Combination of Private and Public Funding 

Concocting a mix of public and private funds is the most typical path to football stadium construction, yet it is by far the most controversial to take—just like sausage, no one wants to know how the deals get done.  Just look at the situation in Minnesota:  nobody wants to see the Vikings move, but the main sticking point is how much of the cost should be borne by the public (through taxes and gambling revenues, which come with their own issues) and how much the team should have to pony up. 

Just how easy or difficult the process is will depend, in part, on the tolerance of the community for public spending on the venture—which is influenced, no doubt, by the passion that particular community has for its team.  To illustrate the point, let’s look at two contrasting cases:  Cowboys Stadium in Arlington, Texas and Santa Clara Stadium in Santa Clara, California.

 Cowboys Stadium (a.k.a. “The House That Jerry Built”):  Originally budgeted for a construction cost of $650 million, the final tally when the 2,100-inch hi def jumbotron was plugged in was $1.15 billion.  The retractable-roofed stadium is a temple to gridiron glory generously fed by the passion the Dallas area has for its 'Boys.  Aside from the largest hi def screen in the world, the facility boasts more than 3,000 LCD displays throughout the stadium.  The area behind the stands at each end zone is framed by 120-foot high glass doors that can be opened; the tallest movable glass walls in the world.  The stadium’s most interesting feature, in my opinion, is the presence of luxury suites at field level.   All of the luxury suites have the latest amenities and plush surroundings, but these suites are positioned eighteen inches below field level, to maximize the feeling of being part of the action.

The view from a corner field level suite

Once the site in Arlington, Texas was established (Dallas County officials didn’t want to ask the taxpayers for approval to foot the bill for $425 million public share), the local officials and residents jumped on board relatively quickly.  In July of 2004, Cowboys owner, Jerry Jones, announced that the team was in negotiations with the city of Arlington; in August the city council voted unanimously to put the necessary tax increase to the voters.  In November, the taxes to raise the city’s $325 million share were approved by the voters.  The taxes include increases of the city sales tax by 0.5%, the hotel occupancy tax by 2% and the car rental tax by 5%; bonds were also used for financing.

"When should I tell the city I lost the remote for the jumbotron?"

The NFL itself also kicked in $150 million through a loan program established to encourage the construction of new stadiums throughout the league.  At the time, the program was called the “G-3” fund and the maximum loan amount was capped at $150 million.*  Fortunately for the 49ers, this changed in 2011…

…You'll see why in my next post!

No comments:

Post a Comment

Have a question you want answered, a correction or a comment?