Thursday, January 7, 2010

LA Stadium Offer to Bills, Jaguars No Great Deal

LA Stadium Offer to Bills, Jaguars No Great Deal

By Evan Weiner

January 7, 2010

(New York, N. Y.) -- Here is a question that Ed Roski needs to answer in his quest to yet again attract a National Football League franchise to the Los Angeles market, specifically the City of Industry. Who is funding the stadium project? You, your Majestic Realty Company or will it be Ralph Wilson or Wayne Weaver? The answer to that question is necessary because at this point it is rather unclear when the dollars that are needed to build a “majestic” stadium for an NFL owner or NFL owners to move a franchise to the market are coming from.

The stadium was supposed to cost $800 billion when the City of Industry City Council approved the plan in February 2009. The $800 million figure seems out of line and too conservative when compared with Jerry Jones’s Arlington, Texas venue for his Dallas Cowboys and the East Rutherford, New Jersey stadium that is being funded by the owners of the New York Giants and New York Giants. Both stadiums price tags are estimated at well over a billion dollars.

The National Football League used to have something called the G-3 program which loaned up to $150 million to owners who built stadiums. Money went to Denver’s Pat Bowlen, ($50 million) in 1999, New England’s Bob Kraft ($150 million) in 1999, Philadelphia’s Jeffrey Lurie ($150 million) in 1999, Detroit’s William Clay Ford ($100 million) in 2000, Seattle’s Paul Allen ($50 million) in 2000, Chicago’s McCaskey Family ($100 million) in 2000, the Green Bay Packers Board of Directors ($100 million) in 2001, Arizona’s Bill Bidwill ($50 million) in 2001, Dallas’ Jones ($76.5 million) in 2005 and Indianapolis’s Jim Irsay ($34 million) in 2005 to fund new facilities or to renovate old venues.

Even though the G-3 program was running out of money by 2006, the Giants Mara-Tisch families and the Jets Woody Johnson did get $300 million for their new Meadowlands facility from NFL owners in 2006 and the Kansas City Chiefs Hunt family ended up with $42.5 million for renovations at Arrowhead Stadium.

The loans helped fill a shortfall between public financing of projected final costs of stadiums in Denver, Philadelphia, Detroit, Seattle, Chicago, Green Bay, Glendale, Arizona, Arlington, Texas and Indianapolis. All the facilities including Foxboro, Massachusetts and East Rutherford, New Jersey received various tax breaks whether they were privately or publicly funded.

Majesty Realty plans to pursue Buffalo’s Ralph Wilson or Jacksonville’s Wayne Weaver initially. Wilson’s lease in Orchard Park ends following the 2012 season. Wilson is 91 years old and he has leased a number of home games to Toronto through the 2012 season. Toronto, Ontario is 90 miles from Buffalo and there is enough money in Toronto to support an NFL team should Wilson or his heirs decide that small market Buffalo is not for them.

Jacksonville does not have the wherewithal to support an NFL team in the 21st century as there are not enough well heeled fans or corporate dollars around to sell out the stadium. Demographers were wrong in estimating the city’s growth and potential when the NFL awarded Jacksonville a franchise in 1993. The Jaguars owner Wayne Weaver has won lease concessions from the city but has been unable to sell naming rights at the Jacksonville stadium and the team has not be able to sell out the stadium which means home games are not seen in the Jacksonville market. This despite cutting down the capacity of the stadium by covering seats.

Majesty Realty has decided that Buffalo and Jacksonville are not NFL markets by whatever arbitrary means they have created. The company will not go after San Diego’s Alex Spanos, Minnesota’s Zygi Wilf or San Francisco’s York family because those owners are attempting to find financing in those markets although the Yorks have their eyes set on Santa Clara which is 40 miles south of San Francisco with Oakland as a fallback position.

The NFL would like to see the York Family and Oakland’s Al Davis to find common ground and work on a new stadium together to solve a potential Bay Area problem. Davis lease in Oakland ends in 2013.

St. Louis is another franchise that might be in the City of Industry mix. The Rams franchise lease ends in 2014.

Roski and his company want to develop a football village in the City of Industry complete with a stadium and other businesses. Roski doesn’t want to outright own an NFL team but would like a piece of the action and is trading the right to help fund the Roski stadium for the right to making lots of potential revenues generated in the LA market and in his stadium village and to be an owner in LA.

In other words, Roski wants an NFL owner to become his partner in a real estate venture. In the real world of the NFL, cash on the barrelhead is the preferred way of doing business. Roski ought to know this by now, he witnessed it first hand when the NFL gave LA an expansion team. All LA and Roski needed to do was to put up a stadium.

That never happened and Robert McNair and Houston got the team. Houston and Harris County approved a publicly financed stadium.

With no G-3 revenues available, with California in dire financial shape, with Jerry Jones and the Mara/Tisch/Johnson East Rutherford, NJ group still looking for a naming rights partner for their stadiums, with ticket prices far, far too high and in the City of Industry’s scheme, there would have to be a heavy Personnel Seat Licensing fee and then high prices for those buying the licenses, Roski’s deal doesn’t look like much of a bargain for Wilson or Weaver or both.

Roski might not have any lawsuits to worry about that would slow down the project and lame duck California Governor Arnold Schwarzenegger has waived environmental laws because the stadium and the other part of the construction project would in theory create jobs with Majestic estimating that the project will put 6,700 people into jobs that would create $21 million in new tax revenue and have a $762 million impact on the area.

Based on other deals that developers have cut with municipalities, it is unlikely that those figures have any accuracy. Because of various tools such as payment in lieu of taxes (PILOT), tax increment financing (TIF) and others, the City of Industry won’t be getting full property taxes assessment on the land.

If Roski and the City of Industry think that a Los Angeles market stadium will get them a Super Bowl, they are probably correct, the NFL will put the stadium in the rotation but there needs to be a history lesson here. Back in 1994-5, the NFL was trying to help Al Davis land a new stadium for his Los Angeles Raiders near the Hollywood Park racetrack in Inglewood.

The NFL, trying to sweeten the deal, offered five Super Bowls over a ten year period to get the stadium built. The deal was scaled back to three over 10 years then one, then the NFL decided LA should be a two team marketing and another team (after Georgia Frontiere moved her Anaheim-based Los Angeles Rams to St. Louis) and that Davis team would share the stadium with another franchise and share all of the revenues generated inside the building.

Davis went back to Oakland.

The Super Bowl does not guarantee that the corporate community will take a look at the area hosting the game and move some of their operations to that area. The corporate community knows Los Angeles. If that type of thinking---that corporate leaders will open up facilities in an area because it was good enough for the Super Bowl was true --- then Jacksonville should be a burgeoning area.

Jacksonville hosted the Super Bowl on February 6, 2005.

Where is the great deal that Roski and Majestic have offered? Unless they offer hundreds of millions of dollars and it might be closer to a billion dollars to buy out an owner, there is no great deal. An owner will not sell off a piece of his franchise in exchange for development rights in a bad economy in a financially downtrodden state with a high rate of foreclosures. It does not make sense.

If Roski has to spend a billion for a team, then another billion for the stadium, what does that do to a franchise’s finances? On top of that the NFL might impose a relocation fee and furthermore, there is no collective bargaining agreement in place after 2010, so owners have no clue about future budgets.

Because the stadium is privately financed more than eight percent of the stadium generated revenues will go off to pay down the debt unlike those that get public monies. No special tax district will be created unless the City of Industry decides that a special tax district for a team would be a benefit for the city and franchise. The City of Industry is not near LA, Hollywood or Beverly Hills, it is 25 miles east of LA, and will the high rollers want to venture away from the city?

That gets back to the original question. Just who will finance Roski’s stadium? Question two is simple. What makes Roski’s proposal a sure fire winner for Ralph Wilson or Wayne Weaver?

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