Saturday, February 6, 2010

The Subsidized Bowl


The Subsidized Bowl

By Evan Weiner

February 6, 2010

(New York, N. Y.) --- Super Bowl XLIV is really the wrong title for this weekend’s championship game between the Indianapolis (by way of Dayton, Brooklyn, Boston, Miami, Baltimore, New York, Dallas and Baltimore) Colts and the team that Congress created in 1966, the New Orleans Saints. To be perfectly correct, the NFL should be calling this game the Subsidized Bowl I or maybe III or XII depending how deeply you want to explore the political relationship and taxpayers roles in the funding of Super Bowl teams.

The owners of the Indianapolis and New Orleans franchises do have a lengthy history of putting the screws to politicians for either new stadiums or outright payments to keep a team in town.

Saints owner Tom Benson probably cut the greatest bailout deal ever in 2001. Benson’s trek started in 2000 when he began to complain that his one time money producing lease at the Superdome was failing way behind other franchises because other cities and states were underwriting the costs for sports facilities and then giving most of the stadium revenue streams to “grateful” owners. (Under federal law only eight percent of stadium revenues are required to go to paying down the building’s debt if it the venue was paid by taxpayers.)

Benson did what any respectable owner would do. He threatened to leave town without a stadium. Benson’s options were limited: San Antonio had a relatively new stadium but was a very small market like New Orleans. Los Angeles was unsuitable as there was no stadium on the horizon, something that cost the area an NFL expansion team in 1999.

Louisiana didn’t have money on hand for a new stadium either, but in 2001 Governor Mike Foster and the legislature would cut a deal with Benson. They would give Benson handouts as a thank you for not breaking his Superdome lease and moving. The first check was for $12 million in July 2002. A $13 million check would be presented in July 2003. Benson would get the money from a number of ways. Louisiana hiked the hotel and motel sales tax and gave Benson the ability to sell the Superdome’s naming rights. Louisiana gave Benson $186.5 million in outright cash through 2010 so that he could spent money for players, front office people and marketing and keep his Saints competitive in a market that barely had any Fortune 500 companies and had a declining population.

The deal backfired on Louisiana taxpayers immediately. The multiple attacks on September 11th, 2001, in New York and Washington, had a dramatic impact on tourism in New Orleans and the falloff in the number of people going to New Orleans meant fewer revenues to payoff Benson. Additionally, no one stepped forward and bought the naming rights to the Superdome. By 2004, Louisiana was cash strapped and owed Benson $15 million on July 5th of that year. If Benson did not receive the check, he would have been a free agent and able to shop his franchise around by September 18th of that year. Somehow Louisiana found money and did not default on the agreement.

In 2005, Hurricane Katrina drowned New Orleans but that didn’t stop Benson from wanting his money when he returned in 2006. Louisiana continued paying and Benson because of Katrina ended up with over $200 million worth of renovations Superdome. In all, Benson got his money and a better facility but that did not mean Benson was committed to stay in New Orleans once the subsidies ran out in 2010.

Benson will get one more check from the 2001 deal in July for $23.5 million.

Benson and Louisiana officials signed a new 17-year agreement in 2009 that capped the outright cash subsidies to six million dollars annually over the life of the deal after 2010 and included a promise to continue renovating the Superdome with $85 million of subsidies. Additionally, Benson said he would buy the empty Dominion Tower near the Superdome and that Louisiana would lease space in the building. The deal would be worth $100 million for rental over 15 years for Benson. The Saints owner can also develop an entertainment district around the Superdome.

Louisiana taxpayers are one of Benson’s biggest partners and in a league with CBS, NBC, FOX, ESPN and DirecTV which pays Benson a huge sum of money annually. Because Louisiana citizens are so giving, the NFL rewarded New Orleans with the 2013 Super Bowl after dropping the city from the Super Bowl rotation before Katrina.

The Irsay family has also been blessed with willing government partners. Jim Irsay’s father Robert bought the Los Angeles Rams in 1972 and traded the franchise to Baltimore owner Carroll Rosenbloom in what can best be described as a tax deal. Irsay didn’t seem too impressed with Baltimore’s Memorial Stadium and started looking for a better deal. Irsay checked out Phoenix and Indianapolis and in 1980 struck up a conversation with the Los Angeles Coliseum Commission about relocated the Colts after Rosenbloom moved his Rams to Anaheim. He also looked at Memphis and Jacksonville. On March 29, 1984, Irsay moved his Colts to Indianapolis in the dead of night during a snowstorm because he feared Baltmore seize the team through eminent domain.

Indianapolis put cash on the barrelhead (the usual NFL currency) for Irsay by giving him a $12 million loan and promising him a $4 million training camp site along with a brand new stadium loaded with revenue generating gadgets. Irsay was happy in Indianapolis but when his son Jim took over, the Irsay gene that produced wanderlust in Bob hit Jim and the once lucrative Hoosier Dome lease was outdated and Irsay wanted a new stadium or was going to look outside of Indianapolis to get it.

Eventually Irsay got his wish, a new stadium funded by various taxes with Irsay throwing in $100 million of the estimated $720 million facility costs. To pay for the stadium, Marion County raised taxes on food and beverage sales, auto excise taxes, innkeeper's taxes and admission taxes. There was also an increase in food and beverage taxes in some surrounding counties and a tax hike the on Indiana's Colts license plates.

Irsay is not paying much rent and is keeping a large share of the new stadium’s generated revenues which he can do under federal law. Irsay is getting $6 million a year from Lucas Oil for naming rights and paying just $250,000 in annual rent. No wonder he can make Peyton Manning the highest paid player in the NFL. Meanwhile Indianapolis’s Capital Improvement Board cannot pay the anticipated operating costs of the new stadium. Jim Irsay who was in a hurry to get a new stadium has been rather slow in offering to help Indianapolis out of the money pit. He has a contract and a contract is a contract no matter what financial difficulties have befallen Indianapolis.

A Vince Lombardi Trophy is a nice piece of hardware but its worth is just $25,000 and that certainly is not enough to pay off any debt in Indianapolis or New Orleans that was incurred because those cities craved an NFL team.

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