Why Los Angeles May Not Get an NFL Team
By Evan Weiner
December 26, 2010
(New York, NY) -- There seems to be a lot of momentum in the “Bring the NFL Back to Los Angeles” campaign, but is the push for an NFL team in downtown LA or the City of Industry just an illusion? It is a question worth pondering even if soon-to-be former New York Governor David Paterson thinks the Buffalo Bills franchise could end up in the Southland in 2014.
Under Governor Paterson’s scenario, Buffalo Bills owner Ralph Wilson’s estate tax will be so high that his heirs will have to sell the team to the highest bidder and that someone will scoop up the franchise and move the team elsewhere. Governor Paterson doesn’t think Toronto will support an NFL team and that Los Angeles is the logical alternative once the Bills lease in Orchard Park expires in 2013.
But will there ever be an NFL stadium built in downtown LA? That is a huge question mark. AEG (Anschutz Entertainment Group) is behind the construction of a stadium near LA Live, a congested area that might not be able to handle the traffic flow of 70,000 people per game. But the traffic congestion may be just window dressing for the real problem.
There are some holes in the LA story that need to be addressed. AEG President and CEO Tim Leiweke is talking about building a stadium near the LA Live property for the past couple of months. His vision is building a 65,000-seat facility and getting an NFL owner (presumably Minnesota’s Zygi Wilf, Jacksonville’s Wayne Weaver, maybe San Diego’s Spanos family) to commit to moving his franchise to Los Angeles by perhaps the NFL annual spring owners meeting in March.
Wilf is going before the Minnesota legislature after the first of the year and asking for a new stadium. Red McCombs sold the team to Wilf in 2005 after failing to get the Minnesota legislature and Governor Jesse Ventura on board in his attempt to get a new stadium. Minnesota has built a new baseball stadium and college football stadium since McCombs sold the team.
Here are the problems Leiweke will encounter. He might be too full of himself. His boss, Phil Anshutz is not on board with the stadium plan. The NFL is going to do absolutely nothing in helping Leiweke in terms of paying for a stadium until the league’s owners and players agree to a new collective bargaining agreement. There is a reason that the San Francisco 49ers owners, the York family, have not gone ahead with the construction of a facility in Santa Clara even though voters gave the project the go ahead last spring. The NFL’s stance though might have to change before Minnesota elected officials in the statehouse in St. Paul to help Wilf. The Vikings-Metrodome lease ends after the 2011 season.
NFL owners want the players to help finance the cost of a new facility and plan to get in writing as part of a new Collective Bargaining Agreement.
Leiweke’s recent track record is not good when it comes to arena projects or getting a major league team as a client in an AEG building. Harrah’s and AEG agreed to build an arena in Las Vegas in 2007, that never happened and AEG has been unable to convince an NHL or NBA owner to relocate his franchise to an AEG-run, new facility in Kansas City.
Leiweke thinks the stadium will cost about a billion dollars and AEG will finance the place. The NFL’s two newest venues in Arlington, Texas and East Rutherford, New Jersey cost more than that and neither Cowboys Stadium nor the New Meadowlands Stadium have a corporate sponsor. That means the actual financing for the facility has to be questioned.
There is the timetable that Leiweke has laid out. He wants to get a deal done, get tax breaks, maybe a payment in lieu of taxes or a tax incremental funding or some other sleight-of-hand economic gimmickry (which politicians love to approve even though there are financial consequences down the road—just look at Hamilton County, Ohio and the fiscal plight of the Cincinnati Bengals facility and how Cincinnati-area politicians totally underestimated revenues and failed to understand basic stadium financing) from Los Angeles elected officials. The problem this time around is simple.
Los Angeles has nothing to give and California is broke (the University of California because of the state’s perilous financial conditions has dropped five sports teams including men’s baseball at Berkeley) although you would never know it looking at Oakland’s reaction to Lew Wolff’s threat of moving his Major League Baseball Oakland A’s to San Jose. Oakland wants to keep the team in town even though Wolff wants greener pastures like San Jose.
California also has some very tough environmental provisions that need to be met by stadium planners.
Leiweke is selling the stadium as part of a grand plan that includes a convention center with the thought of making downtown Los Angeles a convention destination. That would put Leiweke and AEG in competition with Las Vegas and Orlando and other cities for an industry that is drying up---conventions. The competition for conventions also includes cruise ships. One line built two super- sized vessels with the thought of going after conventions and having conventions taking place on a cruise ship.
That has not worked out as planned.
Leiweke also has a competitor to the east. Ed Roski wants to build a football facility for some NFL owner at a plot of land in the City of Industry. Roski has floated the idea for about two years and nothing much has happened. Roski’s proposal doesn’t make sense for an NFL owner looking for greener pastures.
Roski’s 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.
Roski’s Majesty Realty plans to pursue Buffalo’s Ralph Wilson or Jacksonville’s Wayne Weaver initially. Wilson’s lease in Orchard Park ends following the 2013 season. Wilson is 92 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 March 3, 2011, 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.
Getting a franchise back in Los Angeles is a dream shared by NFL owners, Leiweke, Roski and the LA business community. But the reality is that there is not enough money around right now to get a facility built and there is an array of other factors including getting the approval of the Los Angeles Coliseum Commission, a group that doesn’t want competition in the Southland. All of these factors can be a momentum killer for Leiweke, AEG and Roski.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at www.bickley.com, xplana.com or amazonkindle. He can be reached at email@example.com