BRADENTON, Fla. – Three National Football League teams in the Southeast recently ended years-long, hard-fought battles for public money to building or improving their stadiums.
The score was 2-to-1 in favor with the Miami Dolphins losing big last week when they failed to get any public funds their project, and forfeited $5 million the team paid for a local referendum that was called off in the midst of early voting.
The winners – the Atlanta Falcons new $1 billion stadium and the Carolina Panthers’ $112.5 million in improvements – also took hits because the Falcons paid more than anticipated for community improvements and the Panthers cut $137.5 million from their project due to the lack of support for public funds.
The public policy debate that swirls around stadium projects is nothing new, and hardly points to a trend, according to sports industry attorney Irwin Raij, a partner with Foley & Lardner LLP.
“These are just all hard-fought battles and the arguments flow from what’s going on around you,” Raij said. “Arguments also shift; sometimes they are more favorable to the team and sometimes they are more favorable to the public sector. It just depends on the political winds. These projects are not givens.”
In difficult economic times, some teams suffer from greater lack of public support when funds for public services are limited, said Wells Fargo Securities Senior Municipal Research Analyst Randy Gerardes. In healthier economic times, some teams tend to get better deals, he said.
Early stadium upgrades in the late 1980s through 2009 to make the fan experience more vibrant with new technology, seating, and concessions tended to get more public support, Gerardes said. In this current wave of proposed stadium upgrades “public sentiment isn’t the way it was when the economy was better.”
The stadium deals proposed in Florida, North Carolina, and Georgia had several common denominators.
First, state lawmakers refused to grant new state or local funding toward the projects. Then local officials negotiated agreements that cost the team more than they originally wanted to spend, or scaled back the proposed improvements.
For all three teams, the main source of public funding came from a tourist, bed, food, or beverage tax with limited uses. The revenues could not be used for general public services such as police and fire protection.
All three projects aimed to upgrade aging stadiums to bring in more revenue and add value to the franchises. Most were also designed to make venues more competitive to attract large sporting events such as the Super Bowl.
In a nail-biter end to the Florida Legislature’s session last week, the House refused to pass a Senate-approved bill that would have granted a sales tax rebate and authorized a 1-cent increase in the Miami-Dade County tourist tax to help the Miami Dolphins make $350 million to $400 million in improvements to Sun Life Stadium.
The Dolphins pledged to privately finance just over half of the cost to “modernize” its 26-year-old facility, and agreed to a 30-year non-relocation covenant. Additional penalties could be assessed if the team was sold and the team failed to host a certain number of large events.
Public opposition to the Dolphins’ plan grew largely from the backlash to generous public financing the city of Miami and the county provided for the $639 million stadium built for the Major League Baseball’s Miami Marlins. The team traded away many of its best and highest paid players after the stadium opened.
The Dolphins, hoping to appease public concerns about the project, agreed to allow local voters to have the final say about increasing the tourist tax, though the election hinged on state lawmakers’ approval of the bill. The team planned to leverage the taxes with revenue bonds.
Though there have been referendums on other stadium deals supported by general obligation bonds, Gerardes said he never heard of a team agreeing to a binding referendum for improvements financed with revenue bonds.
Raij, who represented Major League Baseball in the Marlins’ project, said it took the team almost 10 years to get a new stadium. In 2009 and 2010, Miami-Dade County sold the bulk of financing for the new ballpark. The city of Miami sold bonds in 2010 to build parking garages for the stadium.
“The Marlins were able to get a stadium development done in the heart of the recession,” said Raij. “That was done, in part, because of the expectation of economic development and job creation. Elected officials have to make some tough decisions – are those temporary and permanent jobs enough to offset the concerns that people are raising.”
The Dolphins’ leaders, who publicly said many times that the team’s deal was nothing like the Marlins’, also pointed out that 4,000 jobs would be created.
“For me, what it comes down to is your expectations,” Gerardes said. “If you can do a stadium and drive economic activity for the area, owners benefit but also other tax revenue receipts could be impacted, and there would be more construction work. It’s about how much benefit would be there.”
Though thousands of Miami-Dade voters participated in early voting, the May 14 election was called off and ballots destroyed after the bill died.
In North Carolina, concern about the Panthers leaving Charlotte helped drive the process of negotiating a stadium deal.
On April 22, the Charlotte City Council gave the Carolina Panthers $87.5 million in additional funds from a local tax on hotels, food, and beverages.
Some $75 million will go toward scaled-down improvements at the 17-year-old Bank of America Stadium; the rest will pay for operations. The team will pay another $37.5 million of the cost and agree not to relocate for at least six years.
The Panthers originally planned $250 million in improvements but the projects were scaled back after the North Carolina General Assembly refused to authorize an increase in the local food and beverage tax. Lawmakers, instead, gave Charlotte the authority to contribute to the project using existing funds.
In March, the Atlanta City Council approved $200 million of municipal bonds secured by a local hotel-motel tax to support a new $1 billion stadium for the NFL’s Falcons.
The city agreed to sponsor the stadium project after Georgia lawmakers refused to increase a financing cap imposed on the Georgia World Congress Center authority, a state agency that owns the Dome in downtown Atlanta where the Falcons currently play.
While the team, the NFL, and personal seat licenses will pay $800 million for construction, and the Falcons agreed to remain in Atlanta for 30 years, the city’s help did not come without added cost to the franchise.
During public hearings on the public funding, numerous speakers and residents asked the City Council to require additional funds for neighborhood improvements. Falcons’ owner Arthur Blank committed $15 million.
The council also required the team to increase the amount it pays for infrastructure costs to $70 million from $50 million, and ordered the team to add another $20 million if needed for land acquisition.
While the stadium debates in Florida, North Carolina, and Georgia were hard-fought with mixed results, experts said they support the notion that each deal has unique aspects.
“In the ebb and flow of public sentiment, everybody’s got their own situation,” Gerardes said.
Because a stadium deal is “really localized” and requires a lot of work, tenacity, patience, and creativity, Raij said it would be hard to find a trend in the outcomes experienced by the Dolphins, Panthers, and Falcons.
“Each team means something different to each community, and every community has different finance needs and other considerations,” he said. “When you are talking about stadium developments they are just tough projects overall.”
In California, Raij said, it’s rare to see direct public investment in a stadium, though teams typically are offered incentives such as providing property, selling land at below market value or rezoning for the highest and best use.
“In California that shifts a lot of risk to the team side,” he said. “That’s a risky proposition for teams as a result of the policy challenges in stadium development in California.”
Whether the risks create concern for investors depends on the expected outcome and type of investment, according to Gerardes, who said the best projects are not overleveraged.
If an investor is considering private stadium bonds secured by revenues produced by the stadium, any public funding would be considered equity, he said.
“As a stadium revenue bond investor, I’d like to see more public dollars because it takes a lot of strain off the revenues of the stadium,” he said.
“If I’m buying the public bonds, I’m looking to the security of the actual deal rather than how the stadium performs,” Gerardes said. “If it is a tourist tax, I care about how it performs.”
