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http://www.101sports.com/2013/07/15/rams-stadium-and-relocation-prospects-not-as-they-seem/
Rams’ Stadium and Relocation Prospects Not as They Seem
By STL Staff on July 15th, 2013 @ 2:11pm
Shane Gray provides special Rams commentaries on 101sports.com. Follow him on Twitter @ShaneGmoSTLRams.
Whether it’s because of the flimsy reporting that often occurs regarding the St. Louis Rams’ stadium situation and relocation prospects, a lack of homework by some on the aforementioned issues or a myriad of other potential factors, misunderstandings run all too rampant in regard to a plethora of items concerning the Rams’ long-term future headquarters.
Recently, both the St. Louis Convention and Visitors Commission and the Regional Convention and Sports Complex Authority officially rejected an arbitration-based dome renovation plan that would have cost the city approximately $700 million to implement while likely creating significant revenue losses during a multi-year construction process. According to Jeff Rainford, chief of staff for Mayor Francis Slay, the concurrent loss of convention business during the remaking of the Edward Jones Dome would have taken $500 million out of the local economy.
When considering a potential total cost of well over a billion dollars and the fact that the dome remodel would have only guaranteed a Rams stay through 2025, the decision to reject binding arbitration was a no-brainer. In the end, the determination was the only one that was economically feasible or otherwise made sense.
As expected, both the delusional and the doom-and-gloom crowds got worked up over the “news”; however, none of those paying attention – including the Rams – remotely expected the CVC to move forward with the proposal.
With the arbitration process having been finalized without a stadium plan in place, the Rams will become franchise free agents in 2015 unless a stadium resolution has been reached by then. If an agreement has not been secured by that time, the club may opt to utilize its current dome lease on a year-to-year basis or pursue moving the franchise to another location – a location like Los Angeles, for example.
As of today, the eventual utilization of the year-to-year option seems almost a certainly, particularly when considering that L.A. isn’t close to being ready for an NFL return and the Rams still retain one of the top two or three team-friendly leases in football.
To some, a Rams return to L.A. is all but inevitable. Those writing or believing such are apparently doing little to no homework, though. One mind-boggling group, for example, has gone so far as to say there is a 100-percent chance the Rams are moving back. However, when studying various topics related to L.A., the NFL and the Rams, the evidence strongly suggests that a move to California is excessively unlikely.
As has been the case with the NFL and L.A. for a long time, what glitters isn’t always gold.
For one, to put a theoretic potential L.A. move into better perspective, consider that Stan Kroenke could construct a top-tier venue in St. Louis – even before counting a dime of outside financial help from public and NFL sources – for approximately what it would cost in relocation fees and lost NFL G4 money alone. And that’s before turning a shovel of dirt on a new stadium there, building practice facilities or setting up shop. (Let me clarify, before being misunderstood, that I offer the preceding as a perspective-builder, not as a predictor of what might occur.)
Even if one suggests that Kroenke is anxiously anticipating the chance to sell out his home state by making more efforts to lead the Rams out than he did to bring them in when buying 30 percent of the club on the precondition that they move here after being lead investor for St. Louis’ expansion efforts in 1993, the Rams would still need relocation approval by 75 percent of league owners if successful in checking off a dozen or so league-mandated prerequisites for moving.
Speaking of the league and its ownership group collectively, we know a few things: We know they love money, we know they love using and/or allowing L.A. to serve as leverage for stadium deals and we know they realize that expansion fees (according to Mike Ozanian of Forbes and others) could be in the neighborhood of a billion dollars per team. The league, by the way, attained $700 million when the Houston Texans joined the NFL in 1999 during its most recent augmentation.
And those prospective mega-expansion fees are a big reason why the relocation of any organization is remote at best. And even if the Rams wanted to pay up, the Raiders and Chargers could jump ahead of them and move first.
Let’s be real: Anyone thinking the powers that be would bypass a huge payday by allowing a franchise to take one of two potential L.A. expansion spots off the map and the corresponding money it could later generate without maximizing a relocation fee is ridiculously out of touch.
League owners know that the collective bargaining agreement runs another eight years, and the TV deals and overall finances are set through that time. Moving a team to a city like L.A. – minus a massive relocation fee that would equate to an expansion fee – would not economically benefit the league and would take away both a lucrative future expansion spot and leverage piece, even if one believes L.A. is predestined for two teams rather than one.
Thus, common economic sense would suggest that expansion is the league’s long-term objective, as NFL commissioner Roger Goodell spoke of in detail with Bob Costas before later withdrawing those comments – likely under pressure to do so after nearly killing the golden goose better known as L.A. leverage.
The L.A. market could eventually bring a windfall in expansion fees with the addition of two teams there. Simply put, if a current owner wants to take one of those paper-printing expansion fee lottery-like jackpots away, they will be paying top dollar to do so, as you can be sure the NFL and its owners will get theirs. Believing otherwise is naďve and unrealistic. At minimum, one should expect a $500 million fee and the price could certainly push closer to a billion.
After all, why would a league that has never been more lucrative than it is now not prefer to retain its current bountiful revenues in every existing market and also add to those dollars via expansion monies and larger future TV deals? It would seem obvious that the NFL would prefer to increase the money pie rather than simply moving it around and making a mess by alienating one or more regions of the country through any unnecessary franchise moves.
Quite simply, why move an existing team that is generating profits when they can keep those profits intact and add to those through expansion? More specific to home, why leave St. Louis unnecessarily – which would then become the nation’s second largest market without a team – when you could add L.A. through expansion and still reap revenues from here?
In addition to a punitive relocation fee, a moving team would bypass the opportunity to receive up to $200 million in funding from the NFL’s G4 program as any stadium “…project must not involve any relocation of or change in an affected club’s home territory,” according to NFL policy guidelines. By the way, while the G4 program is known technically as a loan, fieldofschemes.com and others argue that it effectively operates more as a grant due to the fact that repayments come via monies that clubs would not normally retain anyhow.
Circling back to an earlier point on costs to re-emphasize it, Kroenke could choose to pay a relocation fee of $500 million or more and bypass $200 million in G4 money, or could use that money to build a Lucas Oil Field in St. Louis – at a cost of $768 million in 2013 dollars – before even counting a dime of public funding contributions and investments towards that effort. Lucas Oil, by the way, is a stadium Rams officials have often talked highly of after touring the facility.
It is also important to consider that Kroenke and/or his franchises own the venues of all of his other major franchises: the NBA’s Denver Nuggets, the Premiere League’s Arsenal, MLS’s Colorado Rapids and the NHL’s Colorado Avalanche. With that pattern understood, it would seem likely that Kroenke would also prefer to own and operate his NFL stadium. If so, that’s part of why a resolution was never going to come via the just-finished arbitration process. Those suggesting Kroenke would never contribute to paying for a venue once again need to do some homework on his other clubs before making such assertions.
As for L.A. sites for Kroenke to build upon, one location that has been discussed since the late 1990s is on the Dodger Stadium grounds. However, recent reports show that former Dodgers owner Frank McCourt can re-enter the picture, which makes the spot a virtual no-go because the NFL has no interest in dealing with him, according to Sam Farmer of the Los Angeles Times.
In the City of Industry, Ed Roski’s site has been shovel-ready for five years, but would require an organization to sell a significant minority interest to Roski before being allowed to build its own venue there. It’s little surprise, then, that nobody has yet bit at the chance to build there.
The much-overhyped Farmer’s Field proposal would cram a stadium with direct costs potentially exceeding $1.8 billion into a small downtown area. The proposed project has a plethora of problems surrounding it, including the fact that Tim Lieweke – the project’s long-time point man and spearhead – is no longer involved after moving to Maple Leaf Sports and Entertainment of Toronto. In addition, AEG has been in a state of flux after being up for sale earlier this year. Most of all, according to a recent report from Jason Cole of Yahoo! Sports, the project is “essentially dead” to the NFL in its current state because “the numbers just don’t work.” Anyone studying the details of that prospective deal found the report to be of no surprise.
With Farmer’s Field – like the aforementioned Industry project – an owner would be required to sell a significant minority interest in the franchise, potentially at a discounted rate to boot. Kroenke, however, has never sold any portion of a franchise, so these alternatives would seem like non-starters from the jump. Furthermore, the Farmer’s Field deal would not only keep Kroenke from owning the venue, but would see him receiving just a set fee on returns. That setup, of course, is something that would certainly seem unattractive to any owner, let alone one who likes to own his venues and develop properties.
If it’s not the relocation costs discussed above or the dismal current stadium potential in L.A. just touched on, another topic that people seem misinformed about or confused on is market size.
People are often either oblivious to the fact that market size isn’t a major factor in the NFL or seem bamboozled and shocked when they discover that it has so little to do with an individual NFL team’s bottom line. Many don’t realize that market size is far less a factor in football than it is in other leagues like Major League Baseball, where teams can secure their own individual big-money TV deals.
In the NFL’s egalitarian model, an organization’s stadium situation and lease are far more important than market size. In the NFL, the vast majority of revenues are shared, so keeping costs low while having a friendly lease and a good stadium situation are much more vital than market size – as L.A.’s nearly 20-year absence from possession of a league team strongly supports and validates.
As Arash Markazi of ESPN Los Angeles has pointed out, a move to L.A. by a team from a smaller market would never make financial sense if a franchise could obtain some public support and a friendly lease in its current city, because that type of deal is unlikely to ever occur in L.A.
As a first side note to the market-size discussion, TV ratings in the nation’s second-largest city are thought to be better without a team, as networks can put the most in-demand games on each and every week. That’s vitally important when TV contract talks come up.
As a second market size-related point, many do not realize that the higher gross revenues that sometimes occur in larger markets do not necessarily equate to a higher net profit. Upped revenues don’t mean much if corresponding costs rise concurrently, after all.
People often point to the Forbes franchise valuation reports as they certainly are helpful in getting an idea about NFL teams and their individual financial statuses. Unfortunately, however, the reports don’t tell the whole story because organizations do not have to fully divulge their books. For instance, last year’s edition of the aforementioned report showed that the Pittsburgh Steelers lost money in 2011. Does anyone actually believe that?
As a report from Amy Shipley of the Washington Post points out, we don’t know what an individual team is paying and/or charging to the team. We don’t know if teams are paying aunts, uncles or children millions of dollars, for example.
In St. Louis, the Rams were typically among the more profitable teams before encountering the NFL’s worst-ever five-year performance. And that was while routinely spending to or near the salary cap when other teams (the Cincinnati Bengals, Buffalo Bills and Kansas City Chiefs, for example) would sometimes spend $20 or $30 million less towards player salaries. Obviously, a team that is spending tens of millions less on personnel is going to see a difference on its bottom-line financial numbers.
As for L.A. in the view of others, the aforementioned Farmer of the L.A. Times recently wrote that the city is as far away from the NFL as it has ever been since the Rams and Raiders departed almost 20 years ago. ESPN’s Mike Sando called L.A. an “overrated suitor” in his July 10 NFC West blog. And AEG’s former point man, Lieweke, admitted last year that there is no groundswell of support in L.A. for a return of the NFL.
If L.A. were such a sure goldmine, why have the Chargers – a team that could have been in L.A. a decade ago and continue operating on a year-to-year lease in a more outdated stadium than St. Louis’ – not made the move? Why did the Vikings – who began stadium discussions in 1998 and were to the point of operating with no lease at all – pass it up? Well, when looking at all of the above, it’s no surprise that they and several other franchises have routinely bypassed the market over the last 18 years.
As for the Rams, will they be the exception to the rule and make a move to L.A.?
Even if one believes the 66-year-old Kroenke wouldn’t mind alienating his friends and family in his birth state and the state that is still his official residence, or living out his days as a villain here, or tossing away his Missouri Sports Hall of Fame legacy, or doing damage to his work with the University of Missouri or blighting many other things he has accomplished in the Show-Me State, it would still be hard to imagine that business issues and interests – i.e. money – wouldn’t cause him hesitation in considering running out on Missouri.
If Kroenke cancelled the Rams’ run in St. Louis, it would do immense damage to his day job, realty development. His home bases are still in St. Louis (THF Realty) and Columbia (The Kroenke Group), and Kroenke has long benefitted from some favorable tax deals and other economic helps from the city and state. The chance of maintaining as positive a standing with city leaders or state politicians as he has now would be remote at best if removing the NFL, particularly after all they did to help secure its return.
Some have questioned “Silent” Stan’s quietness on the Rams’ future of late, and while it would be nice to hear him say “we are staying no matter what,” it isn’t going to happen – at least not for now. Anyone not understanding why a businessman wouldn’t flat-out proclaim that I’m keeping my business here irrespective of what the future holds probably won’t understand the explanation, either. Sure, Kroenke could say, “Hey, we are staying in St. Louis, period.” If a businessman wanted to play the fool, that would be the route to travel. If Kroenke wanted to ensure that he would receive as little city and state help as possible, well, that would prove the wisest way to go. Otherwise, it would be an incredibly illogical thing to express.
In 2010, Kroenke addressed his long-term intentions in St. Louis.
“There’s a track record,” Kroenke said. “I’ve always stepped up for pro football in St. Louis. And I’m stepping up one more time. I’m born and raised in Missouri. I’ve been a Missourian for 60 years. People in our state know me. People know I can be trusted. People know I am an honorable guy.”
Besides that, Rams chief operating officer Kevin Demoff is and has been the de-facto voice of the franchise. He has continually made it clear that the Rams plan to remain somewhere under the distinct shadow of the Gateway Arch.
Chip Rosenbloom, son of former Rams majority owner Georgia Frontiere of St. Louis, has stated his beliefs that Kroenke will honor his late mother’s wishes and keep the team here.
NFL Hall of Famer Dan Dierdorf, a former CVC chairman and long-time St. Louisan, has told Bernie Miklasz of the St. Louis Post-Dispatch that he believes Kroenke’s No. 1 objective is to possess a long-term future here.
“I guarantee you at the top of his list (Kroenke) is a new stadium in the St. Louis area,” Dierdorf said. “That’s priority No. 1 for the Rams.”
Twenty years ago, at the same time Kroenke became lead investor for expansion efforts here, another relatively unknown man by the name of Roger Goodell was working closely with city leaders before ultimately recommending St. Louis as an expansion city.
According to Miklasz, Goodell is still just as bullish on St. Louis and has clearly confirmed his desire that the Rams remain in place during private conversations. By all accounts, Goodell and the league want the team to stay put.
And why in the world would they not, when considering the above on expansion fees and the fact that the league can retain revenues in all current markets while create a bigger overall pie by adding new teams? That’s a win-win if there ever was one.
As for the Rams, their own actions seem to be making their long-term intentions rather clear.
The Rams have continually expanded their community efforts and outreach since Kroenke took over in 2010. As led by Demoff, the organization became the first team in the city’s history to win its Philanthropic of the Year award. The Rams’ community initiatives are some of the league’s most extensive. They have been done in part to grow the “next-generation fan,” according to Brian Killingsworth of the club’s front office. It would seem odd to constantly increase efforts in this community if it were planning to uproot from it.
And the Rams are not just ever-expanding their St. Louis community work and marketing, but are now also beginning to reach out more to markets like Springfield, a city that houses the Double-A Cardinals and is a huge St. Louis Cardinals town and the centerpiece of a sports-crazed region. (By the way, the coming work in Springfield is something brand-new and has just begun to be worked on since the close of arbitration, something that also would seem particularly odd if a move was in the works.)
In addition to all the community initiatives, the Rams recently installed the league’s largest preseason network, one that reaches into nine states and is geographically as widespread as the league allows with affiliates in every market within 250 miles of home base. The team’s preseason network – just like its community work – escalated after Kroenke took over ownership.
I have to ask, why in the world would you implement this network if not expecting to be here for the long haul? A three- or four-year preseason network, after all, isn’t going to add many, if any, deep-rooted fans who would be sticking with a team on the West Coast or purchasing tickets there. The preseason network expansion, put bluntly, was and is nearly useless if not designed and used as a long-term tool for growing this region’s fan base.
As a side note, a weekly show called “Rams Nation” was shown directly via affiliates for the first time last year ago in markets outside St. Louis, yet another indicator of commitment to enlarging the base in the surrounding regions.
As yet another indicator, the Rams went to great lengths in recent seasons to ensure home broadcasts with Kroenke at the helm while fans in places like Tampa Bay, San Diego, Oakland, Buffalo, Detroit and Cincinnati have endured multiple blackouts.
In looking deeper at Kroenke, he is a guy who is thought by many to be a few steps ahead of the game. He likely has had a good idea of what he wants to do (and by that, I mean in St. Louis) for quite some time. For now, it’s a matter of going through the process and securing the desired location and the best deal possible before then, almost certainly, owning and developing surrounding properties therein.
Kroenke is known to model Bob Kraft of the New England Patriots. One can look at and study Gillette Place online and see who paid for most of that venue and what ownership did on the land around it. Indeed, it is impressive. Kroenke knows how to get things done more so in Missouri than anywhere else. St. Louis is the safest play and the best bet.
As for getting things done here, that starts with Gov. Jay Nixon. It is highly encouraging that he was not only willing to take the lead on future negotiations, but that he requested the opportunity to do so. Nixon will be a great asset going forward, and was key in hiring Goldman-Sachs – a company that has often advised various parties on stadium-related matters and is already working on finding the optimal stadium solution here.
Nixon and Kroenke have known each other since their mutual Mizzou days. Nixon is known as a proponent of St. Louis sports and will help find a workable solution for the both St. Louis and the Rams.
Having the process streamlined to primarily just involve Nixon and Kroenke at this point is highly advantageous. In general, the fewer people in the room at this stage, the better.
Late last week, a portion of a statement from Nixon’s office said he appreciates “the value of having two solid NFL franchises in the state of Missouri, with stable ownership in both St. Louis and Kansas City” and that he will “never forget the way both franchises stepped up to help the people of Joplin after the 2011 tornado, including building several new homes as part of the Governor’s Joplin Habitat Challenge.”
Earlier this year, Nixon said, “The state has a long-term interest in the future of the Dome and in ensuring Missouri continues to be home to this proud NFL franchise.”
People often speak of public votes, but Minneapolis was technically required to utilize a public vote for its coming stadium and got around it, something St. Louis and Missouri has done in regard to many things in the past.
A new report came out via Fox 2 on July 11 that suggests a vote might be able to be averted if bonds are used again. For over two years, I have shared skepticism that a public vote – or at least one that would be critical in making or breaking a deal – would ultimately come.
Beyond a public vote, the city and/or state could use tax-exempt bond financing, MODOT services, TIF, tax abasement, blighted land grants, property donations and more to bring indirect dollar support toward a new venue. There are creative solutions to be utilized.
And it won’t take a fully publicly financed stadium to get a deal done. Those days are gone.
Atlanta is on its way to a new venue, but the Falcons will cover roughly 80 percent of the stadium’s funding. In Minneapolis, their recent agreement called for what amounts to nearly a 50/50 public/private split of costs. In Santa Clara, the 49ers took out a $200 million loan from the NFL and are on the hook for an annual rent of approximately $30 million dollars.
In Massachusetts, the Patriots paid for their entire venue. In New York, the new Jets/Giants home was primarily privately funded. In Texas, Cowboys owner Jerry Jones paid for the majority of his palace.
In St. Louis, we can expect a new stadium that comes by way of a private, NFL and public split.
Whether a breathtaking new venue ultimately goes up in the downtown area or in a suburban locale is yet to be determined. However, don’t expect city leaders to stand too strongly in the way of something getting down outside the city limits if that ends up being the chosen destination. As David Hunn of the Post-Dispatch reported in January, Rainford has said a metro solution is a good second option if an agreeable city plan cannot be created.
Wherever the location, expect a deal to get done that will see an elite stadium come to pass in the St. Louis region that not only houses the former Super Bowl-winning Rams, but one that – in my estimation – will bring an MLS team to soccer-loving St. Louis. A new venue – dare I say a Wal-Mart Field or Sam’s Club stadium – will beautifully showcase the region on a worldwide scale, serve the region exceptionally well, free up the dome to book events year-round and generate significant new revenues annually. If done properly, this could be a win for all parties.
In St. Louis, contrary to some misguided reports, the region’s corporate base is healthy. In 2012, the city of St. Louis came in fifth in the U.S. in regard to most Fortune 500 corporations, more than that of L.A. The city also boasts 21 Fortune 1000 companies. The corporate base is strong, and that bodes well for the Rams.
When looking over what has been touched on here, it seems clear that the Rams are very likely to remain in St. Louis for the long run unless there is no cooperation whatsoever from the city and state, which seems highly unlikely.
In upcoming decades, expect the Rams to be winning more Super Bowls in St. Louis and building an NFL legacy that football fans and non-football fans alike in St. Louis and the state can be proud of. In my opinion, that is something that Kroenke has had in mind all along. ________________________________________
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