A key part of the Falcons’ plan for paying for their new stadium will be on the agenda when NFL owners hold their annual spring meeting next week in Boston.
The owners of the league’s 32 teams are scheduled to vote Tuesday on a proposal to provide the Falcons $200 million in league funding toward construction of the retractable-roof stadium slated to open in 2017. Approval is expected because the measure already has been vetted by the league’s finance committee.
The money would come from an NFL program created to support stadium construction and renovation around the league, and it would provide a big chunk of the $800 million in private funding planned for the estimated $1 billion Atlanta stadium project.
The rest of the private funding will come from the Falcons and from personal seat license sales. The $200 million public contribution toward construction will come from bonds backed by Atlanta’s hotel-motel tax.
The NFL contribution will be a combination of loan and grant. Although exact terms are determined on a case-by-case basis, the contribution likely will consist of a $100 million loan that can be repaid over 15 years from the league’s share of the increased revenue generated in the new stadium, a $50 million grant that would not have to be repaid and a $50 million loan that the Falcons would have to repay.
Those parameters are described in a four-page resolution passed by NFL owners in December 2011 to create the program.
Officially, the league calls it the “G-4 stadium construction support program.” It replaced a previous program that the league called “G-3,” which began in 1999 and contributed to 12 stadium projects. The G-3 program provided up to $150 million per stadium, but would have been capped at $102 million for a market of Atlanta’s size.
Since adopting the G-4 program, NFL owners approved the maximum $200 million toward a San Francisco 49ers stadium slated to open in 2014 in Santa Clara, Calif., and a Minnesota Vikings stadium slated to open in 2016.
The program is unique in U.S. sports because of the degree to which it makes the league an economic participant in building stadiums. It is symptomatic of a league built on financial partnership and revenue sharing among franchises.
“The NFL has supported stadium construction through various means for decades,” Falcons president and CEO Rich McKay said in an emailed statement. “The owners understand we must have strong partners around the league. Along with our much-talked-about revenue-sharing philosophy, it is often lost that we also share expenses and investment costs as well.”
The current stadium program grew out of the collective bargaining agreement negotiated with the players’ union to end the 2011 lockout. The labor deal ostensibly gives the players 47 percent of league revenue, which reached $9.5 billion last year, but allows the league to deduct 1.5 percent of revenue for stadium expenses before determining the players’ portion.
Robert Boland, a professor of sports management and sports law at New York University, said the stadium funding program pays off for the league in a variety of ways.
“It stabilizes the television map and the league map,” he said, by making it easier for teams to build stadiums in their current markets rather than move to smaller markets, as the Rams and Raiders did when they left Los Angeles for St. Louis and Oakland, respectively, in 1995 and the Oilers (now Titans) did when they left Houston for Tennessee in 1997.
“And because new stadiums (in existing markets) produce far more revenue than the stadiums they replace … team values have risen tremendously,” Boland said.
“Another thing it allows the NFL to do, particularly in the short run, is increase the number of cities bidding to host Super Bowls,” Boland added. “San Francisco and Atlanta, if able to build successful stadiums out of this, have the benefit of potentially being in the Super Bowl rotation, and that’s helpful to the NFL because it produces larger revenue around the centerpiece event.”
Another sports-finance expert, Holy Cross economics professor Victor Matheson, said the program also “serves to entice” taxpayer contributions to stadiums. That’s because, according to the G-4 resolution, “the stadium construction project must be a public-private partnership” to be eligible.
In the Falcons’ case, 39.3 percent of a seven-cents-per-dollar Atlanta hotel-motel tax will go into the stadium — $200 million toward construction and the rest toward interest costs and offsetting the team’s expenses of maintaining and operating the facility.
“The beauty” of the G-4 program for teams, Boland said, is that the stadium loan can be repaid “on enormously favorable terms,” largely from money that otherwise would go to the league anyway.
In general, NFL teams pay 34 percent of home gate receipts into the league’s revenue-sharing pool, which is distributed equally to all clubs and commonly referred to as the “visiting team share.” But the NFL will waive its 34-percent share of revenue from premium seating fees and its share of the incremental increase in other gate revenue for 15 years to allow those funds to instead be used toward repaying G-4. (The program defines incremental increase as the amount by which gate revenue grows in the new stadium compared with the old stadium, adjusted for the average league-wide increase.)
The loan must be guaranteed by the team owner, and the team is responsible for any shortfall if new revenue proves insufficient.
“Let’s imagine the current Falcons stadium generates $10 million a year for revenue sharing, and let’s imagine the new stadium will generate $20 million,” said Matheson, choosing those random numbers only for illustrative purposes. “What happens is, the Falcons will be allowed to use the additional $10 million to pay back the loan.
“A league has to have a lot of revenue sharing for this grant arrangement to work in this way,” Matheson added. “The NFL is by far the most generous of all leagues in the United States in terms of revenue sharing, so there are these revenue streams going to the NFL that the league can appropriate (for stadium projects).”
The highly nuanced program requires that if a team is sold before the league loans are paid off, the selling owner must repay the outstanding principal balance from the proceeds at closing.
Among other conditions, league funding cannot exceed the team contribution to building the stadium. To qualify for the maximum $200 million, the Falcons must put up at least a matching amount; their contribution will far exceed that. The team can recoup its investment over time through various revenue streams, including sales of naming rights and other sponsorships.
In other business at Tuesday’s meeting, NFL owners will vote on the sites of two Super Bowls.
The new 49ers stadium, which was recently named Levi’s Stadium, and the Miami Dolphins’ Sun Life Stadium will compete to host the 50th Super Bowl in 2016, with Miami a long shot after the Florida Legislature this month halted a plan for a taxpayer-supported stadium renovation. The loser of the vote for that game will compete with Houston’s Reliant Stadium for the 51st Super Bowl.
