Connecting state and local government leaders
The bill is coming due for upgrades to pro sports venues built decades ago. It won’t be cheap.
You're reading Route Fifty's Public Finance Update. To get the latest on state and local budgets, taxes and other financial matters, you can subscribe here to get this update in your inbox twice each month. You can find a full archive of these newsletters here.
Public Finance Update - June 21, 2022
Welcome back to another edition of Route Fifty’s Public Finance Update! I’m Liz Farmer and this week I’m looking at one of my favorite topics: sports stadiums. Did you know the average NFL football player is just 26 years old, but odds are the stadium in which he plays is younger? I’ll examine what’s in store for aging sports facilities constructed during the stadium building boom of the 1990s and early 2000s. As always, send feedback and tips to: firstname.lastname@example.org.
After the Great Recession, it seemed the appetite for publicly financing new sports stadiums had mostly waned. Since 2010, just 14% of the $16 billion spent on stadiums was publicly financed, according to an analysis of a University of Chicago study.
But over the next decade, many of the 30- and 40-year leases for the taxpayer-funded facilities will be up for renewal. And governments and team owners will have to decide whether it’s better to remodel the old stadiums or build new ones. That decision will largely come down to how well the venues have been maintained over the years, said Marty Conway, a sports business expert.
In Nashville, for example, Burke Nihill, president and CEO of the Tennessee Titans NFL team, said that city-owned Nissan Stadium has had water infiltration issues that have been worked on since 2015 and that utilities at the site are near the end of their useful life because of inefficient water pumping through old pipes. What’s more, the stadium has not had any renovations since it was built in 1997.
“Just understanding that the condition of this building, the increasing NFL standards and really all standards for building [means] that we had to stop plugging holes and come up with a comprehensive solution,” he told The Tennessean.
Nihill argues that building a new stadium is the better value for the Metropolitan Sports Authority. According to an analysis by construction firm AECOM Hunt, Nissan Stadium will need close to $900 million in upgrades to remain stable until 2039. That’s in addition to the $1.2 billion needed to renovate the facility today. Those costs combined would roughly equal the projected cost of a new stadium.
In Maryland, where the state owns Oriole Park at Camden Yards (built in 1992) and M&T Bank Stadium (built 1998) it’s a different story. Both structures will undergo renovations with total funding of $1.2 billion from the state. In those cases, the buildings maintained by the Maryland Stadium Authority have had upgrades to suites and amenities to remain commercially competitive.
“I think you give a lot of credit to the public operators who have invested wisely over the years,” Conway said. “When you look at that, it makes the decision on whether to renovate much easier. In Maryland, they decided ‘absolutely’ and in Nashville they said ‘no chance.’”
The Cost of Staying Competitive
Team leases of publicly-owned stadiums commonly require the facility to be maintained at a “first class standard.” That crucial phrase is what Stan Kroenke used to justify pulling the NFL’s Rams out of their lease agreement with St. Louis in 2016 and to move the team to Los Angeles (where he privately financed a $5 billion stadium).
But, as NFL stadiums in particular have become more luxury- and amenity-laden experiences, maintaining that “standard” has become a much more expensive proposition.
Take Nashville: In 1997, it cost $264 million to build a new stadium which is equivalent to about $485 million in today’s dollars. The state government has offered even more than that—up to $500 million—to help fund either a renovation or a new stadium. But given that the average NFL stadium cost now surpasses $1 billion, the state’s ante only covers around half of what’s needed.
There are, however, opportunity costs to not staying competitive. Modern NFL stadiums are more attractive venues for major events and tend to win more bids. Earlier this month, FIFA announced the 16 host cities in the U.S., Canada and Mexico for the 2026 soccer World Cup and the list of host stadiums is mostly populated by new or recently renovated venues. Los Angeles, for example, made the cut; Nashville did not.
What’s likely to happen in Nashville is a compromise financing deal that gets the city out of its maintenance obligations and contains a non-relocation agreement. These types of arrangements have become more common as nearly all cities are now less inclined to foot the entire bill for stadiums when they see team owners benefiting from luxury suites and other high-price add-ons that increase the team’s valuation and put more money in owners’ pockets.
For example the NFL’s Buffalo Bills, whose lease at the 1973 Highmark Stadium expires next year, is expected to split the cost of a new venue with the state of New York.
In a recent op-ed, Nashville Mayor John Cooper said any new agreement would make the Titans responsible for stadium maintenance and improvement costs and not put taxpayers on the hook. "I will not sell public land, raise the sales tax, or spend your property tax dollars to fund the stadium," he wrote. “Tourists and spending around the stadium will pay for this project.”
$20 Billion Over the Next Decade
As leases expire, some experts estimate that up to $20 billion will be spent over the next decade on building stadiums, ballparks and arenas or on renovations to them. But unlike a generation ago, taxpayers won’t be footing the bulk of that cost.
Back in 2016, the NFL’s Miami Dolphins owner Stephen Ross lost his bid for public funding to improve Hard Rock Stadium (another one of the 2026 World Cup sites) and ended up bankrolling $500 million in improvements himself in exchange for property tax breaks.
Other NFL teams looking to remodel publicly-financed stadiums include the Jacksonville Jaguars and Green Bay Packers. The Packers are unique in that it is the only publicly-owned NFL franchise. And while official negotiations between Jacksonville and Jags owner Shad Khan haven’t begun, the cost for the stadium’s prior renovation in 2016 was shared.
Conway said that team owners have increasingly been looking beyond stadiums and also investing in the real estate around them. Khan has even been criticized for prioritizing his real estate investments over the often-struggling team. Still, it means owners are that much more invested in a location and less likely to move a team elsewhere.
“If you look at L.A., it’s about the footprint around it,” Conway said, referencing Kroenke’s prolific real estate dealings around SoFi Stadium. “The owners going forward have spoken that it’s not just about the game-level revenue streams, it’s what you can do beyond gameday.”
NEXT STORY: The Tax Scam That Won’t Die