Giants, Cowboy Workers, Governments May Suffer If There Is an NFL Lockout
Governments that subsidized $7 billion of National Football League stadium construction will be the biggest losers if the New York Giants, Dallas Cowboys and other teams lock out players March 4.
Mayors and city officials of Houston, Miami, Minneapolis, San Diego and Kansas City, Missouri, have written the NFL asking that it avoid a work stoppage that could cost the entire season and millions in revenue and wages for workers at stadiums, hotels, restaurants and other businesses that depend on games.
Governments that financed 65 percent of new stadiums in the past 20 years would receive an unexpected blow at a time when tight budgets are forcing them to dismiss teachers and firefighters and cut back other government services.
“We don’t want to lose a dime,” said Tony Young, San Diego City Council president, who said by telephone that the NFL’s Chargers generate at least $100 million of local spending. “We’re talking about janitors, parking-lot attendants and catering crews, people who are already struggling.”
The 2011 regular season could be in jeopardy if “serious negotiations” don’t begin soon, NFL Commissioner Roger Goodell said in a commentary posted on the NFLlabor.com website last week. The league may lose $1 billion in ticket sales if it takes until September to reach an agreement, according to Eric Grubman, executive vice president for business operations. Each week of lost games would cost the league about $400 million.
Opting Out
Owners in the U.S.’s most-watched television sport voted in 2008 to opt out of the labor deal with players as of next week, saying it didn’t account for costs such as those for building stadiums. Talks have ranged from dividing revenue and expanding the season to 18 games from 16, to a rookie salary cap and health-care benefits. Both sides agreed Feb. 17 to negotiations run by the Federal Mediation and Conciliation Service.
Bondholders of both corporate and municipal debt tied to stadiums and other infrastructure would be protected by reserves of as much as 18 months of revenue or the proceeds of hotel and motel taxes pledged to repay bonds sold by municipalities. The rating company Standard & Poor’s said in 2008 that it didn’t expect the NFL owners’ rejection of the current contract to hurt repayment of seven stadium-related debt issues.
“If NFL games were not played, the stadium projects should have sufficient liquidity to withstand a prolonged labor action,” S&P’s Jodi E. Hecht and Craig Parmelee, both New York- based analysts, said in a bulletin.
Cowboy Stadium Bonds
As the deadline for an agreement has approached, prices of bonds that the city of Arlington, Texas, issued to help build a new stadium for the Dallas Cowboys have risen, according to data compiled by Bloomberg. On Feb. 23 the bonds traded at an average of 98.4 cents on the dollar, up from 93.8 cents on Jan. 19, driving the yield down to 5.14 percent from 5.55 percent.
Sal Galatioto, who has helped structure bond deals for teams including the New York Giants, said he doesn’t expect stadium bondholders to be hurt because of reserves and the fact that the national TV contract would keep paying the NFL during a work stoppage.
“You’re making plenty of money because you have no expenses,” said Galatioto, the president of Galatioto Sports Partners LLC in New York. “The bondholders would be fine.”
For NFL cities, the teams add value to the property-tax base and labor pool, said N. Edward Coulson, an economist with Pennsylvania State University in University Park, who has studied the value of sports franchises.
“People are willing to pay more to live in a town with an NFL team,” Coulson said.
Sought-After Franchises
The value leads government officials to offer subsidies as incentives to help owners finance stadiums. In Houston, bonds for the Houston Texans’ Reliant Stadium are backed in part by taxes on hotel and car rentals. Alcohol and tobacco taxes helped fund the Cleveland Browns’ stadium.
Subsidies in the Ohio city, which dismissed firefighters, and in New Orleans, which has struggled to rebuild after Hurricane Katrina in 2005, would continue to be paid even if localities are cut off from the economic benefits expected from games, according to official documents and reports. Yet the cities would lose the economic benefits generated by the events.
In Minneapolis, the Minnesota Vikings’ regular-season games generate $6 million of spending that “support a wide variety of good jobs for workers in the hospitality, hotel and service industries,” wrote Mayor R.T. Rybak in a Feb. 3 letter to Goodell. Playoff games generate $9 million, the letter said.
Metrodome Situation
The city has no guarantee the Vikings will play in the Metrodome after the roof collapsed in December, leaving the team to host games at the University of Minnesota’s TCF Bank stadium.
Houston Mayor Annise Parker said in her Feb. 8 letter to Goodell that the Houston Texans’ games in Reliant Stadium generate $250 million of economic activity in restaurants and other entertainment outlets.
“Any decline in these revenues would hurt working families and the city as a whole, further compounding the difficulties we are facing due to the ongoing economic downturn,” Parker wrote.
As businesses and governments that depend directly on games lose income, the impact on the economy in most NFL cities will be minimal as fans spend on other activities, said Andrew Zimbalist, who teaches sports economics at Smith College in Northampton, Massachusetts.
“It may be devastating to the psyche of a community, but not the economy,” Zimbalist said. “Instead of spending money at the stadium, fans will go bowling or do something else.”
