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The entertainment capitol of the world, Los Angeles, one of the most diverse metropolitan areas in the world, has something for everybody. Music, movies, soccer, sand volleyball, ping pong, and even chessboxing, if you can think of it, you can do it in L.A., unless you want to see an NFL game. Oddly enough, America's hub for the entertainment business lacks a representative from the country's most popular and profitable professional sport. The wheels are now in motion to change that, to return the NFL to L.A., likely very soon.
Los Angeles lost two NFL teams in the early 1990s when the Raiders and the Rams both failed to find stadium arrangements aligned with the emerging economic realities of the NFL. More specifically, both owners wanted stadiums with luxury boxes, a source of income exempt from revenue sharing and a way to eat up sections of a stadium with space not covered by the league's inflexible blackout rules. Al Davis and Georgia Frotiere also wanted public dollars to pay for those stadiums, at least a significant portion of them.
Economic realties have changed since then. The growth of the American and world economy in the years since Los Angeles lost the NFL created even more wealth and higher concentrations of it. NFL owners went from millionaires to billionaires. Football's popularity exploded, and league revenues followed suit. Many owners can now build and own their own stadiums, with a much smaller, less direct public investment. Owning the venue in which the team plays increases the value of a franchise and creates new revenue streams that bypass revenue sharing.
The stadium situation in Los Angeles today flipped the script by featuring stadium developers seeking NFL teams, rather than NFL owners demanding a stadium. Finding a willing seller is the biggest speed bump in professional football's return to L.A. In other words, it's inevitable.
Two Stadiums
The downtown stadium project being developed by Anschutz Entertainment Group looks like lead horse in the L.A. stadium race. AEG even has a twenty-year $700 million naming rights deal with Farmers Insurance for Farmers Field. In addition to being the permanent home of the NFL, Farmers Field and the L.A. Live entertainment complex it would anchor could host a multitude of other events, including the NCAA Final Four.
Whispers that the league and others prefer the downtown site abound; however, significant concerns have been expressed about the project limiting the profitability of a team. First, few believe that the costs associated with stadium debt and relocation fees could be easily recouped, limiting a team's profitability in a market where it ought to skyrocket. Second, AEG wants to buy equity in the relocating team at a steeply discounted rate. They have reportedly offered $250 million for 50 percent of a team. Not only would that offset the cost of the development for AEG, it would give them a very lucrative investment that would likely double as soon as the team charter hit the ground at LAX.
With the certainty guaranteed by the new collective bargaining agreement and the league's television deals likely to increase significantly in 2014, teams can stay in the black regardless of their location. For any team to commit to Southland, it would need to significantly grow a team's valuation. The current pitch by AEG concerns owners and the league because it has the potential to take away from that jump in valuation.
If AEG can find a team, they could break ground on the stadium as soon as June 2012 with completion expected in 2016. Construction cannot start on the downtown project until AEG secures a long-term lease with a team to stay in L.A. Tim Leiweke, President and CEO of AEG, has been quite clear in his company's desire to move forward with the project in 2012, including relocating a team to L.A. in time for the 2012 NFL season. AEG is reportedly willing to push things back a year.
Outside of town, in the City of Industry, real estate developer Ed Roski is working on his own stadium project, dubbed Grand Crossing. Sensing favor for the downtown project, Roski recently dropped his demand for a no-cash stake in a relocating team. Roski's new pitch sweetens the pot. If a team commits to the Grand Crossing location, Roski will give them the 600 acres for the team to develop and finance a new stadium. At that point, the team would sell Roski a minority share of the team at market value.
Both projects have their advantages and disadvantages, and the competition between the two projects only gives the NFL more leverage to find the most favorable deal. Despite a sentimental attachment to downtown L.A., Roski's deal may now be the most attractive as it gives an NFL team the ability to develop and own its venue and reap all the revenues associated with it.
Still to be determined is which team will make the move?
Despite years of trying, the Spanos family has been unable to get a new stadium in downtown San Diego. They have yet to completely give up the effort, and would like to get something on the ballot for November 2012. Spanos and AEG have also engaged in preliminary talks about selling a stake in the team and moving to L.A., according Sam Farmer of the L.A. Times, who maintains that Spanos is the most likely option to relocate. AEG's opening bid for a discounted stake in the team has been an early stumbling block, but Farmer and most others believe that AEG will be willing to negotiate.
The death of Al Davis may have opened the door for a Raider relocation to Los Angeles, again. Inheritance taxes may ultimately drive Mark Davis to sell the family's 40 percent share in the franchise. Davis is under no rush to so, since there is no tax bill yet because the Davis share legally belongs to his mother. Mike Silver at Yahoo reported that Davis did have talks with AEG prior to his death, but those discussions went nowhere due to AEG's insistence for owning a share of the team. Selling a share of the team complicates their dalliance with both of the Los Angeles projects.
Oakland also has an option to share a Santa Clara stadium with the 49ers. However, Mike Silver reported that some NFL owners would prefer to have only one team in the Northern California market. The same report quotes one NFL owner who calls the Raiders "a very viable option" for Los Angeles.
The Rams have an out clause in their lease on the Edward Jones Dome, but it doesn't kick in until after the 2014 season. At that point, if the Dome is not among the top 25 percent of facilities in the league, the Rams can bolt.
As it stands now, the EJD would most certainly not be among the league's top facilities, and it would need significant renovations to get there. The St. Louis Convention and Visitors Commission has until February 2012 to present a plan to the Rams that would bring the facility into the league's top tier. Once the CVC presents a plan, the Rams can present a counter plan. If those plans differ significantly, an arbitrator can decide on one plan or work out a compromise plan. From there, the CVC can either choose to implement the plan or take a pass.
Timing is the major hurdle for the Rams and the L.A. stadium projects, but if things don't look good in February, Southern California could loom a bit larger. Another point worth remembering is that many question whether or not the Rams' owner, billionaire real estate developer Stan Kroenke, would be willing to cede any portion of the team or the chance to own his own stadium.
Their lease on the outdated Metrodome expires after this season. Vikings owner Zygi Wilf and the NFL are interested in plan to develop a stadium in suburban Ramsey County at the site of a former ammunition dump in Arden Hills.
Estimated to cost $1.1 billion, funding for the Arden Hills plan is split among three sources. The Vikings and the NFL are willing to pony up more than $400 million and pay for cost overruns. Ramsey County would pay $350 million from a half-cent sales tax increase, something that still faces opposition locally. The snag in the plans is at the state level, where Minnesota taxpayers are being asked to kick in $300 million.
Not-so veiled threats from the NFL and the Vikings prompted governor Mark Dayton to call for a special legislative session next month to figure out how to pay for the state's portion. Lawmakers on both sides of the aisle are reticent to most of the solutions presented thus far. The Vikings prefer the Arden Hills plan, and have been less willing to pony up as much money for alternative options.
Another popular option mentioned in the Los Angeles conversation, the Jaguars might be the most unlikely of the bunch. Jacksonville is locked into a lease on EverBank Field through 2029. Breaking that lease would carry prohibitive financial penalties. The only way to circumvent those penalties would be to prove three consecutive years of financial losses - impossible in today's NFL - and get judicial approval to leave the stadium. Jacksonville does struggle with ticket sales in a stadium that was built too large for the market. However, the NFL has allowed them to cover up some 10,000 seats, leaving roughly 65,000. The Jaguars have not been blacked out since 2009.
Another small market team, the Bills are always in the conversation for relocating a team to Los Angeles. The Bills are not being talked about much in the current conversation, but some outstanding issues will keep their name in the discussion.
Owner Ralph Wilson's age, 92, and declining health keep the Bills in the conversation. Right now, the team is working with state and local entities to get some needed renovations and extend the lease on Ralph Wilson Stadium. The lease expires in July of 2013. By all accounts, both sides sound confident that a deal will get worked out, even if they don't seem to be in hurry. Now that Buffalo is winning, selling tickets and suites might be even easier.
The NFL has tried to return to Los Angeles before, but the stars never aligned correctly to make that happen, mostly due to the lack of a suitable place to play. Now, stadium development hurdles have been cleared, for the most part, and would-be developers are now courting teams. It's just a matter of time before Los Angeles has every kind of entertainment residents desire, and the strange story of the NFL in L.A. begins a new chapter.