NFL Talks at Impasse Over Use of Public Funds

Recoiling from comments last week by National Football League Commissioner Paul Tagliabue indicating it would take more than $150 million in public money to bring a new team to Los Angeles, local leaders said Monday that they are frustrated by the league’s position and believe the talks have reached a dead end, if the league remains adamant.

“I don’t think there is any public support for public money to go into the stadium construction and/or the franchise fee,” said County Supervisor Zev Yaroslavsky, who is a member of the Coliseum Commission. “I don’t support it. I don’t know anyone who does.”

Others were similarly puzzled and irritated by the league’s latest actions, including Tagliabue’s comments and the decision by the owners last week in Chicago not to sign a nonbinding agreement on negotiating the football deal. That agreement, written by Gov. Gray Davis’ personal representative, investment banker Bill Chadwick, was signed by the local and state agencies with a stake in the talks, but was rejected by the NFL.

“They have said they don’t want to execute this agreement,” said Chadwick, who was said he was told by NFL officials last week that the league supported the deal, only to return home to Los Angeles and find that it had been rebuffed. “At this point, I don’t know what they do want to execute.”

The proposal that Chadwick helped draft called for the state to charge the new team $2.5 million to $5 million in annual rent and would have required the owners to build the stadium at Exposition Park at no cost to taxpayers.

At the same time, it would have given the owners such valuable perks as naming rights for the new stadium and the ability to hold 50 events a year there for 30 years. And it pledged to find public or nonprofit sources for money to build more than 15,000 parking spaces at the park.

If the deal drafted by Chadwick is not enough for the NFL, local officials said, then the league needs to say precisely what it wants to make the deal happen.

No easy answers were forthcoming, however. A spokesman for the league would say only that Tagliabue and other league officials and owners do not believe the economics of the deal Chadwick proposed will work.

“We’re not willing to do this under conditions that would put the team under distress,” the spokesman said.

At his news conference last week, Tagliabue was only slightly more specific.

“We feel clearly that the current levels of public money that are being discussed, which is really public bonding with private payback, are not sufficient to enable the economics of the team to work,” he said. “It wouldn’t work either for the owners or for the fans because you couldn’t field a competitive team.”

Beneath the political tussle is a complicated debate over the wisdom of an NFL investment and of who should bear the costs for it.

Some observers note that the overall package--the franchise fee plus building a stadium--will cost about $900 million and return about $25 million to $30 million a year in revenue to the new owner. In fact, one set of calculations circulating among NFL owners indicates that the new team could post a $10-million annual loss.

Even if the team were to make money, league officials worry it would probably be a paltry return and one that would leave the new team without the resources to compete. That’s because the league is concerned that an owner strapped for cash would skimp on salaries or signing bonuses, which are key to attracting top talent. That eventually could cause the new team to lose games and erode fan interest in the franchise.

Others, however, note that there is another value to the team: its likely appreciation. And when that’s taken into account, some observers believe that investing in a football team does not seem nearly so unrewarding.

After all, if the team costs $500 million today, but is worth $1 billion in 10 years, that changes the economics and makes it far more feasible, they say.

Advocates of that analysis compare it to investing in an apartment building. An investor in such a property puts some money down for the building, and expects to collect a certain amount in rent from tenants. Over the course of 10 years, the rent might or might not make the owner wealthy. But if the owner bought the building for $10 million and sold it for $20 million, that alone would represent a smart business decision.

Still another fundamental conflict is over how to view the parking for the new team.

Chadwick has proposed having the state government, through a series of bond measures, build 15,000 parking spaces at Exposition Park. That would satisfy the league’s demands for parking there, but it comes with a hitch.

If the state were to build the parking, the state would own it and would take all the money that it produces to repay the bonds used to build the structures. That would relieve the new owners of the debt from parking, but it also would deny them the revenue from it.

At the same time, the state is proposing to impose a tax on tickets sold for Coliseum events. That too would be used to pay for the parking structures demanded by the league, but it represents yet another nick in the potential flow of money to the team and thus potentially would erode its ability to compete.

Looking at those theoretical balance sheets, Tagliabue says the league needs more. He wants the government--presumably the state government, since neither the city nor the county have much to give--to help pay for the stadium itself.

That would relieve the owner of some of the $400 million or so to be invested, allowing more to be spent buying the franchise from the NFL.

But as Chadwick analyzes the same numbers, he warns that he’s not sure he can sell the public on more, particularly if the perception is that public money is to go toward allowing billionaires to spend less, while the league boosts its franchise fee.

“I think that’s a real challenge, very difficult,” he said. “It’s much more likely that the public would be willing to participate in the infrastructure that would benefit the community generally, including the museums and other tenants at Exposition Park.”

At City Hall, one official was more emphatic: “This is blood from a turnip.”

Critics of the NFL’s continuing insistence on public money accuse the league of overlooking certain benefits that would come with bringing a team to the Coliseum and to Los Angeles that make the situation different from that in other cities.

Exposition Park, where the new team would play, already is undergoing a significant renaissance. The California Science Center is expanding and attracting millions of visitors, a new school is planned for the property and a host of other improvements are underway or anticipated. Most of those improvements are being made with public money, but local leaders complain that the NFL does not include those investments as being relevant to the football discussions.

Finally, there is the potentially huge issue of naming rights for the new stadium. Under Chadwick’s proposal, any money raised by naming the stadium would go to the new owners, and many observers predict that will come to well over $100 million.

“This isn’t some stadium in Jacksonville or Charlotte,” Yaroslavsky said of Chadwick’s proposal. “This is the Los Angeles Memorial Coliseum. This was the home to two Olympics. . . . This is the second most famous coliseum in the world, and we’re giving the naming rights away.”