No Easy Fix for Saints

Owner Tom Benson of the New Orleans Saints drew a line in the sand in late April, when the cash-strapped state of Louisiana balked at paying the next installment in a decade-long string of subsidies totaling $186 million.

Benson demanded that the state, which owns the Superdome where his team then was playing, pay the inducement if the team was to stay in New Orleans.

The Louisiana Stadium & Exposition District, which operates the Superdome, has had to borrow to make good on the two most recent Saint subsidies -- one loan coming from a state economic development agency that will play a role in resuscitating Louisiana’s hurricane-ravaged economy.

Benson knew that he enjoyed significant leverage when it came to dealing with the state. Forbes magazine recently set the value of the Saints at $718 million, higher than 11 other NFL teams, including the San Diego Chargers and the San Francisco 49ers, because the franchise is viewed as a likely candidate to move. And, as is the case with professional athletes, free agents can use that status to drive up their value in the marketplace.

Then Katrina hit, the levees broke and Benson’s line in the sand was washed away by the floodwaters that drowned New Orleans and plunged Louisiana into uncertainty. Billions of dollars in federal emergency funding is being poured into the state, and Baton Rouge, the state capital, is starting to fathom the economic pain the disaster will leave in its wake.

“At this point, the Saints have got to be a low priority for the city and the state,” said James Richardson, an economics professor and director of Louisiana State University’s Public Administration Institute. “The overall budget of the state will certainly take a tremendous hit because we’ve lost about 30% of our businesses.”

However, Richardson quickly added, “No governor wants to be known as the governor who lost the Saints.”

Benson and the Saints, meanwhile, are stuck in an unusual and uncomfortable holding pattern. The NFL transferred the team’s home opener to the opponents’ home field. The rest of the team’s home games will move to other fields, most likely at San Antonio’s Alamodome or LSU.

Meanwhile, hazardous waste crews are being assembled to clean up the Superdome so engineers and architects can safely assess damage done by wind, rain and vandals. It could take two months to complete a comprehensive damage report.

The Louisiana Stadium & Exposition District suggested Tuesday in a preliminary report that it could cost more than $400 million to repair damage to the dome, as well as to deal with wind and water damage at the nearby sports arena that is home to the NBA’s Hornets.

The uncertainty hasn’t deterred Saint fans from pressuring politicians, Benson and the NFL to guarantee that their team will remain in New Orleans.

The Times-Picayune newspaper spoke for many football fans who lost homes, loved ones and livelihoods when it recently wrote: “Before Katrina, Saints’ fans wanted their team to stay. Now, they need it to stay.”

Benson’s deal with the state includes free rent at the Superdome and the annual subsidies for 10 years, through 2011. The contract allows Benson to walk away from the Superdome after this season but only if he repays $81 million he has received in subsidies. Or, the state can get out of the agreement after the 2008 season, in which case the Saints could leave without a financial penalty.

Benson’s grumbling over the years about the 30-year-old Superdome’s lack of amenities and his inability to compete with richer clubs has fueled speculation that he wants to move the franchise out of town.

In May, Benson told reporters that the Superdome was an “outstanding” facility when it was built. “Today it’s not,” he added. “We’ve got a lot of problems there. But hey, let’s get time to work it out. Let’s get a great football team on the field, then we’ll deal with that problem when the time comes.”

According to documents introduced during the Oakland Raiders’ long-running lawsuit against the NFL, the Saints lost $849,000 in 1999, and Benson maintains that the state subsidy is necessary.

The Superdome and New Orleans are relatively weak when it comes to revenue streams -- stadium naming rights fees, advertising revenue and luxury boxes and premium seating sections -- that franchise owners now demand. Economic uncertainties caused by the disaster will only make it harder for Benson to make a go of it in the Superdome, sports industry observers said.

Louisiana had financial challenges long before Katrina hit. Gov. Kathleen Babineaux Blanco earlier this year pushed Benson to renegotiate the subsidies in light of her state’s growing budget deficits.

The payments approved by Blanco’s predecessor, Mike Foster, were supposed to be covered by a hotel tax, but that revenue stream unexpectedly dried up when tourism slumped after Sept. 11, 2001.

Blanco had proposed that the state pay most of a $170-million package that would add premium seating and other improvements to the Superdome, helping the franchise bolster revenue. In return, the state wanted Benson to change the subsidy formula.

Benson said no, arguing that it was “in everyone’s best interest to continue operating under the existing agreement.”

Blanco also stood firm.

“I could not in good conscience agree to a deal that might, at the taxpayers’ expense, only add to the wealth of a very profitable team,” she said.

The problems created by the devastating hurricane and subsequent flooding have dramatically reshaped the economic picture for both Benson and the state.

State officials will feel pressure to do what’s necessary to keep the team, but Benson and the NFL will be forced to consider their own hard economic realities before determining whether the team will stay put.

Both camps risk the wrath of fans, for whom the Saints are as much a part of the Big Easy as jazz on Bourbon Street and beignets at Cafe Du Monde.

Sports industry observers agree that the state, the franchise and league are caught between a rock and a hard place.

The NFL has long viewed New Orleans as a marginal location for a franchise. Its population is relatively small and there is a dearth of big companies to lease luxury boxes that franchise owners say they must fill to generate profits.

Given all of the uncertainties, however, many sports industry observers say it is too early for Benson or his fellow franchise owners to state long-term intentions.

“It’s absolutely naive, in the absence of a larger plan to deal with restoration of New Orleans and the surrounding community, for the NFL to be committing to anything right now,” said Maryland sports investment banker John Moag.

“But having said that, it’s also bad business, or would be bad business, to indicate that you’re going to leave the market.”

The saga of the Superdome also is proving to be a cautionary tale for other big league towns where civic leaders have dangled public funds to lure and keep professional sports franchises.

“This episode will lead to sober second thoughts,” said John J. Pitney Jr., a professor of government at Claremont McKenna College. “A number of cities have had bad experiences, and this catastrophe will serve as another reminder that sports franchises bring real costs and risks.”

Red McCombs, the former Minnesota Viking owner and a longtime associate of Benson, advises everyone involved to take a deep breath and adopt a long-term view.

“There will be people with different feelings as to what approach to take, and ultimately, there will be a resolution,” he said. “But as in most issues, there will never be a resolution that pleases everyone. I don’t know that Solomon would want to touch this one.”

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Even as crews continue to pull corpses from flooded streets and the evacuation process continues, life must go on for the Saints. Like other businesses that lost factories, storefronts, restaurants, hotels and warehouses, the Saints are -- or are supposed to be -- a money-making proposition.

Sports marketing consultant David Carter, however, offers a caveat:

“Everybody associated with the NFL is operating from a new playbook as of Katrina. The NFL, the Saints and any municipality that makes a run at [the franchise] has to be very careful that they’re not accused of engaging in the sports-marketing equivalent of looting.”

That message may resonate in cities that want the economic benefits associated with serving as interim homes for New Orleans’ professional sports teams.

Las Vegas Mayor Oscar Goodman acknowledged that he had talked to the NBA’s Hornets about temporary arena space but was quick to tell a local newspaper that it would be inappropriate to “take advantage of people while they’re down.”

San Antonio, which built the Alamodome in 1993 at a cost of $186 million in the hope of luring an NFL franchise, also is being cautious as it awaits word from the NFL on whether its dome will serve as a temporary home for the Saints.

Before Katrina, some civic leaders believed that their city had an inside track in luring the Saints because Benson made his fortune as a car dealer in San Antonio, where he still has a residence.

“It’s clear the only reason we’re talking about this at all is because the Superdome is out of commission,” said San Antonio Councilman Christopher “Chip” Haass. “And if something can be worked out so the Saints can play in Baton Rouge, we agree that it would be better for the Saints to play their home games in Louisiana.

“But if the NFL makes an offer, we’re ready to go. This would be an audition of sorts, if the opportunity is granted. It’s as if your city gets a preseason game, which is an opportunity to show that your city is an NFL-caliber city.”

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Moving a franchise to a temporary home won’t be easy.

“No franchise in pro sports has faced these kinds of issues before,” said Brad Humphries, a sports industry economist at the University of Illinois at Champaign.

Benson is talking about moving the team, coaches, management and office staff -- along with their families -- to San Antonio. Besides the logistics of housing hundreds of people, the franchise must sort through contractual obligations with sports-marketing partners. It also must arrange ticket refunds for thousands of fans who, under the best of circumstances, would be hard pressed to attend games in a distant stadium.

Benson is expected to lean on fellow franchise owners for financial support because he stands to lose revenue from food and beverage sales, luxury suites, stadium signage -- the sources that local franchises favor because, unlike television revenue, it isn’t generally split with other franchise owners.

NFL owners have a long history of sharing the lucrative television broadcast rights package, a process that benefits the league’s weakest franchises.

“It wouldn’t be unrealistic for the league to take the next step and create some program that involves sharing the downside,” McCombs said. “The NFL business model isn’t perfect, but it’s the best in the sports world when it comes to meeting emergencies and putting teams on a belly-to-belly basis.”

Moag, whose clients include the Rose Bowl in Pasadena, suspects that Benson, a highly successful businessman outside of professional football, will want to “wait and see how it all plays out, whether or not there’s a stadium to be played in, or a new one that’s part of a reconstruction plan. And more important, he has to assess the market to see what it’s going to look like after Katrina.”

Even if the Superdome is ready for the 2006 season, it’s uncertain whether surrounding neighborhoods that now are under water will be ready to support a game, or that fans who have lost homes, relatives and livelihoods will be able to afford tickets. Companies struggling to regain their financial footing might not be ready to renew sports-marketing deals with the Saints, and businesses that have been leasing luxury suites might deem it inappropriate to engage in upscale entertainment.

The NFL also is feeling intense pressure to do right by New Orleans and the Gulf Coast. The league, for example, has a powerful economic stimulus in the Super Bowl but Super Bowl games are pledged to other cities through 2009.

And as Humphries, the sports economist, noted, “Who knows how long it will be before the city has the hotel capacity to host a Super Bowl?”

NFL spokesman Greg Aiello said that the NFL remained focused on “the decisions we have to make on the Saints -- where are they going to play the rest of their home games -- and how can we assist the team through this difficult season and also contribute to the relief effort. That’s our focus in dealing with the Saints right now.”

And the league’s longer-term goals?

“That has not been addressed in any way, shape or form,” Aiello said. “There are much more immediate priorities to deal with.”

Late in August, just days before Katrina roared ashore, Blanco and Benson agreed to meet later to resume negotiations. As structured, Louisiana is scheduled to pay Benson $15 million in 2006 -- money that Louisiana isn’t likely to have.

“We hope we can come to some amiable solution with the Saints,” said Rosemary Patterson, a member of the Superdome district’s board of directors. “But without the hotels, motels and parking revenue, our income has gone to zero.”