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A MULTI-USE SPORTS-ENTERTAINMENT MODEL FOR PROFITABLY BUILDING AND OPERATING A PROFESSIONAL SPORTS STADIUM/ARENA/TEAM/FRANCHISE
48 The Stadium Complex involves two financial models: first: financing the new construction or expansion/renovation of an older facility, and secondly: using the facility for on-going revenue generation year round. This proposal deals with new construction, although everything herein could be applied to an existing stadium for its renovation and/or expansion. And, if there is an existing stadium or arena, its management can be coordinated with the new one so that the older venue generates revenue as well.
49 A. 8 WAYS TO FINANCE STADIUM CONSTRUCTION With Minimal Public Dollars
- The prime owner would put up an amount up to $50 million (but might not have to)
- $25-50 million* by the public for infrastructure (i.e., state costs: land and site prep, streets and sewers, etc.)
- $100-200 million** by bonds backed by ticket and parking revenues
- $350-450 million*** by investors (the Dreamworks model raised $2 billion).
- $25-75**** million by a one cent or less tax for a set period in return for profit cut
- $150 million***** from lease bonds backed by state income tax on players salaries
- $25-50****** million plus from "anchors" & others in non-stadium part of complex
- $25-50******* million from interest of monies waiting to be spent
- $800 million to 1 Billion - total potential for the construction of the stadium complex
- * Amount to be determined by design estimates of total involved
- ** Amount to be determined by final costs number of the stadium complex
- *** Could also be tailored to include public investment participation to share the wealthwith others (fans, community), in order to take the sting off the notion that teams arewealthy and therefore unfair recipients of the money earned.(note: the model could cover even infrastructure costs, if it came to that)
- **** Amount depends on the jurisdiction and the negotiated profit sharing amount. Thisamount may not be part of the mix as sentiments shift from tax maximizing to tax cutting
- ***** This allows the state to set aside a specific portion of its general fund in the form of themoney from ball players income taxes and uses it to make payments on the money borrowedto apply toward building the stadium
- ****** Amount to be determined by extent of development and final negotiations with anchors NOTE they will finance the construction of their part of the complex
- ******* Amount depends on formulas used for receipt and expensing of items 1-7
51. Re 8: not the final number (see #53 below).
52. Estimated Revenues of this model: as this model will demonstrate, the complex could generate over $200 million/year, to start.
53. As noted: 8: not the final number: more have been presented to www.vikingsstadium.com More will be requested from fans once this process is implemented. By the time we are finished, we could well have a dozen or more workable financing methods to help meet the goal of financing without adding debt. This could happen for any team using this model. Here is what we said on the site, when it was put up in 1999, to which fans have been responding:
54. We at www.vikingsstadium.com believe that by working together, we can develop a new financial model which will satisfy the owners who need to make a profit, the taxpayers who don't want to subsidize [a game that generates millions], the small businesses and others who profit from the games, and, of course the fans for whom the Vikings have long been a cherished part of their lives. We are inviting all the key players in the debate both for and against a new stadium to join with us in working to put our heads together to create a new financial paradigm that works for Minnesota and in turn works for the Vikings which means it will work for the fans.
55. We believe that there are enough examples out there to provide Minnesota with a model which will work for all concerned, from the taxpayers, that is all citizens, to the legislators trying to develop a public-private partnership that will satisfy all, to the owners who will need to show a profit, to the coaches who need to develop a competitive team, to the players on the field, and to the fans in the stands and watching on TV and listening to the radio.
56. As fans, we're thinking football. We have also geared up for an exciting 1999 season. At the same time, we would like to begin a conversation about the next home for Minnesota Viking football. We believe there is a stadium solution that will benefit not only the team, but also fans and the state of Minnesota. We are committed, cooperatively to "Creating a solution to continue a tradition."
57. We invite you to submit your suggestions. We will sift through the suggestions as we continue to develop our own research, with the goal to come up with a means and mechanism to achieve a win-win "conflict resolution" for all sides concerned.
58. It is ALSO important to note that this model will work even if ALL a team follows are the 8 financing mechanisms, and ignores most of the 40ways to generate revenues in 26 categories, and if it ignores all or most of the other ingredients in this models recipe for success (team operations, player compensation, communications, and the Internet). BUT, if the team does adopt these, the team and the community will gain far more.
59. Note also: There are numerous investment funds set up that are trolling in the Far East with big funds to buy up companies that tanked during their downturn; their turn-arounds, generate enormous returns on their investments, requiring them to find investments like well conceived stadium complexes to soften their tax burden.
60. And: the Web portal could be established as an Internet IPO to generate revenues for construction and/or on-going operations (the airlines have made more profit from their Internet reservation IPOs than they have from running their airlines). See Appendices B and J.
61. In terms of public funding, if needed (considered a worst case scenario):
- Public bonds backed by users fees (e.g., ticket and parking fees)
- Directing stadium and team related sales taxes and income taxes of players and coaches to the stadium bonds, as those revenues would not exist if not for the team being in town
NOTE: The current home of the Minnesota Vikings (pro-football), Twins (baseball), and Gophers (college football and baseball), is the Hubert H. Humphrey Metrodome, which opened in 1982, and which provides the exception to the rule and shows that a stadium can be self supporting. "It is financially self-supporting. It is the only public stadium in the country that does not rely on a continuing tax subsidy to finance operations, maintenance or debt payments." For a community with this tradition, tax dollars dont work. BUT the stadium no longer fits into current economic realities. This model will enable all three users to build their own stadiums PLUS enable the Metrodome to continue in a profitable mode (until it is torn down) by cooperating with its former tenants in coordinating events.
Re the Twins: we arent sure the situation with the new stadium proposed for the MLB Minnesota Twins. However, as the Twins web site notes, "the bill in legislation calls for an open air stadium to be built using no new taxes." Perhaps it the guarantee desired by the Twins that is the draw back. We believe if the Twins used this model, they would not hesitate." The citizen site for the Twins, http://www.mn4mlb.org/homeletter.htm expresses its concern for the Twins just as ours does for the Vikings, biwww.vikingsstadium.com . Our model suggests that Twins owner Carl Pohlad need not put up a full $150 million for his part of the new stadium.
62 Additional research for additional ideas to add to the mix can be obtained from:
- 9-18-00 Forbes Magazine piece on Daniel Snyder, owner of the Washington Redskins: http://www.forbes.com/forbes/00/0918/6608092a.htm
- Analysis already done in reports of the NFL, and local teams.
- For example, take one location: the Twin Cities: studies have been done by the NFL, the Vikings, the Twins, the Timberwolves, and the Wild, as well as local jurisdictional bodies. These are all studies worth paying attention to.
- These studies cover finance and operations/maintenance figures. For example, using Minnesota as an example again: the $130 million public finance plan for the new National Hockey League arena which was developed by Pam Wheelock, former planning and economic development director for St. Paul, MN, for the Minnesota Wild. All of these studies have ideas that could be brought to bear on financing the new stadium.
63 Etc. "Etc" is an important concept for it leaves the door open to new ideas and new understanding of the situation as it unfolds in real time, in real life. Many workable suggestions have come in from fans to the www.vikingsstadium.com site. And a ticket promotion contest awarding best ideas submitted would generate even more as well as deliver tremendous PR in support of the stadium.
64 B. STADIUM COMPLEX SYNERGIES FOR GENERATING ON-GOING REVENUES/PROFITS/FAN SUPPORT: 40 ways to generate revenue in 26 revenue-generating categories, with examples (see I.B.)
65 Introduction: in general terms: according to the 9-18-99 issue of Sporting News, a football team brings $1 billion/year in direct benefits to the teams community, and an additional $1 billion/year in indirect benefits. This includes but is not limited to: hotels, restaurants, travel industry, nightclubs, department stores, etc., and all of the 3rd and 4th tier companies making money by printing/making/ selling licensed programs, figurines, memorabilia, etc., whether related to the team or not, etc.
66 In specific terms: Stadium area itemized sources of revenue/profit generation :
67 1. Permanent seat licenses
68 2. Luxury boxes
69 3. Luxury suites
70 4. Club seats
71 5. Ticket sales
72 6. Parking
73 7. Signage (space for signs of corporate advertisers)
74 8. Concessions
75 9. NFL shared common revenues from TV and licensing ($65 million in 1999).
76 10. Example: The new Cleveland Browns cover annual debt payments in just TWO ways. The cost of their stadium was $280 million. The cost of their annual debt payments is $8 million. This is covered by just TWO revenue categories: $30 million, through (1) 148 luxury boxes and (2) signage
77 11. Use of Stadium as Center of on-going revenue generation outside tickets and signage
a. Retail stores
b. Sell merchandize over the Internet
c. Beverage maker "pouring rights"
d. Establish an official "charge card"
e. Corporate logos displayed on stadium
f. Outside promotional deals
78 12. General Co-branding benefit for corporate partners (alliances): the opportunity to get their message out on both the grounds as fans/visitors come and go and on TV through signage inside.
79 13. Specific Co-Branding: As noted above, when Jerry Jones took over the DallasCowboys, they were losing $1 million/month when he took over). Next is a listof some of the new methods he introduced to generate on-going income (See9/20/00 issue of Forbes):
a. Chain of retail stores (Dallas has chain of 12; sold $15 million of goods last year)
b. Selling Cowboy merchandise on the Internet
c. Wiring his training camp with cameras to provide real time Internet coverage of preseason practices for the team's fans
d. "Pouring rights" to Pepsi at Texas Stadium
e. American Express as official Cowboys charge card
f. $20 million deal with Nike to display its logo in Texas Stadium
g. $24 million/year from outside promotional deals, more than three times as much as any other team
h. Leads the league in stadium gimmicks that lie outside the league's revenue-sharing agreement
i. As a result, Jones added $100-200 million value to team's worth
80 Note: This article was entitled: COWBOY CAPITALISM. And although the sub-head read "The NFL owners are playing fast and loose with debt. Will your team win -- or get knocked out of the game?" It points out exactly how to play solid and profitably, and makes our case for the need to develop new revenue streams. As the article points out, "the new breed" is dancing on the graves of the old "socialist" sports ownership model. Whether this is a correct interpretation or not is up for dispute. What is not up for dispute is the dollars generated. It can be done. This would work for any team in any city.
81. Also note these key points from the article:
- The dollar amounts will get greater, not smaller
- Many teams are carrying staggering mortgages without corresponding revenue streams to generate payments. These new ideas are providing significant new revenues.
- (Six more teams to have new stadiums by 2002
- "To those who can't generate new revenue streams or get taxpayers to help, the only options may be to move or sell." Why go through all of that when this Model gives what owners need and want, without that debt?.
82 In specific terms: in stadium complex but not in the stadium itself: itemized sources for further expanding the mixed-use base for revenue/profit generation
83 14. A full service studio (film, video, DVD, TV, multi-media)
- a. broadcast capability
- b. recording studio
- c. sound stage/shooting capability
- d. Others as later identified, which would generate additional revenue for the team in the same space,
- e. These would occur simultaneously, if need be, with other events
84 15. With all of the electronic gear, etc., the professional recording studio can generate revenues as a recording venue.
85 16. The professional broadcasting studio can be used to produce and broadcast sports programs for syndication on cable TV. Stations need content. The team can be a content provider.
86 17. The sound stage can be used to shoot theatrical, TV, music video, and advertising film.
87 18. The full service aspect allows the facility to generate revenues by serving as a pre- and post-production facility for film, TV, and music projects.
88 19. Given similar facilities in other cities, the stadium facility can engage in partnerships and alliances with other facilities.
89 20. Partner with a world-wide communications company, especially one with many TV and radio stations, to serve as a broadcast center (an excellent candidate would be any such company owned or participated in by the owner).
90 21. Build an office building as part of the new complex, whether above ground or under ground. Many companies would enjoy the prestigious location. This would also be a good location for businesses of the owner, partners, and/or investors. If built by a partner or in alliance, the partner firm or company in alliance would finance the construction.
91 22. A commercial/housing/shopping complex:
- (a) Stores for shopping
- (b) Restaurants and upscale bars
- (c) Office tower (or underground)
- (d) Entertainment centers/venues
- (e) Condominiums above stores and offices
- (f) Moderate priced housing on fringe areas as trade off for tax benefits
- (negotiate such that this housing is to be for workers at the complex)
- (g) Incubation of new businesses
- (h) Parking, etc.
NOTE: tenants would finance their own areas.
92 23. A movie theatre multi-plex (possibly closed on game day Sunday afternoons)
93 In specific terms: Stadium area NON-TEAM transient users whose use of the stadium will generate more revenue/profit generation (to be coordinated with the previous venue, if the previous venue is not owned by the team, if the previous venue is not torn down or until it is torn down):
94 24. Any number of sports shows could originate there, both for local TV/cable as well as nationwide and satellite worldwide.
95 25. Large show productions such as touring, including but not limited to:
- Rock, pop, and other music concerts
- Touring shows such as Ice shows, Circuses, and Rodeos
- Prestige sports events such as Super Bowl, Final Four
- Community gatherings, including occasional or scheduled college and high school sports
96 26. Etc. "Etc" is an important concept for it leaves the door open to new ideas and new understanding of the situation as it unfolds in real time, in real life.
97 C. PUBLIC-PRIVATE PARTNERSHIPS
98 1. A public facility, with use to be determined, with such candidates (who finance their involvement) as
- (a) A community center
- (b) A zoo annex
- (c) An aquarium annex
- (d) A high school
- (e) A training/trade/electronics/Internet school
- (f) Etc.
99 2. Involve a wide range of business groups, including Minority Business Enterprises, both for their expertise and for their extension of the fan base. For example, there are currently 2 million minority-owned firms generating more than $205 billion annually, who represent a non-white demographic that will become over 50% of the population by 2060, which will have a collective spending of $3 trillion in disposable income over the next 45 years.
100. 3. Involve the non-profit community of schools, community centers, and the faith community, by arranging participation by players, not only because it is the right thing to do (giving back to the community is only fair), but because it enhances the brand image and corporate bottom line by generating free publicity, reinforcing the high status of the sport, and keeps the community favorably disposed towards the team and its organization.
101 4. Etc. "Etc" is an important concept for it leaves the door open to new ideas and new understanding of the situation as it unfolds in real time, in real life.
102 D. STRATEGIC GAME PLAN FOR SECURING FUNDING
103 1. Flexible stadium approach: now the fun begins
 Manhattan Project approach (all parts at once)plan
 Fan huddles (focus groups) for input on: likes and dislikes, "dream" stadium, design, seating, restaurants, rest rooms, parking, roof, etc. Have fan financing suggestion contest
 Financing, including mixed use tenants letters of intent
b. Focus of:
 lobbying to Legislators (see 4.g. below)approach
 PR to fans
 structuring design and financing with architects and investors
c. Goals:  Public funding (state, county, and/or city tiny tax) scenarios
 Partial public funding team repay bonds, following a formula over agreed period of time (10-15 years)
 Minimal public funding: streets and sewers only
 No public funding; totally team financed
d. Dreamworks  Raised $2 billion for Spielberg, Katzenbach, Geffen (Dream-
Model works SKG); the three own and have the only voting shares
 Investors get share of profits after first 65% goes to S, K, & G
 Investors get lunch with Spielberg, visit movie sets (Paul Allen is one of their investors)
104 2. Dreamworks Model applied to the an NFL stadium complex (if 4.c.[1-3] dont succeed)
a. Stadium owned and controlled by the team
b. Investors not loans, with both tangible returns (set a percentage of revenue, not an actual amount) and intangible returns (have a suite to share; have a "do" at training camp; hobnob with owner, coach, players).
c. Model is possible later for any other local group wanting to buy the local team whenever it is to be sold (could be used to allow for higher buy out price, greater return to the owner, and to give a "right of first refusal" regarding any other offer), while also removing any ceiling barrier in terms of amount, as it is invested, not loaned). 105 3. Additional stadium suggestions
a. Retractable dome seating 70,000 to 110,000
b. Higher tier of seats like projected balcony over seats below
c. Two rows of stadium suites, one higher, one lower, with a differential in amenities and appointments and costs.
106 4. Reason for flexibility from public financing to little or no public financing (the "secret" that is not so secret: tax funding is really not needed
a. 60 Minutes, Mike Wallace interview with Archer Daniel Midlands CEO:
- Dont need to contribute to candidates
- Dont buy influence; will do what will do, regardless of party
- Dont need government subsidies, but will take as long as that is part of the game and others are getting them
b. Nonetheless, still try for tax dollar support, and still be ready with additional concessions in order to move smoothly and face saving to the next level (partial public funding paid back with little or no interest), still be ready with additional concessions in order to move smoothly and face saving to the next level (public funding only for streets and sewers).
c. Ultimate fallback position: financing without using tax dollars
d. Wooing the legislature and county governments: to obtain whatever support the final plan calls for in terms of location, mixed use allowance, ownership and control, and appropriate public funding (infrastructure, non-taxed user bonds, etc.)
e. Lunch with owner and coach of key influencers in the city/state/region, business leaders, elected officials, players, etc., one and two at a time. Treat them as small focus groups; listen to their needs, share owner and coachs needs. Follow Coveys Habit #5: "Seek first to understand, then be understood"
f. Invite them to invite others to small group discussions with owner Key influencerKey opinion makers
g. Include owners of newspapers and TV/radio stations Include CEOs of any of the Fortune 500 in the region Include the established money people and the "new rich" Include the former owners Include Presidents of the local major colleges and universities
107 5. Downshift to Scenarios 2-4 (I.D.1.c.) if difficulties are encountered
a. From (1) full tax support to (2) partial to (3) partial with payback to (4) little or none
b. Flexible re mixed use, in order to include favorite wishes of the city/region
c. Flexible re financing mechanisms with state as long as team retains control
d. Key is to get them to buy into the need for the stadium; then work out the details of how much public funding (Plan 1-4, I.D.1.c.)
e. Flexibility allows switch in flow to avoid lengthy legislative road and legal suits and their time delays measured in years
f. This is particularly true if the public hits the "dont fund billionaire owners and millionaire players" attitude as the Canadians and Floridians.
108 6. Fall back position: the knowledge that tax dollars are not needed.
109 7. Etc. "Etc" is an important concept for it leaves the door open to new ideas and new understanding of the situation as it unfolds in real time, in real life.