Jan 17


The hidden costs of housing the Bills

The cost of a new stadium doesn't end with subsidies to cover construction costs. The current lease saddles taxpayers with $13 million a year in expenses, right down to paying for ushers.

There was a time when Erie County made money from Buffalo Bills games in Orchard Park. 

From the opening of the football stadium in 1973 through 1997, the county collected millions of dollars from parking, concessions and the sale of stadium naming rights.

No more. 

Erie County in 1998 made major concessions that gave all the revenue from parking, concessions and naming rights to the Bills. 

The county and New York State also agreed to take on a host of expenses previously covered by the Bills, ranging from stadium maintenance to the cost of ushers and ticket takers.

The bottom line: the county surrendered more than $1.3 million a year in revenue and picked up, along with the state, about $6 million annually in expenses. That was on top of $63 million in stadium improvements. 

Twenty-three years later, the county is collecting rent of about $900,000 a year, but the share of expenses it covers, along with the state, is approaching $13 million annually. If the terms of the current lease are carried forward in a new agreement, the cost to taxpayers over 30 years before rent would be $390 million, not factoring in inflation.

Most of the key financial components of the 1998 lease remained unchanged in the current agreement, which was negotiated in 2013. That deal was a starting point in ongoing negotiations for a new stadium. The Bills are demanding an open-air, 60,000-seat facility in Orchard Park. The estimated cost is $1.4 billion. Much — if not most of it — would be covered by taxpayers. 

The basic terms of the current lease, if carried forward in a new agreement, would be somewhat more favorable to the Bills than those negotiated in other cities that have built venues over the past decade.

In each case, teams keep all revenue from parking, concessions and naming rights. But most are responsible for expenses such as stadium maintenance and game day expenses. And several pay significant rent, as much as the $8.5 million a year the Minnesota Vikings pay. 

The Bills current lease “is not much worse than a lot of the other leases out there, but given that the average lease is pretty bad, that’s not really a compliment,” said Neil deMause, editor of Field of Schemes, a website that covers public subsidies used to build stadiums and arenas. 

Givebacks in 1998

The county agreed to build the Bills current stadium in response to owner Ralph C. Wilson’s unhappiness with the team’s original home, War Memorial Stadium. Rich Stadium, as it was originally known, was built for $23 million.

By the late 1990s, Wilson was again restless. He said Buffalo’s small market size and limitations of the stadium put the team at a competitive disadvantage. He wanted more luxury suites and a larger share of the game day revenues. 

While he was on record saying he wanted the Bills to stay in Buffalo as long as he was alive, Wilson also suggested the team might have to move to another city to remain viable. 

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Against that backdrop, the team and Erie County, under County Executive Dennis Gorski, renegotiated the stadium lease in the late 1990s. 

Wilson got what he wanted.

The Bills gained control of all stadium revenues — parking, concessions and naming rights. The county and New York state agreed to take on most stadium-related expenses. 

Under the lease, the state agreed to pay $63 million for a new training facility and new suites and club seating. The state also provided the Bills with $3 million per year as “working capital” and $14.6 million in other costs during the first year of the lease to cover cost overruns.

In his book, Beyond the Xs and Os, Keeping the Bills in Buffalo, current Erie County Executive Mark Poloncarz estimated the 1998 lease cost taxpayers $214.3 million, including $122.9 million from the state and $91.3 million from the county.

In his book, Poloncarz said Gorski entered negotiations knowing, “no matter what he did otherwise, he would be the one taking the blame if the Bills left town.”  

“What is difficult to quantify is how much the cost to the region would have been if the team moved to another city back in 1998,” Poloncarz wrote. 

“Economically, the impact of losing the team would not be the same as when Bethlehem Steel closed up its operations in my hometown of Lackawanna. However, the impact on the region’s psyche would be substantial and a significant blow to the city’s view nationwide.”

Poloncarz finds himself in a similar position today.

Concessions by county 

Here’s what the county gave up in the 1998 deal:

  • Naming rights, which in 1973 garnered the county $60,000 a year. (They presently fetch a reported $6 million.)
  • Its half of parking and concessions, which at the time of the deal totaled $1.3 million annually.
  • Unspecified revenue from the sale of permits to merchandise vendors who hawked their goods in the stadium parking lots.

The lease also obligated the county to make an annual capital payment to help maintain the stadium, a cost that averaged $2.6 million per year, or $38.2 million over the course of the agreement. 

The county also agreed to start paying a capped amount for game day and other operating expenses, which averaged about $3.5 million per year, resulting in a total cost of more than $53 million over the full term of the lease. 

Those terms didn’t change when the Bills, county and state negotiated a new lease that took effect in 2013

The centerpiece of that deal was $130 million in upgrades to the stadium. The improvements included the addition of a high-definition scoreboard, an expanded and renovated east end zone concourse, and new entry plazas with security fencing. The Bills put $35 million towards the work; the county and state split the remaining $95 million.

Poloncarz, in his book, said the Bills weren’t willing to budge on the concessions they had won in 1998 when they negotiated the 2013 lease.

“My team understood the Bills would not want to part with many of the concessions they received during the 1998 lease, and many other terms reached in 1998 would also continue from a practical standpoint,” Poloncarz wrote. 

And, for the most part, terms favorable to the Bills have remained. 

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There was one notable change: the team began paying rent. This year, it’s $902,582. The county does not get to keep that money; under the lease, it’s put towards stadium capital improvements.

The county and the state continue to pick up nearly all other stadium expenses. Their cost is about $13 million a year.

Here’s a breakout:

Game day and operating expenses. Game day expenses cover security, ushers, ticket takers, cleaning staff, garbage removal and emergency medical personnel at the stadium. They are split evenly by the county and state. 

Operating expenses also include wages, employer paid taxes, insurance and other employee expenses for maintenance and management of the stadium. They also also include general non-game day expenses, like scoreboard repairs and utility costs. 

For the 2020 season, Erie County spokesman Peter Anderson said the cost for operating and game day expenses was $5.2 million, which was split evenly by the county and state.

Annual capital payments. The Bills receive these funds to maintain the stadium. The cost in 2021 was $4.2 million, split between the county and state.

Working capital payments. The county and state provide the Bills with money to spend, at its discretion, on team operations. Last year, that amounted to $3.4 million.

Comparing NFL leases 

How does the current lease stack up against those negotiated for NFL stadiums built in the past decade?

“Most NFL stadium deals are pretty much sweetheart deals, but this is even a little more sweetheartish than most,” DeMause told Investigative Post. 

Five stadiums have been built since 2012. One, SoFi Stadium, home to the Los Angeles Rams and Chargers, was built entirely with private funds. Thus, the stadium owner keeps all revenue and is responsible for all expenses. 

Four others were built with public subsidies.

  • The Minnesota Vikings pay annual rent of $8.5 million to a local stadium authority and set aside $1.5 million each year for capital improvements. The team is responsible for all game day expenses. The Vikings keep revenue from naming rights for the stadium and an adjacent plaza. The team also keeps the revenue from sponsorships, advertisements, concessions and ticket sales. 
  • The Atlanta Falcons paid $2.5 million in rent to a local stadium authority in the stadium’s inaugural season, with the amount increasing by 2.5 percent in subsequent years. The team is responsible for all maintenance and operations. It keeps all stadium revenue, including what’s generated at non-NFL events such as concerts.
  • In Las Vegas, the Raiders pay for stadium maintenance and operating costs and set aside $2.5 million per year for capital projects. The team keeps all revenue from ticket sales, stadium naming rights, advertising and concessions. The Raiders do not pay any rent. 
  • In 2012, the San Francisco 49ers came to terms on a 40-year lease for a new stadium in the City of Santa Clara. Under the deal, the city received $180,00 in rent for the stadium’s first year, with the amount increasing by $35,000 annually. In the 11th year of the agreement, the rent is scheduled to jump to $1 million, with annual increases of $100,000 every five years from through the end of the lease. 

The deal allowed the local stadium authority to sell “Stadium Builders Licenses” and stadium naming rights, and to impose a ticket surcharge. A portion of the funds are dedicated to covering the cost of stadium construction. 

Under the agreement, the 49ers receive various “team revenues” from ticket sales to football games and other events, premium seat sales and NFL advertising and sponsorships. 

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“I think that the typical stadium lease is usually pretty bad from a city, public perspective,” said deMause, the subsidy expert. 

“I think one of the sort of hidden subsidies we’ve been seeing for sports stadiums for the last 20, 30 years is that teams increasingly want not just the public money to build stadiums but also they want to be able to keep all the revenue themselves or at least a big piece of it.”

Ongoing negotiations

Poloncarz, Gov. Kathy Hochul and other officials are now in what’s believed to be the late stages of negotiations for a new stadium. 

How likely are the Bills willing to give back some of the contract concessions the team secured in 1998?

The Bills’ resistance to givebacks during negotiations for the 2013 lease suggests they’re probably not open to the idea.

There’s also what passes for the norm in the NFL.

“It’s not unheard of for there to still be revenue sharing, and it comes up here and there sometimes, but it’s definitely something NFL team owners are much more eager to do away with,” said deMause.

Then again, the Bills are reportedly seeking public assistance of up to $1 billion, which would be the largest subsidy in NFL history

There is also the wealth of the team owners and growth in the team’s value.

Forbes pegs the net worth of Terry and Kim Pegula at $5.7 billion, a number that has steadily grown in recent years. Contributing to that growth is the ever-increasing value of the Bills, up from the $1.4 billion the Pegulas paid for the team in 2014 to $2.27 billion today, according to Forbes.

Could that put pressure on Poloncarz and Hochul to strike a good deal for taxpayers?

“It really is going to come down to whether the elected officials who are negotiating this are more interested in getting a good deal or just in getting a deal,” deMause said.

Investigative Post

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