Jan 16
2023
Bills new stadium lease is not ironclad
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by Jim Heaney, editor of Investigative Post
Investing $850 million of public funds in a new stadium for the Buffalo Bills is a heavy lift for taxpayers. The elected officials who negotiated those terms have offered us the solace that it keeps the team here for at least another 30 years.
It’s an ironclad lease, they’ve assured us.
But it’s not.
And the state of the team’s ownership – Terry Pegula, in his 70s, and his wife Kim, dealing with serious health issues that keep her away from the team – only heighten concerns about the team’s long-term prospects in Western New York.
The memorandum of understanding between the state, county and team allows for the relocation of the team if the Bills owners pay back the $850 million in public funds spent to construct the stadium, plus any capital improvements, and the cost to demolish it, if the state’s stadium authority so desires. After 15 years, the penalties to relocate start to steadily decrease.
The only recourse the state and county would have is litigation in an effort to stop the team from moving. I can’t recall a court ever blocking a major league sports franchise from moving, however.
Now, $850 million, give or take, might sound like a huge disincentive. At least until you consider the escalating value of NFL franchises. The Pegulas bought the team for $1.4 billion. Today it’s worth an estimated $3.4 billion. What are the Bills going to be worth five, ten, fifteen years down the road? A whole lot more.
Suppose the Pegulas decided to sell. Or Terry dies or ages out and Kim is in no position to carry on.
Is there anyone in Western New York rich enough to buy the team and keep it here?
I doubt it.
Could the team be handed down to the Pegula children, assuming they even wanted it? Only if the kids could pony up the federal estate tax, equivalent to 40 percent of the value of the team. That would come to, what, three, four, five billion dollars?
Again, I doubt it.
That could leave the Bills – and the community – at the mercy of an out-of-town buyer. No doubt a gazillionaire. If he or she dropped upwards of $10 billion to buy the team and bring it home with him, do you think spending up to $1 billion to break the lease would dissuade him or her?
Again, I doubt it.
Yeah, but wouldn’t league owners put a stop to it?
You mean the same team owners who in recent years have approved teams leaving Oakland, San Diego and St. Louis?
The same crew that previously allowed the Colts to abandon Baltimore and the Browns, Cleveland? (Iconic franchises, I might add.)
The same owners who have imposed relocation fees on teams and then split the proceeds among themselves? Each NFL team pocketed $55.2 million in relocation fees charged collectively to the Rams, Raiders and Chargers when they left town. Talk about easy money, and an incentive to continue to allow for the movement of franchises.
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All this behooves the state and county to ask an uncomfortable question: What’s up with the Pegulas?
I mean, they own the team and Kim was a very hands-on president. She’s no longer on the scene since suffering an apparently serious illness seven months ago.
The Pegula family has been tight lipped about Kim’s condition and prognosis and has asked for the press and public to respect their privacy. That’s understandable, to a point.
But it’s not unreasonable for the taxpaying public and the government officials negotiating the stadium deal on their behalf to know the state of the team’s ownership before making a final commitment to fork over $850 million to help build the $1.4 billion stadium.
Wouldn’t an investment group want to know about the ownership of a business before it invests in it?
The Pegulas bought the Sabres in 2011 and the Bills three years later. Kim, in time, ascended to president of both teams and by all accounts has been very hands-on.
She was hospitalized in early June for what was described as an “unexpected illness.” No details were provided.
Later that month, Pegula Sports and Entertainment issued a statement that said: “Kim is progressing well and is resting and rehabilitating from a health issue.” Three days later, her tennis star daughter Jessica told reporters at Wimbledon that her mother is “doing a lot better now.”
Another daughter, Kelly, posted comments in September on her Instagram account that featured a photo of her with her mother in happier times that started out: “This is a tough birthday for me. Been a rough few months.”
Meanwhile, it appears Kim Pegula has been completely absent from the operations of the Bills and Sabres. That’s quite a departure, as one source told me that before her illness, “everything ran through her.”
It’s clear something serious is going on with her.
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Terry, meanwhile, has continued his low-key ownership, attending many Bills games but rarely speaking in public. Comments described as “incoherent” that he made in December to fellow NFL owners were noted in a story by CBS Sports. The topic was criticism of the league’s scouting combine.
Bills owner Terry Pegula took to the microphone to make a point that confused many in the room. According to sources, Pegula didn’t condone the combine weigh-ins (which aren’t televised) but seemed to play a devil’s advocate role that it’s ultimately what people want to see.
He then tried to bridge football with women’s tennis, the sport of his daughter, Jessica, who is ranked No. 3 in the world. The Bills owner appeared to bemoan the sometimes-revealing outfits that he said women tennis players are encouraged to wear. Some sources construed his comments to mean that sports all have some level of exploitation. Another source simply called them “incoherent.” The conversation came to an end shortly after Pegula’s confusing comments.
Much like how many Bills fans worried about the team’s fate as Ralph Wilson got on in years, it’s not unreasonable to have similar concerns about the team’s not-a-spring-chicken owner (71) if his much younger wife (53) is not in a position to carry on.
It seems to me that Gov. Kathy Hochul and Erie County Executive Mark Poloncarz – whose offices refused my interview requests – need to do their homework and answer the following questions:
- Are there examples of real ironclad leases from around the league that should be considered for our stadium here?
- How is the Bills ownership structured? Do Terry and Kim own the team 50-50? Are the kids involved?
- Do the Pegulas have a succession plan in place and, if so, what is it?
- What kind of shape are Terry – and especially, Kim – really in and what is their prognosis for the long term?
These are not academic questions. Answering them is required due diligence if the interests of taxpayers and fans are to be respected. The time to do so is now, before it’s too late. And time, according to the governor, is running out, as a final deal is pending.
I hope Kim recovers and that she and Terry live long lives and the Bills (and Sabres) stay in Buffalo forever. But there’s too much at stake to simply hope for the best.
