Jan 26
2023
‘Weak’ relocation clause in Bills’ lease
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The Buffalo Bills would have an easier time abandoning their new stadium in Orchard Park for another city than any of the other teams playing in subsidized stadiums built for NFL franchises in recent years, Investigative Post has found.
Four NFL stadiums have been built with public assistance since 2014: Levi’s Stadium for the San Francisco 49ers, U.S. Bank Stadium for the Minnesota Vikings, Mercedes-Benz Stadium for the Atlanta Falcons, and Allegiant Stadium for the Las Vegas Raiders.
Like the Bills draft lease, those agreements require teams in those stadiums to pay back the taxpayer’s investment in the event they leave.
But there’s a key difference: The financial penalty starts to decrease for the Bills after they’ve played in the new stadium for 15 years out of their 30-year lease. The other teams have to say put longer — 23 to 30 years — before their bill would start to go down.
“If the goal here is to keep the Bills in Buffalo long term, then [the lease] absolutely should have an extremely stringent requirement [to stay], especially given the amount the county and state are putting in,” said J.C. Bradbury, an economics professor at Kenneshaw State University who has studied stadium deals.
“It sounds weak to me,” he said of the relocation provisions in the lease.
One other difference: Most of the other agreements provide the option to extend the lease past the initial 30- or 40-year term. The Bills deal makes no mention of a lease extension.
Yet another difference: The stadium authority in Las Vegas has veto power over any attempt by the team to move out of town. Also, in the event the team is sold, the new owner is obligated to honor the lease.
Many of the stadium deals, including the Bills’, allows public entities to sue a team for breach of contract in the event it breaks its lease. That legal mechanism, state officials said, will require the Bills to stay put for the full 30 years of their lease.
“They don’t have a choice. They don’t get to say, ‘Well, we’re in year 28 now, we’re going to pay this penalty and leave,’” Stephen Gawlik, Empire State Development’s senior counsel, told reporters Monday. “That’s not the way this non-relocation agreement works.”
It’s worth noting, however, that no court in recent history has stopped a major league team from moving to another city.
Six franchises in the NFL alone have changed cities since 1982. The league sued in an effort to stop the Raiders from leaving Oakland in 1982 and St. Louis sued the Rams in 2017 in an effort to keep the team. Both cities lost their teams.
What’s more, NFL owners are incentivized to allow teams to move, as they assess a relocation fee on the franchise moving that is split among the league’s other teams.
Financial terms
The Bills stadium is slated to cost $1.4 billion. The state will contribute $600 million, the county $250 million. The Bills will pay $550 million, funded in part by the NFL and personal seat licenses charged to fans. The team will also be responsible for any cost overruns.
That public contribution to construction costs for the Bills stadium is greater than any other NFL facility built since 2000. Only Levi’s Stadium, home to the San Francisco 49ers, involved a similar amount of public money.
In addition to construction costs, the county and state will contribute $400 million over the course of the 30-year lease for maintenance and capital improvements. The county’s portion, $120 million, will come from a surcharge on ticket sales, concessions and parking. The state’s share is $280 million. The Bills contribution will be $27 million.
In total, it will cost taxpayers $1.25 billion to build, maintain and operate the new Bills stadium over the 30-year length of the lease.
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Atlanta also contributes money annually to maintenance and renovations of Mercedes-Benz Stadium, but the public contributed less in construction costs, just $200 million. The total public investment there is around $700 million.
More than half of the public’s $850 million contribution to build the Bills stadium — $432 million — will come through the sale of 30-year bonds, meaning the county and state will borrow that money and pay it back over the coming decades.
Under terms spelled out in a memorandum of understanding between the state, county and team, the Bills could walk away at any time, unless a judge blocked them. If they leave in the first 15 years, they would have to pay the state and county the $850 million invested to construct the stadium and another $13.3 million in capital and operating assistance for every year they occupy the stadium.
If the team moved after 15 years, the penalties would “steadily” decrease, according to state officials.
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Bradbury, the Kenneshaw State professor, said it’s bad economics to issue 30-year bonds to pay for a stadium when the Bills could leave prior to year 30.
“Normally, if you’re planning to pay off a stadium over 30 years, you need to lock them in for 30 years,” he said.
Gawlik, the attorney with Empire State Development, argued that the state believes the Bills will stay for the entire lease and that a lease extension will come prior to that.
“They’d have to break the lease and try to leave,” he said. “In the first 15 years they’d have to pay every penny back. which is going to be close to $1 billion. and then [years] 15 through 30 it goes down yearly.”
That penalty might not be cost-prohibitive, given the escalating value of NFL franchises. Terry and Kim Pegula bought the Bills in 2014 for $1.4 billion. Today, the team is worth an estimated $3.4 billion. NFL franchise values have increased about 15 percent annually in recent years.
As Investigative Post reported last week, a $1 billion penalty for moving the Bills out of Western New York may not be as steep of a price as state officials believe because of the soaring value of team franchises.
“Talk is cheap,” Bradbury said, “especially when there’s a question of who the ownership might be, which you should always assume regardless of the health of your owners. That’s why you need to protect yourself. ‘Oh they’re not going to [leave].’ They will.”
Lease terms in other cities
Six NFL stadiums have opened since 2010, and five of them have been publicly subsidized to varying degrees.
Las Vegas lured the Raiders in 2020 from their longtime home in Oakland to Allegiant Stadium. The lease mandates the team pay back the full public investment of $717 million if the team relocated during the first 23 years of the 30-year lease.
Payments begin to decrease after year 23, said Brian Haynes, a spokesperson for the Las Vegas Stadium Authority.
The lease also requires a new owner to finish out the lease, in the event the team is sold, Haynes said. The stadium authority also has the right to veto any request from the team to relocate.
The lease on the San Francisco 49ers stadium in Santa Clara, California, is similar to the one in Buffalo: The team must pay back $850 million if it relocates. But the penalty stays in place longer — 25 years, rather than the 15 years in Buffalo.
The Falcons’ lease on their stadium in Atlanta does not permit discussions about relocation for 25 years. If the team were to move prior to that, the team could be liable for paying up to $350 million of the public investment.
The lease on the Vikings stadium in Minneapolis does not permit termination over its 30-year lifespan except in the event of fraud, bankruptcy or the failure of either the team or stadium authority to meet certain financial obligations.
“The Vikings have no right to relocate during the initial 30-year term,” said Lisa Niess, a spokesperson for U.S. Bank Stadium. “It would be a total breach of their contract.”
MetLife Stadium in New Jersey was opened in 2010, built with private money, but located on state-owned land. The Giants and Jets play there. The lease requires that at least one of the teams remain there for at least 39 years.
That deal works like this: Both the Jets and Giants must play at MetLife Stadium for a minimum of 15 years. If one team leaves after that, the other is locked in through year 39 of the lease. If both teams stay after year 15, both have the option to leave every five years, with the same terms applying.
Both teams have the option to play at MetLife Stadium for a total of 97 years, with the lease ultimately expiring in 2107, at the latest.
Only California’s SoFi Stadium, home to the Los Angeles Rams and the Los Angeles Chargers, was built entirely with private money and therefore isn’t subject to a lease with a non-relocation clause.
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Gawlik, while saying the lease on the stadium here will keep the team in Buffalo, noted that taxpayers will be made whole if the Bills were to leave.
“The idea behind it is the state and county will get their money back. We’re not going to be out anything if they try to leave.”
Bradbury said the relocation terms in other teams’ leases suggests Western New York should have gotten stronger terms from the Bills.
“It sounds to me like it’s not as stringent as some of the better clauses that lock teams in have been written,” he said.
