There are plenty of skeptics who aren’t buying the view of the NFL and some of its club owners that the Buffalo Bills need a new stadium to enhance their long-term viability.
They think it’s all about greed, about billionaires wanting to line their pockets with no concern for the Bills or Western New York. After all, the NFL didn’t become the gargantuan, money-making monster it is by being all warm and fuzzy with its business dealings.
But former NFL team executive Joe Banner, who oversaw the construction of a new stadium in Philadelphia and a stadium renovation in Cleveland, thinks that take misses the mark.
Yes, there would be a financial windfall, but Banner insists much more of it would go to the Bills and players throughout the NFL than the owners of the NFL’s 31 other teams or league execs.
For the sake of making his point, he projected a new Buffalo stadium being built for about $925 million and resulting in a $50-million increase in annual revenues for the Bills.
“The new $50 million in revenues will increase the” salary “cap by $25 million league-wide,” said Banner, an analyst for ESPN and former president of the Eagles, CEO of the Browns, and front-office consultant of the Atlanta Falcons. “That means almost every owner in the league gets a bill now for a new million dollars per year added to their cap. And they get no revenues out of the stadium. There’s no direct benefit to the other owners. There’s actually a small cost …” because “most teams spend to the cap on average.”
On the other hand, Bills owners Terry and Kim Pegula would likely realize increased profitability and players collectively would make $25 million more league-wide.
What follows are some basic questions and answers concerning the suddenly red-hot issue of a new stadium for the Bills:
Q: What’s the price?
A: Banner’s estimate of nearly $1 billion is accurate, based on reported costs of recent stadium construction in the NFL. There are many variables, such as capacity, open air versus a static or retractable roof, size/resolution of video boards, and quality/quantity of other amenities. “My guess is in Buffalo, you should build a 55,000- to 57,000-seat stadium,” Banner said. “Probably the cost of the stadium itself is in the $800,000,000 range. With the” added “cost of architectural fees and financing, you’re probably in the $9’s. I don’t think there’s been any of these deals where the public hasn’t provided the land, so I’m just assuming that in the formula.”
Q: Who pays for it?
A: Under the NFL’s present structure, the Bills would have to make a minimum contribution of $200 million in order to receive the maximum $200-million loan from the league – under its G-4 program and subject to approval by three-fourths of the owners – that is effectively interest free and repaid from stadium revenues. The Bills would still be on the hook even if less revenues are generated than required to repay the loan. In all likelihood, the Bills’ tab would end up being higher. The rest of the money, anywhere from 50 percent or more, would come from the public sector. Some smaller market comparables for new stadiums from the last 10 years: Arizona (68 percent public), Indianapolis (86 percent), and Minnesota (46 percent). Private financing for the $1.087-billion U.S. Bank Stadium, in which the Minnesota Vikings will begin playing this year, is $577 million. Part of that comes from the sale of Personal Seat Licenses (PSLs), also called Stadium Builder’s Licenses (SBLs), that fans buy for the right to purchase season tickets.
Q: How do seat licenses work?
A: The team handles the selling of the PSLs. In most cases, according to Banner, the income is set up – in conjunction with the public sector – to run through a government entity and directly into the construction of the stadium to avoid being taxable. Recent programs have ranged anywhere from around $125 million (in Minnesota) to more than $500 million in larger markets. Applying PSLs to all seats sold on a season basis is generally viewed as a best practice. Some may be set aside for single-game sales, based on the market and the overall sales plan. “What” the Bills “will do, or should do, is hire a consulting firm that will do market research to determine how much they’ll raise” from license sales. Banner said. “They might only be able to raise $50 million, they might be able to raise $150 million.”
Q: What sort of increase in ticket prices can be expected?
A: The price of tickets – which, at the current average of $68.81, ranks near the bottom of the NFL – would factor into the Bills’ efforts to recoup their costs for construction, while justifying what will be sold as a better game-viewing experience. “Realize, though, you’re” likely “building a smaller stadium, so it’s very likely that the demand goes up and the supply of seats goes down,” Banner said. “Now, if they try to go crazy with pricing, they’ll create a problem. If they try to create a reasonable increase based on” the economic realities of whenever the stadium is built “and the quality of seats and sightlines and game experience are dramatically enhanced, then the market should be able to handle a decent, modest price increase.”
Q: What’s in it for the fans?
A: Bills president Russ Brandon says, among fans the team has surveyed, 43-year-old Ralph Wilson Stadium has “never really been brought up as something of discontent.” It’s a safe bet they aren’t clamoring for anything that is going to make their game-day experience more expensive, either, yet all of those bells and whistles would no doubt form the basis of a marketing campaign for a new facility. “Everybody’s different, but when we did it” with the construction of Lincoln Financial Field in Philadelphia, “we were very focused on experiential things,” Banner said. “Sightlines, sound, visual … we wanted the experience to be so great and so dramatic, that people really feel like there’s a huge difference in the experience of going to a game and not going to a game.”
Q: How do the NFL’s 31 other owners benefit?
A: Visiting NFL teams collect about 40 percent of the ticket revenue for non-premium and non-luxury seating, with 60 percent going to the home club, so the dollar amounts in both cases would figure to be higher in a new stadium. Otherwise, when it comes to the rest of the NFL owners, it’s more about elevating the league’s operating standards. “It’s collectively good for every team to be on solid footing, selling their seats, filling their stadiums, generating interest and TV revenues, and looking like a current, first-class operation,” Banner said. “League-wise, there’s not a real cost or a real benefit to the building of the new stadiums.”
Q: What’s in it for the public sector?
A: For everyone involved, including the Bills, it would mean the end – at least for about 30 years – of renovation projects, such the recent $130-million facelift for The Ralph. “You can get the brand new stadium essentially for the same cost, over time, as it’s costing you to keep gluing this place together,” Banner said.