Just How Much Is a Football Stadium Worth, Really?

VENTURA — Incensed that Los Angeles won’t cough up a public subsidy, the National Football League owners have apparently pulled the plug on an expansion franchise for the L.A. Coliseum. The owners have rejected an offer from Los Angeles in which the cost of new facilities, including renovating the Coliseum and building parking garages, would be funded by revenues generated by the team and its games. Now they say that unless they get a better deal within the next month, they’ll award a team to Houston, which is offering $200 million in public funds toward construction of a new football stadium.

The L.A. deal is unacceptable to the NFL because, as one owner told The Times, it is “taking money out of the owner’s pocket,” making it impossible for L.A. to field a competitive team. The NFL clearly wants to make an example of Los Angeles, warning other cities around the country that if they want the glamour of professional football, taxpayers have to pay the price.

But the L.A. debacle may well be the NFL’s Waterloo. Public opinion throughout the nation is turning against taxpayer subsidies for sports stadiums--as virtually all sports owners except those in the NFL have figured out. Even if the league goes to Houston, the taxpayer gravy train will not continue much longer. In the end, the hardball negotiations over a Coliseum expansion team are likely to hurt the NFL far more than they will hurt Los Angeles.

It’s not hard to see why the NFL is playing hardball. The owners are accustomed to sweetheart tax deals. And they’re well aware of the dangerous precedent of a no-public-money deal. If they have to depend on their own revenues to pay for the stadiums and other facilities required for games, the value of their teams will go down. They have gotten away with this scam throughout the country--mostly in smaller cities, which don’t have big-time entertainment alternatives and whose politicians are more willing to give away money for stadiums. That’s why Los Angeles has already lost two football teams in this decade to cities whose combined population is less than Riverside County’s.

Los Angeles is right to hold out. As the city’s political leaders point out, it’s partly a matter of leverage: The league needs the L.A. market more than L.A. needs the league. But there’s more to it than that. After a decade-long orgy of public spending on sports stadiums (more than $3 billion, by one estimate), there’s little public-policy justification for the kind of deal the NFL is demanding. Owners in other sports are catching on that they have to pay for their own stadiums if they want the resulting astronomical team values. But the NFL hasn’t figured this out, though there’s less justification for a public subsidy in football than in any other sport.

In public-policy terms, the stadium subsidy is the classic economic development trap for local or state governments. Again and again in the past two decades, desperate cities, counties and states forked over millions of public dollars to entice high-profile businesses to come to town. In the South and Midwest, it’s been auto plants. In big-city downtowns, it’s convention hotels. In suburban jurisdictions, it’s discount retailers. And throughout the country, it’s been sports stadiums.

The intent is to encourage certain economic sectors that produce either jobs or tax revenue, thus giving your community a competitive advantage. But the advantage doesn’t usually last. Soon, the industry you’ve targeted is asking all cities and states for the same subsidy. Then the public subsidy becomes so embedded in the basic economics of the industry in question that nobody can do business without it. Remove the public subsidy from an NFL franchise deal, and the entire economic structure of professional football crumbles.

Curiously, baseball owners, who have benefited more than anyone from public subsidies, have begun to realize that the public-subsidy market is fading.

In the early ‘90s, cities around the country ponied up hundreds of millions of dollars for new “postmodern” baseball stadiums. In Baltimore, Cleveland and Denver, for example, these stadiums helped revitalize surrounding neighborhoods. But it didn’t take long for politicians and taxpayers to notice that these ballparks had another economic impact no one expected: They dramatically increased the value of the baseball franchises playing in them. When it became obvious that the public subsidy was enriching already wealthy baseball owners, a backlash occurred.

In Phoenix, a political firestorm erupted when Maricopa County passed sales-tax increase to pay off bonds for the Bank One Ballpark, home of the Arizona Diamondbacks. The new ballpark was so spectacular that managing general partner Jerry Colangelo was spending big bucks for top players before the franchise even fielded a team. To avoid political embarrassment, Colangelo had to agree to cap the taxpayer subsidy on the stadium, and the Arizona Legislature passed a law requiring voter approval for new tax increases.

More recently, in San Diego, Padres co-owner John J. Moores got tax support for his new baseball stadium, but the city committed only revenue generated in connection with his project, and he paid a price that may cost him more in the long run. In exchange for the city’s help in building a new stadium, at an estimated cost of more than $400 million, the Qualcomm software king has gone into real-estate development, committing to a $1-billion plan to revive the rundown 26-square-block area around the stadium site.

Baseball owners like Colangelo and Moores have committed their own funds because they know that with 80 home dates a year, the value of their teams is tethered to the vitality of the surrounding neighborhood. Cities such as San Diego and Phoenix have engaged in creative financing because they understand a successful ballpark can help their downtowns. But the economics of football are different, both for the owners and the cities they try to squeeze for dough.

In baseball, a new stadium can mean at least a doubling of gate revenues, which, with 80 dates a year, is an enormous increase. For the city, 80 nights means more jobs, more sales tax and more bed tax. But football teams play only 10 home games a year, not including playoffs. With few exceptions, the teams sell out no matter whether they are good and no matter whether they play in new stadiums. And the teams share virtually all TV revenue. So football owners have little day-to-day cash-flow incentive to build new stadiums, at least compared to baseball owners. They want new stadiums because cities are stupid enough to give them away and getting one increases the value of their franchise.

Yet, as cities are beginning to understand, there’s little financial pop to having a football team. With so few games a year, a football stadium doesn’t create many jobs. It doesn’t pump out huge amounts of sales- or bed-tax revenue. It won’t revive a colorful urban neighborhood by itself. And unlike baseball, nobody’s designed a cozy postmodern football stadium.

The football owners, of course, don’t want to believe the economics of their own sport. They want to believe cities will pay any price to get a team and that the value of their franchises will spiral upward forever. Los Angeles may be the first city to call the NFL’s bluff. But with wary taxpayers and a questionable payoff for the public, it won’t be the last.