Kansas City Chiefs’ owner should look at this good idea from the Dolphins and the Rams
If only every sports team owner had it this good: Kansas City Chiefs CEO and controlling shareholder Clark Hunt is trying to decide whether to move his Kansas City-based team across the border from Missouri to the Kansas side of the metropolitan area and build a new football stadium there. The Kansas Legislature offered him a sweet deal, pre-approving funding to cover the majority of the construction costs for a brand-new home for the Chiefs. But that isn’t the sort of deal sports owners are usually handed nowadays. While public funding became more common practice in the 1980s and ‘90s, more recent studies on the economic development potential of sports stadiums and arenas have had mixed results. The upshot: Cities and states can’t effectively make the same argument to voters they have been for the past few decades — that the construction of a new sports stadium will be a huge boost and net economic profit-maker for the local economy. Voters don’t want to hear it, and most lawmakers don’t want to take the heat for giving sweetheart deals to billionaire team owners.
That’s led to several high-profile stadium construction proposal rejections over the last few years — and also several relocations by sports franchises looking for greener pastures. The SuperSonics famously moved from Seattle to Oklahoma City after voters rejected their bid for funding to build a new arena, and similar fates met the (former) San Diego Chargers and (former) St. Louis Rams. All these teams moved to entirely new area codes as their owners’ hopes for more plush and profitable environs were rejected. Part of the never-ending push for better playing facilities comes from the leagues themselves. Since most leagues share certain team revenues, any underperformer can be seen as hurting the whole league. In the NHL, for example, Coyotes owner Alex Meruelo was ultimately forced to sell his rights to the franchise after a series of repeated errors and failures left his hockey team stuck in Arizona State’s 4,600-capacity Mullett Arena.
As a result of league pressures, the Coyotes will play as the Utah Hockey Club this coming season, demonstrating just how fraught owners’ experience with getting a new facility built can be. Voters in Tempe outright rejected a bonds package for a new Coyotes stadium, but community support is just one facet of the new construction puzzle. Arena construction frequently comes with a number of other risks, including litigation with contractors and subcontractors as crews are hustled into demanding timelines. League schedules wait for no one. EXAMPLES IN WIZARDS, CAPITALS It all comes together to create a labyrinth of technicalities for these franchises to navigate, complex enough to trip up even planned and announced stadium rebuilds.
Washington, D.C.- based Monumental Sports & Entertainment, for example, which owns the NBA’s Wizards and the NHL’s Capitals, announced earlier this year a plan to take the teams out of downtown D.C. and into suburban Virginia — something that was supposed to be backed by a proposed $1.05 billion bond package. But public outcry and hesitation in the Virginia legislature meant the team was forced to go back to the negotiating table with lawmakers, ultimately promising a much smaller $500 million deal to revitalize their existing infrastructure. The cleared runway that Kansas is offering the Chiefs is part of what makes the deal so difficult to turn down. Kansas is offering to finance up to 70% of construction costs for a new stadium. But as sweet as the offer is, it should not distract the team’s leadership from the money making possibilities that exist outside of public funding. The 50,000-foot view is that except in the rarest of cases (such as the Chiefs), there are new financial demands on team owners. Unless a team has won three championships in five years and has a star player dating Taylor Swift, its ownership group is going to need to supply a lot more money up front for planned capital projects.
That sounds all bad, but it isn’t. It carries some risks, but it can pay off for owners in the long term.
MIAMI DOLPHINS’ ROSS INVESTED
But rather than give up — or sell the team — Ross instead invested $600 million of his own money to transform the stadium into a multi-use entertainment complex — one that is able generate income for Ross year round, and which today hosts such events as the Miami Open tennis tournament, a Formula One auto race and many major concerts. It’s a change to what owners have come to expect from their sports team infrastructure investment, but Ross is proving that it can be doubly fruitful. Self-funding means that Ross is fully in control of his venue, with greater flexibility over the design of the stadium — so that he can do things like build a dedicated F1 race course — as well as the ability to retain more of the revenue these events generate. While the cost to Ross was significantly higher up front, his ability to earn money on the continued success of the stadium is vastly improved without any bonds or sharing agreements with the local community to pay down. Ross reportedly recently rejected an offer of $10 billion for the Dolphins and their facility, which would have been the highest price ever paid for a sports team of any kind anywhere — by 75%. It’s similar to what Rams owner Stan Kroenke just did in Los Angeles — self-financing the $5 billion SoFi Stadium complex for his team. Without the public-funding spigot readily available for new stadium construction, team owners have to be ready to use more of their own money to get the facilities they want and need. But as some of the smartest sports owners in the world are demonstrating, the bigger they’re willing to dream and invest, the bigger the reward can be on the other side.
*This was republished with permission from The Kansas City Star. Click to access the publication
