Public Contract Law Journal

If You Build It, They Will Relocate: Public Private Partnerships in Sport Stadium Financing

by Alejandra M. Hernandez Irizarry

Alejandra M. Herna´ndez Irizarry (amhi611@gmail.com) is a 2017 graduate of the George Washington University Law School. While in law school, she was a Member, Notes Editor, and Projects Editor of the Public Contract Law Journal. She wishes to thank her parents, Teresa and Roberto, brother, Roberto, and sister-in-law, Nicole, for their endless support. She would also like to thank Judge Jeri Somers and Professor Brian Byrd for their guidance throughout the Note-writing process.  

I.   Introduction

It looks like the Green Bay Packers will soon be the Chicago Packers. Although this scenario remains nearly impossible in the real world, the Madden NFL 16 video game allows for the possibility of team relocation for any team within the game.1 While the Packers may not actually be moving,2 the National Football League (NFL) recently considered three teams for relocation to Los Angeles: the Chargers from San Diego, the Rams from St. Louis, and the Raiders from Oakland.3 On January 12, 2016, the NFL approved the St. Louis Rams’ move to Los Angeles.4 With this deal,  the NFL also gave the San Diego Chargers the right to move, contingent on the two franchises negotiating a deal to share the planned stadium in Inglewood, California.5 Otherwise, the Chargers receive $100 million to help finance a stadium in San Diego.6 The San Diego Chargers confirmed the team’s move to Los Angeles in January 2017.7

As stadium renovation and construction costs continue to rise, many sports franchise owners turn to public financing to fund these projects.Over the past twenty years, approximately 101 new sports facilities opened in the United States, amounting to a ninety percent replacement rate for sports facilities.9 The majority of these facilities received public funding.10 Furthermore, some leagues exempt “income from luxury seating, naming rights, retail, parking, and concessions” from being included in sport league requirements for pooling and sharing revenue.11 As a result, team owners desire more amenities to take advantage of this revenue opportunity.12 At times, the desire for new stadiums and modern amenities entices professional sport franchises to abandon their host city and move to one that offers to finance their preferred facilities, leaving the former host city with an empty stadium and an array of costs.13 “New facilities . . . bring in dollars to the city, but perhaps they bring in only a feeling of pride and economic redistribution of wealth.”14 To realize the benefits of public-private partnerships (PPP or P3), such as those used to finance sports arenas, the partnership agreement must properly allocate the risks, rights, responsibilities, and revenue between the public and private partners. Risk should be allocated to the party most able to mitigate it.15 This, however, might not be the case for current relationships between municipalities and sports franchises. Unfortunately, while professional teams pay for some of the costs associated with building new, luxurious stadiums, many local governments and taxpayers find themselves stuck with most of the bill.16

This Note seeks to find a balancing solution to the current asymmetric risk in sports stadium financing. Part II offers a general background on PPPs. Part II.A discusses types of PPPs, and Part II.B discusses three successful PPPs: the Dulles Greenway, the Chicago Skyway, and the Indiana Toll Road. These three contractual partnerships serve as case studies on how to achieve a successful and viable partnership between the private and public sector.

After setting the table with background on PPPs and case studies, Part III presents the current status and allocation of risks in sport stadium financing — an issue that affects a myriad of municipalities, cities, and teams. Specifically, this Note will touch upon the team-city relationship of the Arizona Coyotes, part of the National Hockey League (NHL); the New England Patriots, a member of the National Football League (NFL); and the Post-Olympic- Post-Braves-Turner Stadium in Atlanta.

Finally, Part IV offers a solution to better balance the risk involved with sport stadium financing. Part IV.A brings in the successes of the Dulles Greenway, Chicago Skyway, and Indiana Toll Road PPPs into the sport stadium arena. Part IV.B continues the discussion on creating effective PPPs by assessing Availability Payments PPPs and their application to sport stadium financing partnerships. Finally, Part IV.C evaluates possible amendments to contract clauses that can further benefit municipalities while still providing appropriate contracts and amenities to professional teams.

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