Government and Sports Business

$34M from NFL lightens Colts' load: Money will count toward team's portion of stadium cost

July 25, 2005

A $34 million loan of sorts to the Indianapolis Colts from the National Football League brings the franchise and local officials another step closer to signing a new stadium lease and drastically reduces what the team will spend out of pocket for the stadium's construction.

The National Football League approved a $34 million loan June 14 that will be applied to the Colts' $100 million share of the $625 million downtown facility, which is scheduled to open in time for the 2008 season.

Already, the Colts are receiving $48 million from the city as compensation for terminating the team's RCA Dome lease. That amount, coupled with the NFL money, decreases the contribution from the Colts' coffers to $18 million.

Colts Senior Executive Vice President Pete Ward confirmed that $34 million had been secured from the NFL, but said Colts officials did not want to comment further until the stadium lease is signed.

The money from the NFL is no traditional loan, said Daniel Kaplan, finance editor for Street & Smith's Sports Business Journal. To satisfy the loan, the NFL will merely credit revenue-sharing payments the Colts already make to the league toward the loan's balance.

The Colts get the $34 million as part of the NFL's G-3 stadium funding program, which generally doles out 34 percent of a team's share of new stadium costs unless a team is in one of the six largest NFL markets, in which case the franchise is eligible for 50 percent.

The G-3 fund, which has handed out $773.5 million to 10 teams since its creation in 1999, gets its money from a pool derived from visiting teams' share of club-seat revenue. Teams also hand over $1 million annually from television revenue, an amount the league can direct to the G-3 fund. The Colts' grant is the first one from the fund in nearly four years.

"This has enabled the NFL to invest in more new stadiums," said Greg Aiello, NFL vice president of public relations. "It's the owners working together so they can afford stadiums."

The NFL contribution is viewed by some as another avenue by which NFL owners-in the Colts' case, Jim Irsay-dodge paying for new stadiums, said Marc Ganis, president of Sportscorp Ltd., a Chicago-based consulting firm that works with NFL teams and playing venue operators.

Ganis doesn't agree with that interpretation of the program.

"This is an example of other teams in the league supporting the Colts," Ganis said. "Those who think this is another way for NFL owners to get out of paying for new stadiums don't understand how it's structured."

Ganis called the G-3 fund one of the most "enlightened and foresighted" programs in professional sports.

"They don't have this in the NBA, Major League Baseball or the NHL," Ganis said. "It's extremely difficult to achieve because you need to have a consensus among owners and the players' association."

Players approved the G-3 fund because, while it means they get less money from revenue in the short term, the program allows more stadiums to be built, which raises team revenues over the long term. Average team revenues are used to determine the player salary cap.

Ganis also pointed out that if the Colts didn't get this money from the league, they'd have to extract it from the local market.

"That money would have to be raised somehow, either through ticket-price increases or sponsorships or other revenue-generating mechanisms in the Indianapolis market," Ganis said. "The local community should be jumping for joy over this."

The G-3 program has been the subject of intense debate in the NFL's inner circle. Cincinnati Bengals owners voted against the recently approved grant for the Colts and $76.5 million to the Dallas Cowboys. Bengals officials declined to comment, but some owners have quietly complained the league has to take on too much debt to make these upfront payments, and others don't like the way the program is tied to the revenue-sharing formula.

Small-market and large-market owners have been engaged in a revenue-sharing debate since February. The result of those negotiations will influence the league's stance on how money should be distributed to the players via the collective bargaining agreement. Irsay has been central in that debate, trying to get a bigger slice for small-market teams and to reduce the revenue gap between the NFL's top- and lowest-money-making teams-which reportedly have a revenue disparity approaching $100 million annually.

NFL officials have scheduled another round of owner meetings for Aug. 10-11.

"The Colts are probably fortunate they got the G-3 grant now, because this funding mechanism could easily get tied up in the revenue-sharing debate," Ganis said.

Sen. Luke Kenley, R-Noblesville, who was a supporter of making sure the Colts contributed their fair share to the new stadium, said the G-3 money is an essential step to completing the lease deal between local government officials and the Colts.

Officials hoped construction would begin Aug. 1, but groundbreaking has been delayed because the lease has not been finalized.

"We had hoped to get the lease signed by July 1, and now that's been pushed back," Kenley said. "This [G-3 grant] is a big step for the Colts and hopefully we can get the lease done now."

David Frick, chairman of the Indiana Stadium and Convention Center Building Authority, which is overseeing construction of the stadium on the southwest side of downtown and the expansion of the Indiana Convention Center on the site of the RCA Dome, said the NFL grant is just one of many loose ends that need to be tied up before a lease is signed. Frick wouldn't reveal what has to be resolved.

He added that the Colts will be expected to start paying their portion shortly after construction begins.

"Hopefully, we can get all this wrapped up in the next few weeks," Frick said. "We're working pretty diligently."
Source: XMLAr00102.xml
ADVERTISEMENT

Recent Articles by Anthony Schoettle

Comments powered by Disqus