LA Rams Move Changes Stadium Financing

Does the Rams’ Move to Los Angeles Signal the Beginning of a New Era of NFL Stadium Financing?

On January 12th, the NFL owners voted to allow the St. Louis Rams to relocate to Los Angeles, thus ending the NFL’s 21-year drought in the City of Angels. More importantly, this move to Los Angeles signaled the end of the era of publicly financed stadia, as the league finally gave up its most substantial bargaining chip.

For years, the NFL has threatened to move teams to Los Angeles in order to force cities into a bidding war with each other. As teams attempt to persuade their current cities to build bigger and better stadia, they often threaten to relocate in an effort to create a bidding war; the lack of a franchise in one of the nation’s largest media markets made the city a potential target for relocation for any franchise, enticing local governments to cough up subsidies in order to prevent their teams from moving.  This tactic was most successful in the NFL (compared to MLB and the NBA) because NFL franchises are able to relocate more easily, and their threats to relocate are more credible. However, the NFL’s recent decision to allow the Rams (and potentially the Raiders and Chargers) to move to Los Angeles may have signaled that the ‘bidding war’ strategy is no longer producing the desired results.

NFL franchise threats to relocate are typically more credible because of the league’s regulations regarding relocation. The insulation from antitrust scrutiny that MLB enjoys grants it the greatest authority among the three major leagues to restrict team movement. The NBA and NFL have similar rules, but case law that has developed over the years has historically favored NFL teams (rather than the league) in relocation disputes. Similarly, NFL rules regarding television contracts and player salaries make it easier for smaller cities to compete for an NFL franchise, increasing the number of cities competing for a franchise and thus the price (in terms of the subsidy). This control that the NFL exerts allows it to play cities against each other, and the league has benefited from preventing a team from moving to Los Angeles by using the city as a potential site for every team threatening to move.

In moving back to Los Angeles, the Rams and NFL passed on an offer from St. Louis, in which the local government offered to contribute more than $350 million of the proposed total cost of $1.1 billion. The plan asked for the NFL to contribute $200 million to the new stadium, in addition to a subsidized loan from the league worth $300 million.

In comparison, the Edward Jones Dome in St. Louis, which cost $280 million to complete in 1995, was financed almost entirely by revenue bonds; the city recently injected another $30 million to improve the scoreboard, video boards, and private end zone clubs. This level of public financing was a large factor in enticing the team to move from Los Angeles to a significantly smaller market in the mid-1990’s.

The proposed stadium in Los Angeles, which is projected to cost around $2.5 billion,

is entirely privately financed, and could easily become the world’s most expensive stadium upon completion. The NFL’s acceptance of this privately-financed stadium likely signals the end of the publicly-funded stadium, following significant public uproar over what many citizens called ‘subsidies to billionaires’.

The NFL’s powers regarding relocation likely would have allowed it to prevent a team from moving to Los Angeles, thus keeping the city as a bargaining chip for every team seeking more public money for a new stadium. However, the weak offers from the cities of St. Louis, San Diego, and Oakland likely signaled to the league that the era of easy public money has come to an end, as none of the three cities pledged even half the cost of a new stadium, despite the threat to move to Los Angeles. The opportunity cost of not having a team in the Los Angeles market has finally eclipsed the benefit of keeping the city as a bargaining chip, and signals a new era regarding public money for stadia for the NFL and its owners.

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