NFL Franchise Relocation and Stadium Financing: The Public Can’t Win

Another NFL offseason, another chance for the League to reclaim a piece of the second-largest media market in America – Los Angeles. What makes this year different, however, is the speculation swirling around the relocation of not just one but possibly two teams to the L.A. area. Currently, there are three candidates all jockeying for position to claim this Hollywood prize: the Oakland Raiders, San Diego Chargers, and St. Louis Rams. Other than the obvious desire to relocate to a larger media market, the driving force behind these three franchises’ potential moves is each franchise’s inability to secure new stadium/renovation financing deals in their current locations. These deals are typically made with local governments in which the city provides generous tax breaks and subsidies for the franchises’ new stadiums. The threat of relocation is the ultimate bargaining chip for an NFL franchise during these financing negotiations. What makes this threat such a powerful negotiation tool is the relative ease in which an NFL franchise can relocate.

 NFL teams are privately owned, with the exception of the Green Bay Packers, and thus, operate according to the owner’s wishes. However, in Article 4.3 of the NFL Constitution, the NFL does maintain some level of control over franchise relocation. Article 4.3 states that in order for an owner to relocate, the owner must first get the approval of three-quarters of the other franchise owners before the desired move. Much of the bite from this provision has been arguably removed though in Los Angeles Mem’l Coliseum v. NFL when the Ninth Circuit held that the NFL could not stop the relocation of the Raiders from Oakland to L.A. Ultimately, the court held that the NFL’s control over the Raiders’ relocation was a violation of the Sherman Antitrust Act. Although the Ninth Circuit has clarified in subsequent rulings that the NFL relocation provision is not invalid as a matter of law but “invalid only as it was applied to the Raiders’ proposed move in 1980,” it is debatable what actions the NFL could take to block a similar move which happened to be against NFL wishes today.

 If the NFL opted not to invoke Article 4.3 against a relocating franchise, and a city wanted to keep its team, the city could attempt to take control of the franchise by exercising its eminent domain powers. Prior attempts by Baltimore and Oakland in the 1980’s to do so have failed, though. In Baltimore, a federal district court held that a “mere filing of the condemnation petition,” without having already paid compensation, gave no power to the city over the NFL franchise when that franchise had already left the state.

 In Oakland the attempted taking similarly failed but this time on Constitutional grounds. In 1982, the California Supreme Court ruled that intangible property could be taken as a matter of law so long as a valid public use be shown and fair compensation is paid. However, Oakland’s public taking was still thwarted when on remand a California state appellate court held that a taking of the Raiders would be an improper local interference with interstate commerce and thus violate the dormant Commerce Clause of the U.S. Constitution. The court held that Oakland was not exempt from Commerce Clause review under the market participant exception because the city was not entering the football market (an interstate commercial market) as a mere market participant but rather as a market regulator, and thus the attempted taking was constitutionally impermissible.

 This ruling did not necessarily mean that no city could take an NFL franchise due to the taking’s effects on interstate commerce. Potentially, a city could still take an NFL franchise if the city demonstrated that the local benefits of the taking outweighed any strain placed on interstate commerce, a high but not impossible threshold to meet.

 Given this high legal bar, though, and the current push towards NFL expansion, it seems likely that at least one team, and possibly two, from either the Rams, Chargers, or Raiders, will relocate to L.A. in the next several years. The NFL has too much of an interest in expanding to L.A. to not allow one or two of these teams to move there. The limited legal action a city can take to keep a franchise from moving will be unlikely to stop a League-sanctioned or non-sanctioned relocation. If Oakland, St. Louis and San Diego really want to ensure the continued stay off their cities’ NFL franchises, the best thing they can do is negotiate new stadium deals with these franchises in their current locations (at the expense of local taxpayers). This NFL policy regarding stadium financing and upkeep – “Pay us or watch us go” – is why the public cannot win when negotiating with NFL owners for the financing of its stadiums today.

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