Anyone in metro New Orleans who has had misgivings about Gov. Bobby
Jindal's decision to spend $50 million in state money to keep a chicken
processing plant open in the north Louisiana town of Farmerville now
has a good reason to crow about that deal: It's going to keep the
Saints in New Orleans.
Cut through all the fine print in the contracts and the
rhetoric from rural lawmakers about subsidizing Saints owner Tom
Benson, and the cold, hard political reality is that both deals need
legislative approval — and that means they need each other.
Jindal Chief of Staff Timmy Teepell negotiated the $50
million deal to help Foster Farms, a California company, buy the
shuttered Pilgrim's Pride chicken processing plant in Farmerville. That
deal pledges $40 million toward Foster Farms' $80-million purchase
price and another $10 million for improvements to the plant. The deal,
if approved by lawmakers, will save at least 1,300 jobs and keep
several hundred area chicken farmers in business. Until the Saints deal
came along, legislative approval was far from certain.
Locally, Superdome Commission Chairman Ron Forman and
Dome management exec Doug Thornton renegotiated the state's costly deal
with the Saints, producing a long-term contract to keep the team in New
Orleans and save the state at least $17 million a year in subsidy
payments to team owner Tom Benson. The latest annual payment to the
Saints is $23.5 million; under the new contract, subsidies are capped
at $6 million and could be as low as zero, depending on the team's
revenues.
The Saints deal also requires the state to spend $85
million on Superdome improvements, which will produce wider concourses,
more concession areas, more seating and more suites — all of
which should help the Saints net more revenue. In addition, Benson will
buy the vacant Dominion Tower building, the New Orleans Centre mall and
a 2,100-space parking garage from California real estate mogul Judah
Hertz — and rent much of it back to the state, which is looking
to upgrade some 320,000 square feet of office space it currently rents
at less desirable sites across New Orleans. Benson will spend more than
$20 million restoring and building out the state's new office space,
and rent the mall area back to the Superdome Commission for use as a
sports-themed "festival plaza" on game days. The dome and Benson will
share plaza revenues.
The Saints deal thus saves the state millions in
guaranteed annual subsidy payments to Benson, but commits the state to
spending millions on office space and dome improvements. Why is that a
good deal? Because the state needed to upgrade and consolidate offices
for some 30 state agencies here anyway, and it needed to invest in dome
improvements — or spend hundreds of millions more on a new
stadium to keep the franchise in New Orleans.
Then, of course, there are the benefits for the city. A
renovated Dominion Tower and New Orleans Centre should renew
private-sector interest in a downtown area that has not come back since
Katrina.
Bottom line: This is a much better deal for the state
than the previous deal.
Local lawmakers quickly embraced the Saints deal, but to
secure legislative approval they will have to trade votes with north
Louisiana leges who want their chicken plant. If you subscribe to
Bismarck's view that good laws are like good sausage — not easy
to watch being made — these two deals offer a fine example of
chicken wieners.
Cluck, cluck. Go Saints.
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Thursday, May 7, 2009
Baton Rouge, Louisiana
A HIGH PRICE TO KEEP THE SAINTS!
The plan seems to be “Keep the Saints at any price.” Proposals at Louisiana’s state capitol to give millions of dollars a year for decades to come is steamrolling through the legislature. Governor Bobby Jindal says the deal will “save hundreds of millions of dollars, while making what will be an incredibly successful investment “ in the state. Even the state’s largest newspaper is all a goggle, calling the proposal a “win-win-win-win situation.” But how good a deal really is it? Considering the state’s precarious financial situation with huge cuts coming in education and health care, it has to be one heck of a deal for anyone to send out cheers and accolades.
Start with the premise that any aid to Saints owner Tom Benson is even necessary at all. No other professional football team receives any state funds. Not one. And New Orleans is not all that small of a market. Teams like the Buffalo Bills and Green Bay Packers operate in similar or smaller television markets and do quite well without any state funding.
The Saints will receive $6 million in direct funding, and this is being embellished as a reduction of what the state is paying them now. But there is much more the Saints will receive that is every bit as valuable as direct payments. $85 million will come out of the state treasury to upgrade the Superdome. But the upgrades greatly benefit the Saints and mean significantly more profit. Most of the money will go towards building new luxury boxes and new club lounges, all which mean more high priced tickets for the Saints to sell. The state pays the cost, and the Saints get the income.
The there is the agreement for the state to lease office space in a downtown office building adjacent to the Dome being purchased by the Benson interests. This is one of the more questionable parts of the purposed agreement. Right now, the state has offices scattered throughout New Orleans to service a cross section of citizens needing state help. All these offices are to be consolidated in one of the busiest parts of New Orleans where parking is both expensive and scarce for both state employees and taxpayers who need to go there for help.
The state is to lease more than 320,000 feet at $24 dollars square foot, which is one of the highest rental rates in the state today. Knowledgeable realtors in New Orleans will confirm that in today’s market, when a potential renter is willing to lease as much as 320,000 square feet, a deal could be made to obtain top office space for rent in the $13 dollar a square foot range. So the state is basically paying the cost of the building the Benson group is buying. If buying the Dominion Tower was such a good deal, the state should have opted to buy the building itself. After all, Gov. Jindal’s mentor, former Gov. Mike Foster, made the case that the state should build and own buildings for state employees, and proceeded to do so all over downtown Baton Rouge.
But what about all these projections of how much the economy in New Orleans will be positively impacted, with millions more in tax revenue. Figures are being wildly thrown around with little study indicating a $500 million economic impact, and a University of New Orleans study, quoted in a Times Picayune editorial, estimated some $22 million in state revenue is produced by the Saints. Here’s the fallacy. Any such study assumes that all of the dollars spent at Saints games are dollars that are new to the region’s economy. Most dollars spent going to the Dome are dollars that would have been spent on other leisure activities in the area. There are numerous choices as to how to spend leisure dollars. Going to a football game is just one such choice.
Job creation is also part of the hard sell to make this proposed Saints deal more attractive. The Times Picayune concludes that the Saints provide almost 4,000 full and part-time jobs. But the major numbers of jobs are part-time, intermittent positions with low wages and few benefits. Hawking hot dogs and beer or cleaning up after the fans go home is not a sure fire route to prosperity.
The Brookings Institution did a recent 500 page study titled Sports, Jobs and Taxes. They concluded that professional sports teams “realign economic activity within a city’s leisure industry rather than adding to it. Professional sports,” they write, “are not a major catalyst for economic development.” They are saying, in effect, that all the public subsidies accomplished was to help shift spending from other forms of entertainment to stadiums like the Dome, with little net employment gain or significant increase in new tax dollars.
A later report by Brookings found that numerous other studies have all concluded the same thing. “Independent research by a number of independent groups has uniformly found that there is no significant positive correlation between sports facility construction and economic development.” Consultants, often hired by team owners who say otherwise, according to the Brookings study, “are peddling snake oil.”
Right now, the State of Louisiana gives the Saints $23 million a year as a direct subsidy. But Saints owner Tom Benson is no fool. He’s not about to give up such a good deal for much less in the future.
So what will he actually receive? $6 million direct from the state, plus an estimated additional $6 million benefit annually from the new luxury suites he can sell, all part of the $85 million in improvements to the dome. He then gets a new office building with high rents guaranteed by the state. In addition, the Saints gain an additional $2.5 million in rentals from the adjoining office mall and the adjacent parking garage.
So all in all, the Saints end up with a new contract guaranteed through 2025 that seems to be every bit as attractive as the contract they have right now. A deal worth more than $20 million dollars paid for with state funds. The city of New Orleans does not put up a penny. Yet no other NFL state or city scratches the surface of giving such a hand out. God bless old Tom Benson. He once again has made off like a bandit, and cut himself one heck of a deal.
Finally, the argument is made that there is an intangible value to New Orleans and the state to have the evening sports news talk about “The New Orleans Saints” as if to entice future visitors to come on down to the Bayou State. Oh yes. When you hear about The Green Bay Packers or the Cincinnati Bengals, doesn’t that just make you want to pack your bags and head for Green Bay or Cincinnati?
Look, most of us are Saints fans, and want the team to stay in New Orleans. But it all comes down to priorities. The state is facing major short falls in many critical areas. The Saints are a luxury and nothing more. Responsible legislators need to look closely at just how important a football team is to Louisiana, and at what price. Right now the price is high; maybe too high. But don’t worry about the Saints. They are just coasting along on the fast train of state subsidies and a singin’ ”Loot, Loot, Loot for the Home team.”
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“The pride and the presence of a professional football team is far more important than 30 libraries.”
-Art Modell, owner of the Cleveland Browns
Jim Brown
You can read more of Jim’s writings along with all past columns by going to his website at www.jimbrownla.com.
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How come I don't think a Baton Rouge paper would've published a similar scathing editorial criticizing the tens of millions of dollars spent on LSU athletics in lieu of academics there?
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