Sports Stadium Finance Paper

Letter of Intent/Memorandum of Understanding Elements

1. Local economic & social impact

· Sports organizations generate revenues from enthusiastic and supporting fans. It is crucial for a sports organization to establish local support before constructing a sports facility/stadium. In return, a well-designed stadium will benefit the city-county by boosting its local economy and increasing the quality of life for its local citizens.

· Economic Impact: Increases the city’s media exposure, attracts more tourists to the city and thereby increases the city’s tax revenue. It also benefits local businesses by attracting more customers on the event day

· Social Impact: Gives fans a sense of belonging, generates pride

2. Stadium Site / Location

· Site selection is an important consideration for a new stadium project. Organizations must evaluate their unique market and establish its site requirements.

· Site acquisition: Organization and city must agree on a proper site acquisition plan. A privately financed project such as the Oakland Athletics’ Coliseum, purchases its stadium site from the county. Whereas a publicly financed project such as the Broward County Civic Arena may have a designated stadium site recommended by the city-county (Florida Panthers LOI 12)

3. Stadium Design

· New stadiums should be designed to satisfy their unique market needs. The design should also support the main tenant’s business operation while accommodating other tenants

· Seating: appropriate seating number to maximize ticket revenue. Broward County Civic Arena has 21,000 seats to accommodate baseball fans (Florida Panthers LOI 3) while the Eagles designed near 70,000 seats for football games (Eagles Lease Terms 1)

· Parking: if stadium located away from the city, parking spaces need to be designed

· Other: amenities, restroom, social areas, shop, and restaurants also need to be considered

4. Stadium Construction and Completion date

· The sports organization and city must have a mutual agreement on the roles and responsibilities in the stadium construction process. City county often contract with a third-party company to serve as “construction manager” to pursuant to the CM agreement and manage the construction process (Atlanta Braves Cobb County MOU 5)

· Completion deadline: it is crucial for all parties to finish the construction process prior to the deadline/ beginning of the season. Any delay will cause significant revenue loss

5. Project Funding

· It is fundamental for an organization to develop a funding plan for the new stadium. The project funding plan should include the estimated cost of construction, as well as parties’ contribution agreement. For instance, the city of Philadelphia agreed to cover the new Eagle’s stadium’s site acquisition and construction cost as well as a part of the costs of demolition of existing buildings. While the Eagles are responsible for the rest of the demolition, plus the basic stadium elements costs and environmental remediation cost (Eagles Lease Terms 3)

6. Ownership

· Most publicly funded stadiums such as the Broward County Civic Arena are owned by the city-county, while other privily funded stadiums are owned by the team/organization. Different ownership structure provides different opportunities and threat

· Media Rights / Naming rights ownership: both being a large portion of the revenue. Stadium and tenants must establish media and stadium naming rights agreement

· Intellectual Property ownership: stadium and tenants must also agree on an Intellectual Property License Agreement, which manages tenant’s rights to use the stadium’s intellectual properties in their marketing program. For instance, the Georgia World Congress Center Authority entered into an IP license agreement, which granted the Atlanta Falcons the right to use Mercedes Benz Stadium’s trademarks and trade names in their marketing programs. The agreement also restricts GWCCA from using the Falcons image on any other GWCCA campus buildings (Atlanta New Stadium Project 23)

7. License Agreement

· Depending on the ownership structure, sports organizations might be required to acquire the license to operate in their stadium. For instance, the Florida Panthers pays the county five percent of its ticket sales from general seating, in order to play in the publicly funded stadium (Florida Panthers LOI 5)

· Scheduling of event: tenants must communicate their event dates with the stadium in advance so there is no concurring event on the same date. Booking procedures should be established as well as a priority booking policy for the main tenant (Atlanta New Stadium Project 10)

8. Operation Management

· Both the organization and the stadium must reach an agreement on the responsibilities of the facility’s daily operation. Organizations may use a third-party Management company to facilitate stadium operations. All parties should establish a management agreement, and the management company must fulfill all tenant’s operational goals and objectives

· O&M, R&R responsibilities: Organizations and facilities must have a mutual agreement on the responsibilities of the facility’s future operational maintenance and repair/ replacement. For example, the Georgia World Congress Center Authority cooperates with the Falcons with its stadium maintenance and covers all landscaping maintenance costs. However, each year, the GWCCA requires the Falcons to submit its maintenance and capital improvement plan before the next season (Atlanta New Stadium Project 19)

9. Financial Terms

· Having an operating expense budget is important because organizations must minimize expenses in order to maximize profit. Organizations must efficiently allocate their budget between employee salary, field maintenance, equipment purchases, administrative services and taxes. (Florida Panthers A-2) Some operating expenses may be covered by the stadium. For instance, the GWCCA will provide the Atlanta Falcons an annual budget for traffic allocation services (Atlanta New Stadium Project 14)

· Organizations also need to consider how the operating revenue is being distributed. Such as ticket revenue, merchandise sales, food and beverage sales. Teams might need to pay a certain percentage of their revenue to the county issued revenue bonds.

10. Development strategy Agreement

· In order to maximize a sporting facility’s usage, it is important that a stadium and its local county, to share the same commitment for a long-term growth strategy. Teams such as the Atlanta Falcons might be required to enter into a Non- Relocation Agreement with its stadium. In such cases, the teams are restricted to relocate, unless a material breach has been made by the stadium operator (Atlanta New Stadium Project 9)

Citation

Florida Panthers and Broward County, FL for Broward County Civic Arena 1996.

Atlanta New Stadium Project 2012.

Eagles Lease Terms 2000.

“8 Things to Consider When Building a New Sports Complex.” Earth Networks, 8 Nov. 2019, www.earthnetworks.com/blog/8-things-consider-building-a-new-sports-complex/.