Kevin Hoffman-US PRESSWIRE
The new lease agreement for Ralph Wilson Stadium makes financial sense not just for New York State, but for Erie County and the Buffalo Bills, as well.
Last Friday, the Buffalo Bills and local and state government officials came to an agreement on a new lease for Ralph Wilson Stadium that should keep the team in town for at least another seven years. The financials of the deal make sense for everyone involved, but questions remain.
The most prominent financial figure most people saw was the $400 million buyout the Bills will face if they move in years 1-6 (or 8-10) of the lease. That's a major piece of relocation protection, and would pay back the state and county for decades of past capital improvements to the facility. But make no mistake about it: that figure is designed not as repayment, but as deterrent to moving the team.
In year seven, the team can opt out by paying a much smaller $28 million buyout. This figure represents the total buyout from the last lease agreement, and is considered substantial compared to most similar deals around the league. It also would do nothing to keep the Bills here for an owner willing to spend up to $900 million or more for the franchise. It would pay back the state for some of the money they dished out, and that's all.
As for money committed to stadium improvements, the $135 million upgrade was split three ways; the state contributes $54 million, the county puts in $41 million, and the Bills - for the first time ever - will chip in $35 million. Erie County owns the stadium, and is ultimately responsible for the upkeep. Think of this as a landlord getting his parents and his tenants to chip in for a home renovation.
Another surprising turn in the new lease is the Bills paying rent. The organization will pony up $800,000 per year in rent payments - a total of at least $5.6 million before the "buyout" year, and $8 million over the course of the entire lease. The Bills contributing, in essence, $40 million to this deal is remarkable, but should give one pause.
It is also somewhat curious that the Bills initially requested much more than that for renovations. Two big numbers - $200 million and $230 million - were the reported demands of the Bills during negotiations. What convinced the Bills to take less, or was that merely a negotiating tactic?
Economically, this move makes plenty of sense for New York State (despite what Deadspin will try to tell you). In total, local lawmakers (including the county and state) are on the hook for $226.8 million for the duration of the lease, per The Associated Press. That includes gameday police and expenses, as well as capital payments through the duration of the lease. The AP estimates that the state earns about $20 million a year from the Bills in income taxes. If New York doesn't have an NFL franchise, they lose all that income tax with nothing to replace it.
It's not hard to presume the other $27 million taxpayer contribution is more than made up through sales tax on things the Bills players and staff purchase, as well as other, harder-to-measure tax revenue from tailgating, local jersey sales, hotels and restaurants, and more.
To compare to some other state economic grants, the state contributed $50 million - just under the amount contributed to Ralph Wilson Stadium - to the Albany area for economic development in 2012. That was the lowest of the major regions of the state. If the state is willing to put investment money around New York, they could (and have) placed worse bets than the National Football League.
Of course, the money is not the only thing the state is worried about. At the press conference announcing the deal, Lt. Governor Robert Duffy made mention of the psychological impact of the Bills leaving Erie County.
"Those that would criticize the state and Erie County for investing taxpayer money to keep the Bills here would be the same ones criticizing if the Bills left," Duffy said. "If we were to lose them, that would be a shot into the morale of this community and this state that could not be understated."
Well, that and losing their own jobs. Politicians who lose major sports franchises aren't remembered fondly.