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Subsidies for Saints Owner Open New Orleans to Super Bowl

January 31, 2013

Super Bowl Returns to New Orleans as Saints Owner Profits

A file photo showing New Orleans Saints owner Tom Benson and wife Gayle Marie after the first game at the Superdome since Hurricane Katrina, during September 2006 in New Orleans. Photographer: Bob Rosato/Sports Illustrated via Getty Images

Two financial deals that kept the National Football League playing in the Superdome, allowing New Orleans to host a 10th Super Bowl, were expensive for taxpayers and enriched Saints owner Tom Benson, said former Louisiana Governor Kathleen Blanco.

Taxpayers have spent at least $471 million on the Superdome since Hurricane Katrina, allowing a state reeling from the nation’s most-expensive natural disaster to keep its pro sports teams and rebuild a part of downtown destroyed by the 2005 storm. Benson, meanwhile, is worth $1.6 billion, according to the Bloomberg Billionaires Index, after acquiring the National Basketball Association’s New Orleans Hornets, a 26-story office tower that houses state agencies and a mall next to the stadium.

“The city is coming back and Tom Benson is an important player,” Blanco, a Democrat, said in a telephone interview. “He knows how to seize a financial advantage.”

The Super Bowl’s return for the first time in 11 years marks a cultural rebirth because “the five Fs of Louisiana are faith, family, food, football and fixing flats,” James Carville, a political consultant and the co-chair of the title game host committee with his wife, Mary Matalin, said on a conference call with reporters. PricewaterhouseCoopers LLC has said the game will generate $185 million in direct spending.

The public has supported that culture by paying for the Superdome, subsidizing the Saints and guaranteeing that Benson would have state leases for about two-thirds of his tower. Team President Dennis Lauscha said Benson helped lead rebuilding in a neighborhood mostly abandoned by businesses after Katrina.

Benson’s Risk

“The state did mitigate some of that risk, but it certainly did not mitigate all of it,” Lauscha said in a telephone interview. “There were a lot of opportunities for a lot of other people to come in and do what Tom Benson did.”

U.S. taxpayers spent about $10 billion more on stadiums and arenas for professional sports teams than had been forecast, according to a 2012 book by Judith Grant Long, a professor of urban planning at Harvard University.

The costs of land, infrastructure, operations and forgone property taxes add 25 percent to the taxpayer bill for the 121 sports facilities in use during 2010, increasing the average public cost to $259 million, or $89 million more than the $170 million commonly reported by the sports industry and media, Long says in the book “Public/Private Partnerships for Major League Sports Facilities.”

Benson’s Boogies

Benson, 86, who made his money in car dealerships, banks and real estate, bought the Saints in 1985 for $70 million, preventing a possible move to Jacksonville. He often waves a fleur-de-lis umbrella after wins in a sideline dance known as the Benson Boogie. He declined to be interviewed for this story.

The Saints debuted in 1967, playing home games at Tulane Stadium until the Superdome opened in 1975. It hosted its first NFL championship game in 1978, the 1988 Republican National Convention, five men’s college basketball Final Fours and three college football Bowl Championship Series title games.

The Saints had loyal fans from the beginning. They crowded the stands for the two decades it took the team to record a winning season, though some of them took to wearing paper bags on their heads to hide their faces. Some wags dubbed the team the Aints and began calling themselves Who Dats, after the chant in the local dialect “who dat say dey gonna beat dem Saints?”

Public Support

In the years before Katrina, the Saints were one of eight NFL teams to play in a building paid for entirely with public money, and one of two that had substantial revenue guarantees, according to a 2005 report by the Bureau of Governmental Research, a nonprofit research group in New Orleans. Along with tax breaks and the public expense of building and operating the Superdome, which cost the state $163 million to build, the team’s pre-Katrina lease provided for $180.5 million in cash subsidy payments over 10 years starting in 2001.

During the storm, the Superdome was at the center of the disaster, sheltering thousands for days even after winds tore holes in the roof. That season, the Saints played home games in New York; Louisiana’s capital of Baton Rouge; and San Antonio, whose then-mayor told ESPN he wanted the team to stay.

Talks headed by then-NFL Commissioner Paul Tagliabue led to a plan to fix and renovate the Superdome with $121 million from the state, $44 million from the Louisiana Stadium and Exposition District, which oversees the facility, $156 million from the Federal Emergency Management Agency and $15 million from the league. Blanco said a rushed bond deal followed.

Ultimately, the financing cost the district more than three times its $44 million commitment, according to data compiled by Bloomberg from state documents and interviews.

Tagliabue’s Promise

“He said that if we could get the Superdome ready by September 2006, ‘I can guarantee the Saints won’t leave New Orleans,’” Blanco said of Tagliabue’s role. “So we decided to make getting the dome ready a priority project, getting something that should take years done in nine months.”

State Treasurer John Neely Kennedy said he felt like he was negotiating with “a gun against my head,” over a deal he described in a telephone interview as “lashed together with baling wire and Band-Aids.”

The NFL plays its Super Bowls only in markets that have teams. Tagliabue didn’t respond and an e-mail and telephone call seeking comment on Blanco’s statement about his role.

“A lot of folks in New York made a ton of money,” Kennedy said. “Louisiana taxpayers didn’t do so well.”

Victorious Return

In September 2006, the Saints returned to the stadium, about a year after Katrina made landfall. They beat the Atlanta Falcons in what Carville said was “one of the most significant regular-season games in any sport anywhere.”

In April 2009, Louisiana negotiated a new lease to secure Benson’s promise to keep the team in New Orleans through 2025. The state made $85 million in fresh Superdome improvements, adding luxury seating and moving the press box. A company owned by Benson, Zelia LLC, bought the 26-story tower next to the stadium that had stood mostly vacant since Katrina and renovated it. At the time, Benson put the total cost at about $85 million. The state then signed a $153 million, 20-year lease for office space in the building, which now houses 51 state agencies, according to the Louisiana Administration Division.

Lauscha said the deal allowed the state to consolidate its downtown office space. Now called Champions Square, the mall has been renovated into a performance space with a stage that serves as a stadium entryway. Benson’s television station, WVUE, does a morning show from a balcony of the overlooking tower.

Revived Neighborhood

“We have to do what’s best for our region,” Lauscha said. “The Benson family took the first dive and invested a lot of money. They took the mall and Benson Tower and put them back into commission.”

Displaced by Katrina, the Hornets played in Oklahoma City for most of two seasons before the NBA bought the franchise from George Shinn, acting to prevent a possible relocation when a suitable investor couldn’t be found. In April, Benson acquired the team from the league for $338 million, a move that NBA Commissioner David Stern said in a telephone interview creates a synergy that “holds enormous promise for that entire area as a downtown development.” The team plays in a taxpayer-funded, $129 million arena across the street from the Superdome.

In 2011, naming rights to the stadium were sold to Daimler AG’s Mercedes-Benz unit for about $60 million, reducing the amount of taxpayer money that supports the Saints.

Superdome Improvements

For Benson, the aftermath of Hurricane Katrina created an opportunity to get the state to move forward on long-sought Superdome improvements, said Robert Baade, an economics professor at Illinois’s Lake Forest College whose 2006 study “Can New Orleans Play Its Way Past Katrina” said that the city’s redevelopment efforts “are better directed at first providing infrastructure that will encourage the return of its middle-class citizenry and the restoration of its culture.”

“New Orleans was put in a position where it had to pony up or lose the team,” Baade said in an interview, referring to the Saints and Benson. “He saw an opportunity and seized it.”

The deals weren’t about enriching the owner, and they accomplished their goals, helping the team and stadium succeed while attracting events including the Super Bowl, said Greg Bensel, a Saints spokesman.

Even with the extra costs of the bond deal, Blanco said, “the financial investment has been paid back many times over.” The Saints, who hadn’t had a winning season before Benson bought the team, won the Super Bowl in 2010.

“The state found its footing and the Saints went on to find success on the field,” Blanco said.

To contact the reporters on this story: Aaron Kuriloff in New Orleans at akuriloff@bloomberg.net; Darrell Preston in Dallas at dpreston@bloomberg.net.

To contact the editors responsible for this story: Michael Sillup at msillup@bloomberg.net; Stephen Merelman at smerelman@bloomberg.net.


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