Baltimore NFL team would reap expansive profits Stadium, lease boost to new franchise

June 09, 1993|By Jon Morgan | Jon Morgan,Staff Writer

If Baltimore wins a National Football League expansion team, its owners will have to endure several years of multimillion-dollar losses, but quickly will see the franchise blossom into one of the most profitable in sports.

An analysis by The Sun of revenues and expenses for the prospective team shows it earning an operating profit of $13 million -- more than some NFL teams make now -- by its second year of play, 1996.

But when the NFL's stiff entry terms are added in, the team owners would have to pay out $118 million in fees and operating losses before emerging into the black in 1998. After that, the team should generate an annual pre-tax profit of about $28 million, thanks to a stadium built with public funds and offered with generous lease terms to lure a team.

"This is going to be the most profitable franchise in the NFL within the first few years. . . . It's outrageous," said Paul Much, an analyst of sports team finances with Houlihan Lokey Howard & Zukin in Chicago, who reviewed the analysis. The most profitable teams in the NFL now earn about $14 million a year, he said.

"These guys are going to have a windfall. They should thank the taxpayers every day," Mr. Much said.

It also should prove a tempting attraction for expansion, because the NFL says it wants to put its new teams in cities where they will be financially sound.

Furthermore, Mr. Much said: "Any time a team is highly profitable, it gives the other owners a standard to ask for from their communities."

Baltimore is competing with Jacksonville, Fla.; Memphis, Tenn.; Charlotte, N.C.; and St. Louis for one of the two teams the league plans to add this fall.

One NFL source who has seen the league's internal estimates for all five cities says all but Memphis are projecting figures similar to Baltimore's, with Jacksonville's running even higher under some scenarios. Memphis' proposal calls for retrofitting the aging Liberty Bowl, which will leave the team with relatively few high-profit luxury seats.

But in all the cities except Baltimore, the projections depend upon some degree of financing still to be approved by local governments, the NFL or, in Charlotte's case, an unprecedented willingness of fans to pay one-time season-ticket fees that will average $2,500.

Baltimore's funding has been approved by the General Assembly and is in place.

The Sun analysis, using a combination of league-wide averages, estimates by independent experts and projections in the Maryland Stadium Authority's NFL application, shows team revenues growing from $41 million in its first year, 1995, when the team would play at Memorial Stadium, to $82 million by 1999. Expenses, not including the NFL's entry fee, would rise from $41 million to $54 million over that period.

The projections assume a sold-out stadium, which most experts say is a virtual certainty for the first few years of a franchise. Even if attendance fell to 90 percent of capacity -- the NFL average -- the team would enter the next century with a tidy annual operating profit of $25 million on revenues of $80 million.

Taxes -- which average about 40 percent for teams -- would reduce that bottom line, although depreciation of player contracts and other accounting techniques can soften the pain.

A big slice of the projected revenues comes from sky boxes, now common in sports, and club seats, a relatively recent innovation that Baltimore was quick to take advantage of at Camden Yards. Those pricey seats are expected to generate more than $18 million a year in rental fees and ticket charges.

"Your taxpayers are making a very substantial gift to the owners of the franchise. Too bad the taxpayers don't have a share of the profit," Mr. Much said.

An offer NFL can't refuse

Herbert J. Belgrad, chairman of the stadium authority, said the taxpayers will benefit from the economic spinoff of a team. "The idea is to make an offer that can't be turned down to get a franchise here," he said.

The proposed stadium would be built downtown, adjacent to Camden Yards, and contain 70,000 seats, including 108 sky boxes and 7,500 club-level suites where fans would have access to exclusive lounges and other amenities. Construction would begin as soon as a team is awarded and would cost $135 million BTC to $150 million, unless the owners decide to add a dome, which could add $100 million and would have to be privately financed.

The Baltimore team would play its first season, 1995, at Memorial Stadium before the new facility was completed. The revenue projections show how much more profitable the new stadium will be -- a point of contention raised by the Colts when they moved to Indianapolis in 1984.

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