State can veto move by Redskins

NFL sale approval reveals clause guarding Maryland as well as Prince George's

May 26, 1999|By Jon Morgan | Jon Morgan,SUN STAFF

You won't see them in the skyboxes, but a couple of unusual co-owners were included with the sale of the Washington Redskins, an $800 million transaction approved yesterday by the NFL: the state of Maryland and Prince George's County.

Under a clause in the 1996 agreement governing the $70 million in public money spent on roads and other infrastructure for Jack Kent Cooke Stadium in Landover, the state and county own a special share in the parent company of the team and stadium.

The share pays no dividends, has no value and doesn't give the governor voting rights at NFL owners meetings. In fact, it has only one function: to veto any move of the team's home games to a different stadium.

Over the past decade, states and cities that have shelled out millions of dollars on stadiums have sought ways to nail down the franchises. Many have included "damages" clauses in their leases that order the teams to pay penalties for relocation. Others tack on clauses that waive, in advance, a team's right to pay off its lease and move.

The Redskins' clause, however, may be a first.

"That is a new one to me," said Paul Anderson, assistant director of the National Sports Law Institute at Marquette University and an expert on stadium leases.

Reference to the clause was contained in the financial documents sent to potential buyers of the franchise and obtained by The Sun.

Neither the new nor old owners have given any indication that they want to move, an event that appears unlikely in the foreseeable future.

One reason fans needn't worry is the economics, amply laid out in the sales documents. The team and its affiliated stadium compose one of the wealthiest operations in sports. The documents, prepared last year, forecasted $46 million in operating profit on revenues of $141 million for 1998, thanks largely to the lucrative skyboxes and club seats built into the stadium.

The organization is "one of the most attractive investment opportunities in the world of professional sports," according to the documents. Unlike most new stadiums in the country, the Redskins venue was privately financed by its team.

Among the warnings to potential buyers: The state and county have a voting interest in any relocation of the team over the 30 years of the agreement.

Representatives of the team's buyer, communications executive Daniel Snyder, have inquired about the clause, but will adhere to it, said Richard Romine, general counsel to the Maryland-National Capital Park and Planning Commission, a signatory.

"This was something that our negotiators came up with as a way to ensure that the team was going to be there if this investment was being made," Romine said.

The 10-page clause called for the creation of a single share of preferred stock -- the only one of its type that can be issued by the team. The stock was transferred to a "voting trustee," namely a vice president at the First National Bank of Maryland. The trustee is instructed by the document to vote against any relocation.

Edward Hargadon, general counsel for the Maryland Department of Transportation, said the arrangement amounts to a veto over any proposed move.

"That is an interesting way to enforce a relocation clause," said Alison Asti, general counsel of the Maryland Stadium Authority, which owns and operates PSINet Stadium and Oriole Park.

The stadium authority's leases also prohibit the teams from relocating. In the case of the Ravens, it is further backed by "specific performance" language that permits the state to seek a court order against a move and waives in advance the team's defenses against the order. The idea is to keep a team from paying off its rent while it plays elsewhere, as the Browns did when they moved to Baltimore from Cleveland.

The Redskins' agreement also contains a specific performance clause, as well as a provision that gives the land and stadium to the county for $10 in the event the franchise relocates.

Anderson, with the National Sports Law Institute, said more and more anti-relocation clauses are showing up in stadium leases. It is not unusual to find one, like the Redskins', that incorporates several different legal avenues.

Anderson said he thinks the best are the ones with damages clauses that force a team to pay a penalty for moving.

Whether or not any of them provides absolute protection to fans and taxpayers remains to be seen, he said. None of the new clauses has been challenged in court.

"There is no such thing as ironclad. There's a lot you can do to punish the party to the agreement that breaks it, but there's not much you can do to stop them from breaking it," Anderson said.

Pub Date: 5/26/99

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