It is axiomatic in sports that a team moves to a new stadium and gets rich.
It happened to the Orioles. And the Cleveland Indians. And the Washington Redskins. The list is long of teams that have been enriched, mostly by taxpayers, during this decade's boom in stadium building.
So what happened to Art Modell?
The Ravens owner did the unthinkable when he moved his NFL franchise to Baltimore from Cleveland after the 1995 season. Desperate for revenues and frustrated by his inability to pry a stadium from Ohio politicians, he took up Maryland on its offer to build his team a new home.
Salvation, however, eluded him.
Last week, he signed a tentative, $600 million agreement with a new investor who almost certainly will own the entire franchise in four years. Modell and his son, team president David Modell, may remain for a time as advisers or employees -- but not owners.
They will be wealthy, but there will be no Modell dynasty. Art Modell will not, as he often said he wanted to, pass on the family business as other members of the NFL's old-guard owners managed to do.
"In many ways, he is a tragic figure in having to leave his home of 30 years. He did a lot of good things for this community," said Frederick Nance, a Cleveland attorney who represented that city in its failed stadium negotiations and a subsequent lawsuit against Modell. "To give all that up and put himself in a position to only postpone the inevitable involves a lot of irony."
Documents prepared for potential Ravens investors, and obtained by The Sun, show how swiftly the team's revenues and value rose after it moved to Baltimore and occupied its downtown stadium. Between the 1997 and 1998 seasons, when the team moved from Memorial Stadium, revenues leapt from $75.6 million to $115.2 million. The operating profit more than doubled, to nearly $11.3 million.
And it is projected to double again this year. And jump by another $10 million next year, with planned cuts in marketing and administrative costs.
But the gains weren't enough. Under terms of the team's gargantuan, $185 million loan, Modell was required to keep revenues well above expenses -- to cover bank payments and provide some padding for his lenders' peace of mind.
The debt that followed the team from Cleveland, and grew more bloated with the costs of the move, swamped even the team's rapidly growing income. Payments on loans that big can cost $20 million a year, experts estimated.
If he hadn't sold the team, Modell risked the indignity of a league-imposed sale.
Debt ratio raises alarms
The beginning of the end came last spring. The team's cash flow-to-debt ratio fell below a benchmark established by the lenders, a syndicate of banks, insurance companies and bondholders.
Requiring a borrower to abide by such a ratio is common in commercial loans, and the Ravens' terms were no more stringent than those faced by borrowers in similar deals, according to sources familiar with the situation who spoke on the condition of anonymity. It is the way bankers protect their investment in companies, by forcing borrowers to keep their revenues up and expenses down.
When the team failed to stay within the guidelines, some lenders were more tolerant than others. But two bondholders, representing retirement funds for teachers and firemen, became alarmed. They wanted to know what the team was doing to get out of its straits. They wanted to see the books. They wanted intimate details of an industry the team felt the pension managers didn't understand. They let it be known they might demand their money back.
Modell had another idea. Familiar with the NFL's newfound willingness to loan teams money for stadiums, he decided to tap into that credit pool instead of holding hands with the lenders, said Ravens vice president of communication and marketing Kevin Byrne.
Modell had reason to believe he could rely on the NFL to see him through because he had gone that route several times, literally capitalizing on his respected status within the league.
The NFL gave him permission to move the team in 1996 and then, when his debt and the costs associated with the move piled up, allowed him flexibility in paying a $29 million relocation fee.
A year later, in 1997, the other team owners voted to allow Modell to exceed NFL limits, permitting the team to borrow $185 million from the syndicate led by the Fleet Financial Group of Boston.
The debt restructuring also resulted in an imaginative redrawing of the corporation's organizational chart.
NFL rules restrict how much of a team can be used by an owner as collateral for loans, to keep unrelated endeavors from dragging a franchise into bankruptcy. But there is a loophole: The debt cap applies only to the majority owner, not a minority investor.