How to pay for a football team

(Editor’s note: A previous version of this story misstated the condition of a sales tax related to sales outside the stadium.) 

To economists, a $2 billion deal for a new Titans stadium is another egregious example of subsidizing privately-owned teams at taxpayer expense. But to Nashville officials, it’s the way out of an eye-popping renovation bill and the contract that caused it.

In spring of 1996, then-Mayor Phil Bredesen closed a $292 million deal bringing the Houston Oilers to Nashville, ushering in a new era of professional sports in Nashville, but also what has become an escalating tab. Twenty-six years later, with 17 years left on its lease, the city owes $30 million on Nissan Stadium debt payments, $32 million to the team for unpaid repairs, and it faces a renovation bill estimated at $2 billion. 

Or, under a new proposal, the city, state and the Tennessee Titans can start anew and pay for a new and enclosed $2 billion stadium, relieving the city of its burdensome improvement and repair duties. The public investment would be at least $1.3 billion, the largest in NFL history.

For economists who long have been warning that expensive public subsidies for sports venues fall short on returns for taxpayers, each of the numbers is staggering. 

“This is a gigantic giveaway,” Victor Matheson, College of the Holy Cross economist, said. “Whatever is driving it to be necessary is kind of just a series of people making bad decisions again and again.”

But to Nashville officials pushing for a new stadium, what matters more than the usual return on investment analysis is that the city is responsible for a massive renovation bill without a method to pay it. Rather than just promoting the deal as an economic opportunity, proponents have framed it as the logical escape hatch from the existing balance sheet.   

“We are going to be on the hook for nearly $2 billion,” TJ Ducklo, spokesman for Nashville Mayor John Cooper, said of the current lease agreement. “It’s a big moment for the city to get us out of this looming dark cloud.”

The cost of renovation 

The issue centers on the 1996 lease agreement, in which the city committed to foot the bill for maintaining “first class” stadium conditions in line with “comparable facilities.” In 2017, the price estimate to repair the stadium was nearly $300 million. In early 2022, the renovation estimate used was $600 million and the number has since climbed to $2.1 billion in a recently released report from Venue Solutions Group, hired by the city. The estimate includes $1.9 billion to redevelop the stadium and another $235 million for maintenance through 2039.

The cost estimates have puzzled many observers, both the increases and the amounts themselves. The latest renovation estimate is seven times the original cost to build. It exceeds the cost of other stadium renovations projects, including $550 million for Miami’s Hard Rock Stadium in 2015 and $500 million forecast for the Bengals’ stadium this year, as well as the projected costs to build a new $1.4 billion stadium in Buffalo. 

“That’s not credible,” Kennesaw State University economist J.C. Bradbury said of recent renovation estimates. “If you go and look at past stadium refurbishment of other stadiums, no stadium spends more than a few hundred million at the high-end of refurbishments.”

Metro Council Member Bob Mendes has also voiced skepticism on the close to $2 billion renovation estimates that the new stadium argument hinges on, given the costs other stadiums have experienced. 

“Personally, in order for me to believe $1.8 billion, I have to believe that Phil Bredesen and Nashville colossally made a horrible deal in the ‘90s. And, I have to believe that the stadium is in such disrepair that it would require three times the highest renovation cost for any other football stadium ever,” Mendes said. “I have a hard time buying it’s $1.8 billion.”

Titans CEO Burke Nihill attributed the rising projections during the past year to a closer look from more construction and contracting professionals, which led to more thorough reviews. As the costs grew, the long-term viability of the stadium came into question, and a new stadium became a consideration, he said. 

“For the last five-plus years we have been chasing leaks through the building,” Nihill said. “We have been repairing expansion joints. We’ve been repairing concrete, things that our fans and people who come to the building would never know. What we’ve been told is that is a process that won’t likely ever stop.” He added, “It has been contractor after contractor, consultant after consultant, that has told the city, that has told us, that this is what would be required.”

VSG also provided the 2017 estimate, and managing partner Russ Simons said in a Metro Council committee meeting on Nov. 7, that the $300 million estimate was a “facility condition assessment” concerning equipment, operating systems and basic building structure, and that it did not address NFL compliance or improvements to the building.

VSG’s 2022 report highlighted cracking walls and stadium surfaces, corroded pipes, suites that were “behind the times,” limited technology in locker and interview rooms and speaker systems near the end of their expected lifespan. It also priced out the cost of amenities, including an outdoor deck and stage area. The report pegged the Hard Rock Stadium renovations at $1.3 billion if prior work was included and if costs were adjusted for inflation, an amount that closes the disparity between the Nissan estimate but still leaves a significant gap. 

Several Metro Council members have taken issue with the focus of the recent VSG report, which cost the city $315,000. Rather than providing an estimate on what renovations must be done to remain legally compliant with the lease agreement, it tallies the cost of executing the Titan’s renovation plan. 

“We’ve got this cost, and we have no idea what is in the cost, what is a need and what is a want, what we are obligated to and what we want to be nice and shiny and cool,” Council Member Courtney Johnston said at the Nov. 7 meeting.

The renovation plan was designed in 2021 by firms Gensler and Hastings, and it was released after the Nov. 7 meeting. The plan includes a canopied rooftop area, a music venue overlooking downtown, a club with theater box seating, a song-writing themed cafe and a three-level sports bar with a patio and several large screens for sports betting fans. 

Simons defended VSG’s focus on the Gensler and Hastings report, saying in a written statement that VSG needed a design to work from and that the firm cannot offer a legal opinion on Metro’s lease obligation. The renovation design “is not opulent, and it is in our professional opinion consistent with the elements that we see in other stadium renovation projects and new built NFL stadiums,” Simon said. 

Cooper’s administration also urged council members to focus on the larger picture of the renovation obligations. 

“The fact remains Metro has a lease from 1996 with an unfunded liability and no way to pay for it — a debate about whether that liability is enormous or just gigantic misses the point,” Ducklo said.

Rebuild instead of renovate

Regardless of its price tag, a stadium renovation is hamstrung by funding sources. Under the current contract, stadium maintenance costs that exceed the in-stadium sales taxes come from the city’s general fund, which also pays for schools, public safety and two dozen other services. Recent state legislation grants the city access to new hotel tax revenue only if it builds an enclosed stadium. A $500 million contribution from the state also is only available for a new, enclosed stadium. If the city renovates or ditches the dome, those options disappear. 

A new partial sales tax for funding stadium facilities, approved by the Tennessee General Assembly in 2021, would pertain to the area outside the stadium, where development depends on a new lease agreement being made, an outcome city officials said is most likely with a new stadium.

“These revenues are dedicated to the construction of a new facility, some of them specific to a new, domed facility,” Metro Finance Director Kelly Flannery said at an October committee meeting. “I don’t know how you solve for that.” 

That the state legislature narrowed some tax revenue opportunities to a new, enclosed stadium “is truly a spectacular victory for the sports industry of Tennessee,” economist Roger Noll, an emeritus economics professor at Stanford University, said. “The choice is not, ‘Shall we spend $1 billion on the school system or $1 billion on a stadium?’ The choice is $1 billion on the stadium or nothing.”

To proponents, the structure of those revenue streams helps shield Nashville taxpayers by relying on tourists, stadium-goers and revenues that wouldn’t exist without the deal, and the dome ensures there are more and bigger events that generate greater economic benefits.  

State documents show a domed stadium is forecast to add 15 ticketed events annually and yield $225 million more annually in direct spending than the existing stadium. A roof could mean more concerts in the winter, more community events, and the holy grail of a Super Bowl, along with other major events, Nihill said. There are fewer seats proposed in the new stadium (about 60,000 versus 69,000) to eliminate what he described as “bad seats” in the upper corners, but the new stadium is still expected to draw more people with those additional events, he said.

“We absolutely expect there will be many, many more events,” Nihill said. “It starts with the biggest events in the world that would not otherwise consider Nashville.”

Economists have pushed back on the size of those gains, especially for a city that already gets a heavy stream of large concert tours and noteworthy sporting events  — at Nissan Stadium and at Bridgestone Arena — and question how those returns flow back to Tennessee taxpayers, especially those outside of Nashville, whose bill is $500 million.

“You’re likely to get a Super Bowl,” Matheson said, estimating one every 15 years. “You are talking about an additional number of events that is pretty small.” 

Nashville is already a heavy draw for tourists, so more stadium events mostly shift which visitors come and where in town they spend. And, most stadium attendees are local residents who otherwise would be spending elsewhere, Bradbury said. 

“The funding mechanism gives the fiscal illusion that it is generating new revenue. Really, what it is doing is reshuffling existing revenue,” Bradbury said.

The cost to rebuild

The Rams’ and Chargers’ SoFi Stadium cost $5 billion and was privately financed. Allegiant Stadium in Las Vegas cost $2 billion, with $750 million coming from taxpayers. The Buffalo Bills are building a $1.4 billion, open-air stadium with $850 million in public dollars, a record that would be bested by the new Titans deal. Levi’s Stadium, opened in 2014, cost $1.3 billion.

Inflation is a critical factor in comparisons to older, less expensive stadiums, Nihill said. Had the Titans’ project been estimated 10 years ago, the number would be significantly lower. And, he said, there is also the cost of the dome, which is at least nine figures but also saves repair costs overtime, with most of Nissan’s damage related to water and outdoor elements.

“Having a roof is going to be a real game changer in terms of  the durability of the building,” Nihill said.  

The new stadium bill breaks down with the $500 million from the state and $840 million package from the team, NFL financing and personal seat license sales. Metro Nashville will be supplying $760 million in revenue bonds, financed by the newly approved revenue streams, the existing in-stadium sales tax revenue, rent payments and taxes on tickets. 

Maintenance costs are not included in the $2.1 billion estimate, complicating any apples-to-apples comparison to the renovation equation. They are expected to cost hundreds of millions of dollars and also be covered by the designated revenue streams. 

“The intention is to amass a giant pile of tax dollars for future improvements to make it so this doesn’t happen again,” said Mendes, interpreting the term sheet he and other members have been asked to approve.

Critical to the new deal’s structure, city and team officials say, is this burden of maintenance costs. If maintenance costs still exceed the designated revenues, they will be covered by the Titans. Under the current deal, they are backstopped by the city.

For Nashville residents, much of the frustrations with the large stadium budget stems from not seeing other needs — housing, education, transit — prioritized in the same way by state and local leaders, concerns that were also voiced in 1996. But, for deal proponents, those needs are just one more reason to support a new deal, so the general fund is no longer encumbered by stadium costs as it is under the current lease.

“If we proceed with this, we will literally rip that up and the obligation that comes with it and the potential impact to the general fund,” Nihill said. The new deal “leaves everyone in a better position than the current status quo.”

City and team leaders also have emphasized the economic opportunity for Nashville in the 66 acres where the current stadium is, which will be returned to the city for development. Property tax revenue and remaining sales tax revenue from that area would go to Metro’s general fund to the benefit of all city taxpayers.  

Without a new stadium deal, “those parking lots remain parking lots for 17 years,” Nihill said. “There is a massive amount of value in that land for the city.”

Plenty of Nashvillians are eager still to defend the original lease agreement now under scrutiny. It brought an NFL team to town, validated Nashville’s rise, contributed to what is now a major professional sports economy and helped capture the attention of corporations nationwide that have since moved to Middle Tennessee. There is also the immeasurable, intangible benefit of boosted civic pride. 

“Nashville really changed when we were named an NFL city,” said banking leader Ron Samuels, who helped welcome the team to Nashville. “Economic development really happened as a result of the Titans accepting Nashville.” He added, “This is one of the best investments the city has made.”

Even at the time of the deal, city leaders acknowledged the contract was favorable to the team. That was the point of the Oilers moving, they said. 

“The answer to the question of why do they get everything and we nothing is that they do get the largest share in the deal,” then-Metro Finance Director Joe Huddleston told the Tennessean in 1996. “But the reason is that to bring an NFL team to Nashville, this is what we had to offer.”

The lingering question for city leaders and residents is, if not this deal, then what? Some skeptics have suggested determining what is owed to the team in court, building a less expensive stadium or simply to keep negotiating, but the state’s limitations on funding streams further complicates any other options. The Titans have assured their long-term commitment to Nashville, but a non-relocation agreement hinges on a deal being made. Other cities have seen teams walk when stadium talks sour.

“There is no threat to leave Nashville,” Nihill said. “We do believe there is a better way forward and we will continue to hack away at that. But in the meantime, we will probably need to make some investments in this building.”

Even among some of the toughest critics of the new stadium, the proposed deal has an air of inevitability because of the dilemma brought to the bargaining table and funding rules dictated by the state.

“They set it up so they can’t say ‘no,’” Noll said. “The message they have given to the citizens of Nashville is ‘You have no choice, write the check.’ Of course it’s going to happen.”

The sentiment is also echoed among many lukewarm and diehard fans. 

“It seems unlikely that it would not be approved,” said resident Joe Nettles. “Football is just too big.”