How Goldman Sachs Profits from Building Obscenely Unnecessary NFL Stadiums

Here is what happened this week in San Francisco, where a new stadium plan has been announced for the 49ers move away from Candlestick Park (or whatever they’re calling it these days):

The funding deal was spelled out in a development contract that caps two-and-a-half years of closed-door negotiations between city and team leaders and essentially completes a planning process that began when the team announced interest in abandoning San Francisco five years ago.

Threaten to leave. Threaten to leave some more. Keep threatening until the public gives you what you want. Standard NFL operating procedures that are good for NFL team owners in their attempt to fleece the public. Sound familiar?

But, here is an interesting twist:

Goldman Sachs, U.S. Bank and Bank of America have agreed to loan the city and team a combined $850 million to pay for the lion’s share of the construction, which could start as soon as next year.

I don’t know about you, but when I think of Goldman Sachs, U.S. Bank and Bank of America, I don’t think “altruistic companies that are looking out for the public’s best interest”. If those three companies have agreed to loan San Francisco money to help them build a new NFL stadium, there is one reason why: they liked the terms of the deal.

And what’s not to like: they will get paid.

Even if NFL football fades in popularity, they will get paid.

Even if the 49ers can’t make rent, Goldman Sachs, U.S. Bank and Bank of America will get paid.

If the city has to raid their general fund, increase taxes, or open a stupid racino, Goldman Sachs, U.S. Bank and Bank of America will get paid.

Back in the days before the financial meltdown, Goldman Sachs was playing an interesting financial game. They were both selling investments based on pools of home mortgages while simultaneously betting that the investments they were buying were going to blow up in the faces of the suckers they sold the bad loans to. While it’s technically illegal to sell a flaming pile of dog crap, that didn’t stop Goldman Sachs. And, why should it? Many of their ex-employees are now in charge of regulating them, so as you might expect, no one has gone to jail over that scam.

Goldman Sachs’ Role in the NFL

It turns out that Goldman Sachs is also involved in profiting from the NFL’s corporate welfare deals. One example is the deal in San Francisco where a city will be making debt payments to private companies (Goldman Sachs, U.S. Bank and Bank of America) on behalf of private companies (San Francisco 49ers and the NFL).

Other connections:

In 2008, Goldman Sachs analyst, Anthony Noto left the company to become the CFO of the NFL.

In 2010, Noto returned to Goldman Sachs.

A former Goldman Sachs executive, George Atallah, was the lead negotiator on behalf of the NFL players association during the recent labor dispute. Who was he negotiating against in the deal? Goldman Sachs:

George Atallah, a former Goldman man now working with the Player’s Association, has called into question his former employer’s handling of the negotiation.

Atallah was recently quoted by The NY Post: “It’s hard to find that Goldman Sachs would ask any of its clients to do a deal without full transparency. I’ve worked for Goldman and know what it believes. So it’s doubly disappointing to me that they are so respected but apparently won’t advise their clients to observe the most basic tenet of business.”

Minnesotans may remember the name Eric Grubman. He’s the executive vice president of the NFL, and – you guessed it – a former Goldman Sachs investment banker. Grubman stopped by Minnesota in October, and took a limo to the capital so he could threaten to move the Vikings if Minnesota doesn’t meat the Vikings and the NFL’s public financing demands.

Here’s how Matt Tiabbi described Goldman Sachs in a piece last year at Rolling Stone:

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

It looks like Taibbi’s description applies to the NFL as well, with the money source being eternal public debt payments to our NFL/Goldman Sachs masters.

What does this lead to?

With all that in mind, what does this lead to? Here’s my guess:

Since Goldman Sachs profits from public financing of stadiums, Goldman Sachs’ employees running the National Football League will push for the most expensive, most publicly financed stadium they can, since this leads to more interest payments to . . . Goldman Sachs.

The NFL will never allow the public to own an NFL team since public owners may decide to make financially rational decisions like refurbishing existing stadiums, building stadiums on transit, and other cost-saving measures that lead to less need for public borrowing.

Goldman Sachs The NFL will never allow public ownership of a team (other than the Packers who are grandfathered in) because it takes away Eric Grubman’s ability to threaten to move teams if the public doesn’t agree to make regular interest payments to Goldman Sachs.

A Better Way

Minnesota needs to make some serious decisions on how to deal with these corporate welfare queens. Here is what I propose:

1. We build stadiums that suit our needs at prices we can afford.

2. We build them in locations that leverage other public investments, such as highways, trains, buses, and parking facilities rather than build stadiums in the middle of nowhere with 21,000 car parking lots at $10,000 per space for 10 uses per year.

3. We ask fans to chip in a serious share of the cost through Personal Seat Licenses. This money should go toward lowering the public’s debt obligations rather than lowering the private business owner’s contribution.

4. We finance the stadium ourselves. Rather than making debt payments to a financial firm based in New York City, let’s finance the bonds locally through locally owned banks or direct investments by taxpayers and local businesses. Sending interest payments to Goldman Sachs is clearly not in Minnesota’s best interest. I imagine someone like Cory Merrifield from @SaveTheVikesOrg would be willing to lend $10,000 to a stadium fund if he would see a 5% return on his money while helping finance a new stadium. Come up with terms where it makes sense for the public to lend money to itself, see a return, then spend that return locally.

5. We demand that our teams use stadiums for longer than 30 years. We need to stop living in constant debt. It’s nonsense to run up the credit card with hundreds of millions of dollars in additional debt as soon as the credit card is paid off. For at least some period, our local professional sports franchises’ taxes should be able to go toward schools, transportation, and health care rather than being earmarked for stadium debt payments.

If any of this seems unreasonable to the Vikings and the NFL, there is a simple explanation why: Goldman Sachs.

8 thoughts on “How Goldman Sachs Profits from Building Obscenely Unnecessary NFL Stadiums”

  1. BTT on the new thread.

    “Feds open SEC probe into Miami Marlins stadium deal

    The U.S. Securities & Exchange Commission has subpoenaed records from Miami-Dade County and Miami over the deal to build a new ballpark for the Marlins.”

    http://www.miamiherald.com/2011/12/02/v-fullstory/2529191/feds-open-sec-probe-into-miami.html

    Two former SEC attorneys who reviewed the subpoenas for The Herald said government investigators are likely looking at whether the city and county did proper due diligence into the Marlins’ finances, and whether there was any influence peddling to local politicians.

    “There’s always the issue of pay-to-play. They want to know whether there were unlawful contributions,” said William Nortman, a Fort Lauderdale attorney and former SEC regional administrator. “Don’t forget, there was a lot of controversy over the building of this in Miami. They are examining how this came to be. They want to know whether inappropriate payments were made.”

    This deal has a bad smell. Taxpayers take it in the a#$ for $2 Billion. Still feeling like the taxpayers should bend over for the Viking’s owners?

    Long before the deal to build the Marlins a new ballpark in Little Havana was cemented with a county commission vote in March 2009, the deal was ridiculed as lopsided, with critics complaining that elected leaders kowtowed to a wealthy ballclub owner threatening to leave town. In the end, the Marlins got their way.

    The 37,000-seat, retractable-roof stadium ended up being a top-heavy deal for the county, put on the hook for $347 million in construction bonds, a $35 million loan to the Marlins, and $12 million for incidentals such as road repairs. The city’s end of the deal is $94 million worth of parking garages, $13 million toward construction, and $12 million for other improvements.

    The county will have to dish out more than $2 billion over 40 years to pay back the principal and interest on the bonds, which were sold under poor market conditions.

    The ballclub — which receives virtually all revenues, from concessions to ticket sales for everything from ballgames to soccer matches to concerts — was required only to spend $120 million at the end of construction, on top of repaying the loan to the county in $2 million yearly installments that would serve as rent.

    I didn’t take the time to calculate the NPV of the cash flows.
    It is a large negative number. Some if not all of the bonds were G.O. bonds. The taxpayers know where they stand on this deal.

    The chances that any G.S. employee goes to jail? Brett Farve coming out of retirement and winning the Super Bowl is more likely to happen.

  2. It is important to follow the money, the money interests at play, but it also is a distraction from two basic questions:

    1-Why should the public pay one cent in a private market transaction – owners, players, TV broadcasters, ticket purchasers – all a web of private free market business. Isn’t that what the Republicans have been touting for years? Reagan on his white horse, saying private markets are American. You name it, it’s been the spiel so, let them live by what they’ve said they value.

    2-If the Vikings move to LA, or Omaha or Fargo or Little Rock, who cares? Some would yell and such, but so what? It is part of bread and circuses, and the bread part is far more essential – after that the circuses. Zygi in Little Rock would be a fun thing to watch.

    Those are the two basic questions. Shouldn’t it be and remain fully private sector? If the threat is made, ignored, and acted on, so what?

  3. To add a couple more entries to your ‘what’s not to like, they will get paid’ listing–
    –When the team still moves after their 30 year lease expires, they will get paid (for 10 more years of that 40 year financing plan).
    –When the team and the stadium is gone, they will still get paid…a la the Kingdome in Seattle.

    The more I see these outrageous deals of this generation, the more I appreciate the wisdom and civic-mindedness that went into the Metrodome…it must be one of the most financially sound stadium deals in modern worldwide history.

    And to follow it up with Zygiworld makes the contrast even more incredibly insane, it truly earns the #wilfare label…and that’s before we even add on the vampire squid crowd of banksters.

    Where’s Tiabbi, he’s a football fan, he should be linking these deals up on Rolling Stone!

  4. I always thought MN should buy the Vikings.

    If they came up for sale again, are you saying the NFL will not let it pass or will just do everything in its power to not let the State own a team?

  5. What is wrong with the Metrodome? That is what is unclear in all this. The TV line-of-sight is fine. That’s the major income source a team should rely upon – the TV deal and revenue to the league, however it is split, and the rest, fans in the seats, is window-dressing. The requirement that a game be sold out to be televised – what is the history of that?

    If Goldman does not take a bite out of MNDoT bonding, then why should they get a bite out of privately funding a stadium loan if the borrower is a muni-bond eligible entity?

    I do not understand that.

    I expect the tax laws are that to be tax-free muni bonding the bonds must be for a public and not private purpose; and that stadium building is for federal tax purposes not a public purpose.

    That is a wise perspective not just for bond status as to income taxes on bond holders, but for all debate.

    Is there really any defensible public purpose or benefit to making the New Jersey Wilf family richer by subsidizing any of their business risk?

    Ed, if you coined the term “Wilfare” bless you. Whoever invented such a spot-on descriptive term deserves a medal.

    A key to the city award, for public spirited invention.

  6. In reply to James.

    Additional public ownership of any professional sports team would not be allowed by the current management of any major professional sport. How could the owners rape and mug the taxpayers and governments as owners currently do if the owners were the taxpayers? There would be no more information asymmetry between the wilfare seekers and the taxpayer victims.

    What if just one or two publicly owned teams began to set an example like the Packers? All the finances on the table, and the profits, if any, invested back into the team rather than skimmed by the profiteers that infest professional sports. Not in a million years.

    I would suggest that selling the bonds and then using the proceeds to make the NFL an offer to buy the Vikings would make more sense than building a new stadium. The flaw with this is that the value of the NFL teams would significantly decrease, upon the completions of a few similar deals. This is because from an economic standpoint the ability of the team ownership to extract ‘rents’ (large taxpayer subsidies) on a predictable schedule accounts for a significant portion of the future cash flow of the team (aka ‘value’ or NPV= Net Present Value).

    The other reason not to be the new public buyer of a professional team is that you would need a wilfare or golden squid type to manage the franchise in order to protect the investment from the other owners.

  7. Goldman Sachs, the NFL, and team owners may all tell us – this is just good business. Well convincing fools to borrow
    money to pay you for poorly planned, designed, located, over priced stadiums is probably legal, just highly unethical. There’s an article in the S.F. Chronicle’s online SFGATE today saying why Candlestick is a pit, and can’t be fixed. It’s all lies. Ed Kohler is 100% right!

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