Explainer: How the Pegulas will leverage seat licensing to pay a big chunk of the team’s stadium fees | Business premises


Although the owners of the Buffalo Bills have agreed to pay $550 million for the cost of a new stadium at Orchard Park, that doesn’t mean the Pegulas are going to dip into their own pockets for it all.

Indeed, part of the team’s contribution – most likely around half – will be paid for with other people’s money.

“We really want to harness the energy of Buffalo fans and create a unique game day experience,” said Scott Radecic, a former Bills linebacker who is the project executive for Populous, the stadium’s architect.

It’s not like the Pegulas have a special offer. This is how it works for most NFL franchises building a new stadium.

This is due to the way stadium finances are calculated, as well as the availability of a loan program available to team owners through the NFL.

It’s also money that can’t be touched by any other owner, because Personal Seat Licenses (PSLs) don’t count towards revenue sharing. Under league rules, 40% of all ticket sales go into a visiting team fund which is then divided among the 32 teams.

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And that gives the team access to a league-run fund that will allow them to borrow $150 million and then repay that loan with money that would otherwise go to the visiting team as part of the league revenue sharing system.

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Neighboring businesses and area residents focused on the need for sidewalks, more public transit, berms and fencing to keep fans away from local properties when they had their first chance to voice their concerns. and ask about the new stadium to be built for the Buffalo Bills.

Although the price of the PSLs has not yet been set, together this program and the loan program are expected to net the team between $200 million and possibly up to $350 million – roughly between a third and two thirds of the team. expected contribution.

Collecting around $200 million in PSL fees for bills to be spent on building the stadium was seen as a fair projection by a stadium expert who spoke to The News. At the low end, PSLs are expected to raise at least $100 million. Much will depend on the final design of the stadium.

Ron Raccuia, executive vice president of Pegula Sports and Entertainment, declined to comment for this story.

But he previously said the team was simply taking advantage of programs available to all NFL franchises. The programs are an essential tool in financing a stadium project that is expected to cost $1.4 billion.

“All of PSL’s money is used to build a stadium, so that’s extremely important as we embark on this project, especially in a market like Buffalo, where we don’t have the capacity to increase (ticket) prices like other markets have done,” Raccuia said.

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Neighboring business owners and other people in the area will have the opportunity to speak up and voice their concerns about the new stadium at Erie County’s “public scoping meeting” Thursday at the Buffalo Bills, where officials will present the organization’s proposed map and master plan for the stadium site.

The NFL’s G-4 loan program, which helps fund stadium construction and renovations, and PSLs, a fee charged by the organization giving season ticket holders the right to purchase tickets, are working hand in hand to minimize disbursements for owners. , said Daniel Etna, a New York lawyer who has worked on a handful of stadium contracts.

“PSLs were always designed by the NFL as a funding mechanism for building or renovating stadiums,” Etna said. “It’s a fertile source of income, even if the PSL have a bit of a black eye.

The NFL expects owners to raise at least some of their share of the money for a new or renovated stadium with PSLs, and that’s integral to securing NFL G-4 funding. .

PSLs could raise up to $200 million

PSLs will be needed for the approximately 50,000 seats to be reserved for Bills season ticket holders in what is expected to be a 60,000-62,000 capacity stadium, around 10,000 less than the current Highmark Stadium .

How much will per-seat licenses cost?  Bills fans get a glimpse of stadium price ranges

Bills season ticket holders got one of the first glimpses of what a PSL could cost in the new stadium when the team emailed them a survey last week about the potential design, amenities and seating options for the $1.4 billion stadium.

A survey distributed a few months ago to numerous subscribers provided initial potential price ranges for PSLs at various locations around the new stadium. PSL prices noted in the survey start at $500 for reserve seats and go up to $16,500 for premium seats.

If the average cost of the PSL is around $4,000, considering that many of the stadium’s seats are in reserve sections, it would net around $200 million in bills to spend on building the stadium. . And that would be half of the $400 million remaining for the Pegulas, after the NFL contributed $150 million to the draft.

“One way of looking at PSLs is that they are part of the cost for people to buy a ticket, so it’s a private expenditure by citizens, not a contribution from the Pegulas,” said sports economist Andrew Zimbalist. at Smith College in Massachusetts.

“But if part of the private cost has to be borne by the public, it makes more sense that those members of the public who are more interested and passionate about football should pay more than other people who don’t care whether the projects of law will be in Ox,” he added.

Significance for stadium constructions

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NFL owners have placed greater emphasis on integrating development around stadiums and arenas to create year-round destinations that cater to more than fans attending a game.

PSLs have been used to help pay for more than half of the league’s stadiums. The Carolina Panthers were the first NFL team to sell PSLs to fund their stadium, which opened in 1996 when the organization first fielded an expansion team. Since then, almost every new NFL stadium has been built – at least partially – using fan money for seat license fees.

According to reports, the PSLs have raised $600 million for the $5 billion SoFi stadium in Los Angeles for the Rams and Chargers, which opened in 2020. The Raiders, who moved from Oakland to Las Vegas , used PSL to raise around $400 million to help pay for their new stadium, where they also began playing in 2020. Fans paid between $500 and $75,000 for a PSL.

Raccuia said the Bills “most likely will have the lowest PSL prices of any new stadium built since 2009.”

Buffalo is the 49th-largest metropolitan city in the United States — the NFL has 32 teams — and the league’s second-smallest market, behind only Green Bay. Gov. Kathy Hochul said the Bills could have moved to a bigger city or a city that has already lost a team if a deal hadn’t been reached.

“From the evidence we have, when people want to buy a football ticket, they find a way to pay for it,” Zimbalist said. “They love their football and need their football as much as they might need a glass of wine before dinner or whatever.”

G-4 loan becomes NFL standard

The NFL providing money to teams that build or renovate stadiums is now common practice as the public has been reluctant to pay them in full. It’s part of what Etna calls the league’s version of “collective socialism”, since funding comes from a bucket of cash shared by all 32 teams.

Pegulas in the house

Buffalo Bills owners Terry and Kim Pegula walk the field before the game at Highmark Stadium in Orchard Park on Sunday, September 26, 2021.

Harry Scull Jr./Buffalo News

The Bills will receive a $200 million loan from the NFL, with $150 million repaid through the Bills’ ticket revenue share over 25 years. Securing the loan was dependent on the Pegulas contributing at least $200 million of their own equity to the project, under the terms of the league’s G-4 loan program, which is part of the collective bargaining agreement with the NFL Players Association.

Raccuia previously told The News that the league’s G-4 funding is “a critical part of our stadium deal, as well as every other stadium deal that’s been done in the NFL.”

The Rams received two $500 million loans from the NFL to complete SoFi Stadium, while project partners the Chargers received $200 million from the G-4 loan program. The Raiders, Minnesota Vikings and Atlanta Falcons are also among the teams that recently built a stadium and received the $200 million in G-4 loan funding.

For the Bills, the remaining $50 million would be repaid to the NFL by the Pegulas over 15 years at a market-friendly interest rate, typically around 2%, Etna said.

New York is expected to contribute $600 million and Erie County $250 million towards construction costs for the new stadium, under the terms of the agreement. The state will own the new stadium — as the county retires from stadium operation — and lease it to the Bills through the Erie County Stadium Corp.


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