Episode 73: Superdome & Saints Lease – What’s Really Going On?

Scott Vicknair, injury attorneys. We fight for the win.

Good morning everybody and welcome to the Overruled podcast, brought to you by the Scott Vicknair Law firm. I am your co-host David Vicknair, along with my co-host and law partner Brad Scott. Brad, good morning. How are you doing?

Good morning, David. How are you doing today?

I’m doing good. I’m excited to dive into our topic today. I’m going to call it Superdome and Saints lease confusion. And researching it this morning, looking through, a lot of the research that you did. Thank you. And reading all these notes and doing some of my own research. It’s quite an interesting topic about what’s going on in the current standoff between the Saints organization and the state regarding lease negotiations in the Superdome, as well as three other bundled packages. But I guess before we jump into it, Brad, can you give our listeners a little bit of the history of the Superdome lease and how it’s evolved maybe from 1975 until today to how we kind of got to this standoff.

So, just kind of set the stage for where we’re at today. We’re recording. This may be resolved by the time this podcast airs. No telling. But the Saints and the state are basically at a deadlock, over the Superdome lease, which is coming up in, what would the date, was it? I think it was 2030.

Yeah, 2030.

Yes. So we’re about five years ahead of that date, but traditionally, these things are negotiated ahead of time to try to get a deal in place. And what has happened is the state has, they’ve, they’ve fully negotiated the Superdome part of the lease. Everybody’s agreed to terms. The Superdome Commission has actually authorized its chairperson to sign the Superdome lease. And the Saints said, nah, nah, nah, we’re not ready to sign.

So the Superdome lease itself, I think, correct me if I’m wrong, Brad. They, the expirations in 2030, but they’ve basically agreed upon initial terms of re-executing the lease, which would give options through like 2055, was it?

Yes.

Okay. So it’s extending out a pretty good bit of time, with some options thereafter. But what’s happening is the Saints are coming in and saying, well, no, no, no, wait a minute. We want the deal on the Benson Tower, the neighboring property, Champions, Championship Square and the, for practice facility. We want all these leases negotiated at the same time, as we’re doing the, the Superdome lease. And just, the before we kind of jump into a little bit, I just want to make sure we get some basic property law principles going here. So the state owns the Superdome, right?

Correct.

And they, the state leases it to the Saints. But then when you mentioned the Saints lease the Benson Tower, the Saints lease the Benson Tower to the state.

Right.

So the state owns the Superdome. Let’s start there. They lease it to the Saints. The Saints, though, own Benson Tower that they lease to the state. Yes. And then to make this even more convoluted, recently last year, the state and the city entered into a land swap deal where the state is now the owner of Champion Square because they swapped city hall ownership with the city, as a part of the city acquiring that park next to city hall from the state, because the city wants to build a new courthouse and city hall on the own land the state owned, that little green space. So now the state owns the land, the dirt under city hall, and the state also owns Champion Square, which is becoming a contentious part of this. Now, and then the practice facility is the fourth piece of this, that who owns the practice facility? Is it the state or the Saints?

I think the state owns it and they lease it to the Saints, if I remember correctly from the research I did.

So, but what drives a little of this problem is and this, we’ll go through the history in just a second, but the deal was done for the Saints to lease Benson Tower to the state. The state was supposed to put some state offices in there. And ever since that lease was put in place in 2010, the state’s been getting a black eye over this, because the market rate that it was negotiated was like $32 a square foot when the going rates were $32.50 a square foot.

So everybody has kind of seen that as an implicit subsidy to the Saints, you know, giving them more money than what it was worth. And, you know, that’s really caused some fiscal issues and, you know, questions whether the taxpayers should be paying extra money for this kind of stuff. So that’s what’s kind of driving this stuff that I think what the Saints probably are with is that, hey, look, we’re not going to sign the deal on the Superdome, unless you kind of renew the lease on the Benson Tower because we don’t want you coming back and then just opting out of that lease. It’s part of an overall package is the way they view this. Now, there’s some historical context for this. This is how the deal was put together back in 2010, during the 2009 negotiations. So last time we did the Saints Superdome negotiations, the tower, the practice facility, all that was part of the package. The Saints are asking, hey, let’s do the same thing over again, but the state, the state’s saying, no, no, no, no. Let’s go back to fair market value for all these properties, do them as individual deals, because we don’t feel like we got a good deal on Benson Tower. And I think for a long time, a good chunk of the space was actually vacant at Benson Tower, and the state had troubles, subletting it. So it’s been a huge financial drain on the state. I think they actually have had to borrow money to pay for some of these leases. It’s been a real boondoggle for us. The Benson Tower lease is concerned.

Well, as I understood it from looking at the history, Brad, like back in 1975, was the first time the Saints moved into the Superdome. And at that time, it was just a very simple lease agreement. So the state just, right,leased the Superdome. There was no other land deals done.

And so the first time this really became an issue was, oh, rest in peace, Tom Benson. Oh, Wally Tom, back in 2001, he negotiated a substantial differentiation from prior agreements that the state had with the Saints, where he got cash subsidies from the state, from the Saints, the team back in 2001, which totaled $186 some odd million dollars over 10 years. It was so costly for the state that Louisiana had to actually borrow money, borrow, money to make those payments to the Bensons. And he also, besides.

Just pausing there for a second. That 2001 deal was really kind of that inflection point. Gotcha. Before that, it was a straight lease deal with, you know, payments of so much for revenues and tickets like that. But 2001, that’s when the state started paying basically, and I’m, you know, an enormous sum, a subsidy to the Saints to keep them here. And then we had Katrina right after that, which I think you.

Hold on. Stop. Because we don’t want to go over 2001. Because besides Benson extracting $186 million from the state, he also got them to pay for a new practice facility as part of the agreement. Pretty good deal.

Yes. So then if you remember that timeframe, you know, this, Benson was basically, look, if we can’t do a deal that benefits us, we’re going to leave. Because this, you know, New Orleans, this team when, seen as one of the smaller NFL markets. So the grass, you know, is always greener for the Saints somewhere else. They could potentially move the team, make more money. And they’ve always hung that over the state’s head. If you want to keep us, you have to come to the table and you’re going to have to give us a little bit. So it really started in 2001 with that huge subsidy they were paying.

Was that the first time, Brad, that you, could decipher or remember that Benson started threatening to move them? It was in 2001?

At this point, I can remember. You know, it may have gone back before that, but that’s where he started using that as leverage. And obviously after Katrina, that was kind of the next step in this historical context is, you know, the Superdome was unavailable. He started talking about moving the team to San Antonio at the time. And this lease was coming up in 2010. So a lot of those threats kind of went into the new deal in 2010, which set the stage for this bundling deal that we’re dealing with now. 2009.

Yeah, 2009, you mean.

Kind of fast forward into that 2009 negotiation, or even the commissioner had to get involved at that point because it got a little heated. That’s when they said, okay, well, the state’s going to have to lease Benson Towers from us from us at a premium. And they had to do all these other deals in this, you know, state form, bundling type of deal, that you know, it’s supposed to save somebody. Somebody, didn’t save us, didn’t save us. As taxpayers, but that’s when that real 2010 deal really put this in place that, hey, we’re going to negotiate all these properties together, as more of a portfolio, so the Saints can value what they’re getting out of this deal to see if they want to stick around.

And the Benson Tower lease is about $10.3 million annually. That’s what the state pays, you know, the Saints to, through a lease that space. So if you kind of compare it to the 2001 deal, you know, the state was paying $186 million over 10 years. That’s about $18 million a year in subsidies. And now we’re paying about $10 million in lease space, that we know the state does get some benefit for. So the deal got, you know, although it was seen as a very lucrative deal for the Saints, as far as the amount of money the state was putting out, it got a little bit better for the state as well as far as decreasing the amount of out of pocket the state was having to pay.

Yeah, and I think if you look at the Benson Tower deal specifically, because that’s the one that has derived the most criticism from state auditors and the public. So there’s no question 32.50, it’s $32.50 a square foot that the Saints are getting from the state for all the lease square footage in there. You mentioned it’s like $10.3 million annually. There’s no question. If you look over the last 20 or 30 years for class A buildings in downtown New Orleans, which is wild, that the rates have really not gone up. So, rates in downtown New Orleans, like we’re in this beautiful building at 909 Poydras. The rates here have stayed fairly steady over the last 20 years. They’re anywhere from $17 to $21 a foot. And so the fact that they’re getting $32.50 in Benson Tower, which isn’t like a crappy building, but it’s not a class A building, let’s be honest. Probably class B. There’s about a $4 million premium, the state’s paying for Benson Tower’s, on a $10 million lease.

$4 million. Exactly. So you had done the math, Brad, and your notes before the meeting that I looked at that. As I, essentially every year, it’s a $4 million premium they’re paying. And, you know, the Bensons get some appreciation in Benson Tower, but candidly, you know, Gayle Benson, I know, or somebody related to her, whether it was a real estate agent, I don’t know how she was connected. They recently bought 1100 Poydras, all this is public, and it was in the newspapers on stuff like six months ago. These class A buildings are not like appreciating extremely in value. In fact, the banks just want to dump them right now. You could get a great deal if you got $50 or $60 million and buy like a 25 to 30 story class A rental tower that these lenders don’t want to hold as assets anymore. But Gayle maybe thinking she can lease it back to the state.

Because of the whole bunch of properties around the Superdome.

You know what? When I saw that in the news six months ago, I didn’t think of it in the context of this topic, but now it’s starting to make a little bit more sense to me.

A lot of sense now, because she can lease it, or lease it above market potentially. So I’m not saying that’s what’s going on, I’m just, you know, completely pulling that out of thin air. But I do think I do think though, you make a really salient point that I hadn’t considered in preparing for the show today, which is like in comparison to what was going on in 2000, 2001, where the state was just shoveling $10 million and cash payments or $18 million a year in cash payments to the Bensons. Now, they’re really like giving them a premium on Benson Tower of $4 million a year. So the state’s actually paying $14 million less to the Saints every year annually in a quote unquote premium, and you can’t even really argue on the flip side, like we just discussed that, oh, but the Bensons were getting all this appreciation in Benson Tower. These assets aren’t going up in value. So they’re getting a $4 million premium as you said, which is less than what they were paying in cash payments previously.

Now, that being said, you know, he did bundle in, him being Tom Benson in 2009, the, he even read some floor mats.

He’s getting a percentage of the money from Champion Square. So I don’t know what their deal is. It wasn’t super. Did you see if it was really publicly disclosed? For example, they have concerts which are non-Saints game related in Champion Squares, do the Saints like get rights to distribution and percentages of sales.

They get some percentage. I’m assuming it’s a much smaller piece of the pie. And if you look at the overall context of this too. Remember, we’re talking maybe a $4 million premium on Benson Tower, the Saints are making. The Saints’ revenue last year was $587 million. And they’re profiting about $144 million a year. So $4 million is not a real big thing, I think they’d be that worried about in the grand scheme of things.

Yeah, the other thing too is from the state’s perspective, the Saints, unfortunately, let’s just be candid. The Saints always have all the leverage because they’re such a big money maker for not only the city of New Orleans, but the state as a whole, because all the taxes that come in and the city also derived state benefit and especially when we’re talking about like the Super Bowl last year, the amount of money that came into this state and this city from the Super Bowl being hosted because we’re an NFL city is enormous. It’s like what, $1.25 billion economic impact. And that’s the big carrot the Saints always have, like you’re going back to negotiating strength there. The Saints can walk away. There’s always greener pastures for them to go to. And bigger markets and other places that will give them brand new stadiums and stuff like that. The Saints can leave. The state can’t leave.

Yep. So you’ve functionally structured the negotiations that way. The state’s always going to lose in this deal and have to cave at some point if they want to keep the Saints here. And the question becomes is what’s the cost of we’re willing to live with to keep them here? And one of the big crown jewels of that calculation is a Super Bowl every four, five, six years that generates a billion dollars for the state and the city. So, you know, it’s, it’s a give and take. But at the end of the day, I think the Saints do have all the leverage here in negotiations.

Yeah, we should keep them at all costs. That’s the bottom line. Let me ask you this, Brad. I did see in your notes and in your research for today, and I saw it in the headlines and I didn’t really dig further. There was some like September 17th of this year deadline for bidding on the 2031 Super Bowl, which I remember after the last Super Bowl, number one, we had all the press coming out of the recent Super Bowl. Congrats to the Eagles, for winning, being Super Bowl champions, we’re very jealous. We hate you because we suck right now. But all the press coming out of that was how everybody loved that New Orleans was everybody’s favorite Super Bowl city. It was amazing. I went to some of the events before the Super Bowl, I went to the game. It was incredible what the city did, hosting the Super Bowl, the events, the things that were done, which candidly as a New Orleanian, we’re all like, of course, all this crap gets gussied up right before the Super Bowl comes. But the city had never looked better. Super Bowl goes great, we’re learning about how much money the state and the city made from the Super Bowl, over a billion dollars, and it was amazing. So everybody’s like, okay, we’re looking at 2031, because of our Mardi Gras schedule, if we don’t get 2031, we may not be able to host it again until 2038 because Mardi Gras down here is such a.

Well, the next one that can actually coincide with our scheduling.

Because of course, we have to prioritize Mardi Gras, and all of the logistical issues associated with Mardi Gras would prevent the Super Bowl probably until 2038. So what’s the lowdown on this recent deadline? Is that like a hard deadline? Like, are we SOL on 2031, or is it just like, this is, you better get your act together because I think these lease negotiations delaying and being stalled affected the bid. Is that right?

Well, there’s nothing public that I could really find, but all popular opinion was there was some kind of deadline on the week of September 17th. So these deals are done a long time in advance. You gotta put your package together and send it to the NFL for approval and stuff like that. So we either right on or we’ve right past the 2031 deadline. Now, I don’t know how, how the machinery behind the scenes works, whether there’s a grace period and stuff like that. But basically what I can find, we might be SOL on the 2031. Now, because they couldn’t extend the lease past 2030. And the NFL wasn’t going to grant a Super Bowl to a city that doesn’t have a lease in place for an NFL team. Because you, you know, got to 2030 and we wouldn’t even have had a team here. So, I think probably the Saints, rightfully so, are using that as some type of negotiating leverage that, hey, you guys want to at least, you have a bid for 2031? We got to get this done now. So, there’s a lot of moving parts. And again, a billion dollars in revenue impact to the city and the state, that’s a huge amount of money that we lose out on if we can’t get a deal put in place for the Saints Superdome. We’re also tied with, was it the dolphins? We did this episode, or not my, was it Miami? We’re tied with the number one most Super Bowls in the city of Miami.

With the Hard Rock. Yeah. And also I was about to say, I got a notification today. The Superdome is hosting the 2027 College Football National Championship. So that is another thing, I think that generates a ton of money as well.

Absolutely. Yeah. Well, I, I know for sure, just knowing publicly, observing the situation, there’s no question that the governor is going to prioritize getting the Super Bowl again. Gayle Benson wants to get the Super Bowl again. The mayor, whoever it’s going to be in a month or two, is going to want to get the Super Bowl again. So hopefully, somebody’s got some leverage with Roger Goodell, that this wasn’t like a hard deadline and they can negotiate this swiftly to get a bid in for 2031, because when you look at the Mardi Gras schedule and the way the calendar falls, it becomes tough. To envision how we get the Super Bowl again until 2038. If we don’t get it in 2031.

Even if we get it in 2038. So you, you know, you’re deferring a lot of potential revenue. And, and this type of deal, with this bundled kind of package deal with other properties, this was very rare in the NFL. I couldn’t find any other franchises that have similar arrangements with the states where the private, you know, rental properties of the owner are coming into play as well. So this is unique. There’s not a whole lot of, you know, precedent for this stuff, other than how we did it in 2009, and 2010 deal. And, you know, the Saints want to do the bundle, you know, like state form and put it all together like they did last time, the state saying, no, we don’t want to play ball this time. I really think besides Brad, you know, Brad, I really think besides like the leverage of threatening to leave and go to San Antonio or whatever it is, will always be a huge feather in the Saints negotiating cap. But the other two things are things that we just talked about, which is one, the Super Bowl. Right? And if I’m the Saints, like I’m really leveraging that right now and using that to my benefit to get a good deal. And by the way, it’s just, it’s just a good feather in their cap. Is a real one that has serious financial implications for the state and the city. But the third thing that I think is super important that we’re not really talking about is if this, if I’m the Saints and I’m looking at this, I’m like, look, there may not be other deals like this where we bundle in ownership of the sports organizations, other assets into the lease negotiation. But look at the fights that are happening. Like I just read a month ago, the Bears are fighting with the city of Chicago and the state of Illinois. And a lot of other cities, either major cities, they force the, the, the state or the city to contribute hundreds of millions of dollars to new stadiums. That’s the fight that they’re always having. And you have these cities and municipalities and the states kick in hundreds of millions of dollars and bonded funds to build these brand new stadiums that all these different teams are demanding or they leave. And the Saints have not threatened the city with that from the standpoint of, they’re not demanding a brand new stadium, which would be way more costly than the bundling of these other things that they’re doing, as far as like lease payments. Probably they’re not doing that. I remember, I mean, hadn’t researched for this show, but I can remember Tom Benson back in the day wanting a new stadium. And, you know, it used to be a point of conflict at one point. Because the Saints, the Superdome is an older building. Dates back to the 1970s. Now, they’ve put a ton of money into it to renovate it and improve upon it. But yeah, you look at some of these other stadiums, there’s some really awesome facilities that have been built by municipalities or states to keep teams where they are. You know, and now it makes sense why the NFL will only put a Super Bowl where there’s an NFL franchise because it gives their owners some negotiating leverage when they go back to the cities to do these deals. So, you know, they got their stuff together, they’re making a lot of money off of it. And, at the end of the day, the Saints can walk away if this, you know, if the city and the state don’t come to the table and play ball with them.

I thought the last time that Tom Benson wanted a new stadium, the concept was to build a stadium which basically would open into the French Quarter. And it was just way too much political pushback because they were going to have to move some of the projects right there, the government housing on, Rampart right there. And so it was like a political thing that was, it was never going to have political support to do it. And I think they even proposed an open-air stadium, which I’m like, good luck getting somebody to go sit in an open-air stadium in August and September in New Orleans.

Doesn’t work in South Louisiana. Yeah. As people, my dad was originally a Saints ticket holder when he played at Tulane stadium, ask them. Nobody went to those games. Well, they were bad too. And it was hot. Yeah. And it was hot. Yeah. Yeah, 1967, it was so hot. That’s why they built the Superdome.

Yeah. And you’re seeing more and more like what’s happening in Chicago, I think there’s some controversy up there right now because they’re going away from Soldier Field and they want to build a dome, which has a retractable roof, which is the new thing and vogue, all these retractable and partially open stadiums. But like you understand like the weather conditions factor in a lot of things there. Like if, if you, Especially in Chicago, it’s snowing five or six months out of the year, however much it snows there. And so that knocks out the stadium’s uses for concerts. That’s a ton of revenue. Like there’s a lot of different things that you can’t use it for if you can’t control the weather. And it also just, you know, who want, like, unless you’re a Buffalo Bills fan, and you like to light tables on fire and jump through them from the top of an RV. You know, those guys, they’ll go sit in the, the Bills fans are wild, man. They’ll sit in like five degree weather. It’s like 20 inches of snow out and their that stadium is full. But like, you know, that’s.

Bear chest with the logo painted on their chest.

So, like, a lot of like the heat, the cold, depending upon the geographical location of the team. You know, a lot of them want domes now because you control the weather, you can use the thing more. So I get it. But in any event, Players want dome stadiums to play in too. It’s less, you know, rigor on their body.

So what do you think, Brad? When is this thing going to get wrapped up? You got an opinion?

Well, we have five more years left on it. Obviously. You know, they could do nothing and ride this thing out. I don’t think that’s going to happen. They’ve already negotiated terms. I just think somebody’s going to have to flinch. And I think it’s going to be the state. And I think it’s going to get done soon. I just say this is not going to linger. They got to put it to bed.

My prediction is that this is going to get done in the next 30 days because they want the Super Bowl bid in ASAP before the end of this year. And they want to start lobbying and lobbying and lobbying to get the Super Bowl here in 2031. And so if there’s still any possibility, I don’t know how all this works. This is that phantom deadline that we think was September 17th, we don’t really know. But if there is any possibility of still getting the Super Bowl here, this is going to be done in the next 30 days. And the benefit is the more of the benefit for the Super Bowl hosting is to the state, to the city, then it is to the Saints. 100%. So that’s why this deadline, I think, is going to push this negotiation. If there is a deadline, coming up soon for the state to have to cave in on some terms. I mean, if the state gets over, I mean, when you just think about it, like over a billion dollars in revenue, which we wouldn’t otherwise have realized in a single event, that’s funding teacher pensions, that’s fun, like firefighter, all kind of stuff that could be funded. And state, guarantees and state retirement, all these things, like a billion dollars in revenue fixes a lot of problems. You’re going to put that at risk for a $4 million premium you’re paying on an office building.

When you put it in that context, I think the state auditors are going to go, freaking get themselves a cocktail and shut the heck up and get over it. And say, yeah, we’re paying the Bensons a little bit higher, but candidly, they haven’t, we haven’t had to build them a new stadium. We haven’t had to fork over $200 million like we did back in cash, back in 21. And like, this isn’t the worst deal in the world considering what the city and the state get out of it. And Super Bowl revenue and special event revenue, things of that nature. You got to look at the overall package, how the whole deal plays out math wise. You can’t look at just the office building lease. Anything else?

That’s it. I just hope it gets done. And, you know, we can pave the way to future Saints seasons, maybe doing a little bit more successful than we’re doing this year. We just need some new, new talent in the draft. We need some experience from our, young players, especially at quarterback. I kind of like, I’m always an optimist. So I see the future being very bright here. So thanks Brad. Interesting topic. Can’t wait to see what happens. I think our predictions are right because we’re too smart guys. And thank you all, you’re brilliant as well, for being with us on the Overruled podcast. Brought to you by the Scott Vicknair.

This has been an exciting discussion about the lease negotiations on the Superdome between the city, I’m sorry, the state, and the Saints, and we’re really excited to see how this turns out and whether we’ve been vindicated in our predictions, but there’s a lot of stuff going on behind the scenes that we don’t know about. So, we’ll be watching just like all of you, and I hope you learned a little bit about the history of the Superdome and the Saints negotiation and Tom Benson’s ability to threaten leaving for San Antonio and get whatever he wants out of us. Is that about summarize it, Brad? That’s very accurate, sir. Thank you. It’s been a good one. Thank you all for listening, Brad. Take care. Don’t take care. Thank you. Scott Vicknair, injury attorneys. We fight for the win. Information is for illustrative purposes only and does not constitute tax, investment, or legal advice. Always consult with a qualified investment, legal, or tax professional before taking any action.