Sep 19
2022
No relief for local taxpayers on Bills stadium
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Erie County Executive Mark Poloncarz likes to say the new stadium deal he and Gov. Kathy Hochul cut with the Buffalo Bills gets the county “out of the football business.”
The deal, however, does not get the county out of the business of paying for a football stadium.
The county’s annual costs for the Bills current home, Highmark Stadium, have ranged from $10.7 million to $12.6 million in recent years.
Estimates provided to county lawmakers for paying off bonds to cover the county’s share of new stadium construction have come in lower, between $7.7 million and $9 million annually. The latest estimate from the county comptroller pegs the annual cost at about $8.5 million over 30 years.
But that’s on top of the $100 million in surplus funds the county has pledged to invest upfront.
Coming Wednesday: Hochul has inflated stadium job numbers
Under the new stadium agreement, the county is also obligated to impose taxes on stadium tickets, parking and concessions. They’re expected to bring in $4 million during the stadium’s inaugural season and increase over time.
Add in those taxes — Poloncarz argues it’s more of a user fee than a tax — and there’s a good chance county taxpayers will spend as much on the new stadium as they are on Highmark Stadium.
Still, Poloncarz has argued that the new deal is better, with one of the main reasons being the county will no longer be responsible for stadium operation and funding subsidies — things like game-day and operating expenses that will cost the county $6.68 million at Highmark Stadium this year.
Under the new stadium deal, the state and the Bills will be picking up those costs.
“We’re getting out of the football operating business,” Poloncarz said. “We are no longer going to own the stadium. This is going to save us money with regards to insurance costs.”
Neil DeMause, editor of Field of Schemes, a website that has tracked stadium subsidy deals since the 1990s, said getting out of the stadium subsidy business can be a financial benefit, but not when debt service estimates for the new stadium are projected to be higher than what it currently costs the county to subsidize Highmark Stadium operations each year.
“It’s clearly a worse deal than what Erie County had before because the county’s going to be spending more per year,” he said. “I guess you could maybe argue that you get the benefit of a newer stadium if you consider that a huge benefit although fans are also going to be paying a lot more for tickets, so I don’t think that’s really a win-win.”
Financing plan
As it now stands, the county is expected to sell $150 million in bonds and repay them over 30 years. It will be — far and away — the largest county bond sale in three decades or longer. The county typically sells about $40 million in bonds annually, used to finance everything from road and bridge repairs to sewer and water system improvements to technology upgrades for county departments.
The stadium deal announced on March 28 commits the state to spending $600 million upfront to help cover construction costs. Erie County would put up $250 million. The state is also on the hook for $100 million over 15 years to cover stadium maintenance and repairs. The county and the state authority created to oversee the stadium would be obligated to kick in $180 million over the 30-year lease for capital improvements. In total, the deal will cost state and county taxpayers $1.13 billion over the 30-year life of the lease.
The National Football League will lend the team $250 million, which will be repaid through the visiting teams’ share of Bills tickets. The Bills will put $350 million towards stadium construction costs and will recoup some of that investment by requiring season ticket holders to buy personal seat licenses.
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Supporters of the deal said it is the price to be paid to hang onto the team. Critics note that the $1.13 billion is the largest public subsidy ever for a sports facility and that the Pegulas — billionaires — have the financial wherewithal to cover a larger share of construction costs.
The state Legislature has approved funding. The county Legislature has approved a memorandum of understanding, but some other elements of the deal still need to be finalized over the course of the next month.
Covering different costs
What the county pays for is different between the two stadiums.
At Highmark Stadium, annual costs include debt service on capital improvements dating to the 1980s and 1990s. Under the current lease, the county also contributes funds to cover game-day expenses, working capital and allowances for capital improvements and stadium upkeep.
In the new stadium, the county’s primary obligation is paying debt service on construction bonds and passing along surcharges — that is, taxes — on tickets, parking and concessions.
The county’s Highmark Stadium costs fall under two categories: lease obligations and debt service.
Over the past six years, the county’s total Bills-related stadium costs have increased from $10.7 million in 2017 to $12.6 million this year.
On the operations side, the Bills and the state of New York split costs at Highmark Stadium for the following:
- Game-day expenses. These include security, ushers, ticket takers, cleaning staff, garbage removal and emergency medical personnel at the stadium.
- Operating expenses. These funds cover wages, employer paid taxes, insurance for maintenance and management of the stadium. Operating expenses also include general non-game-day expenses, like scoreboard repairs and utility costs.
- Annual capital payments. These are funds the Bills receive annually to maintain the stadium.
- Working capital payments. This is money the Bills are allowed to spend at their discretion for team operations.
In 2022, the county’s share of the current lease totaled $6.86 million, including $2.8 million for game-day expenses, $1.8 million for working capital and $2.2 million for capital improvement allowance.
The county is also still paying off stadium debt dating to the administrations of former Erie County executives Dennis Gorski and Joel Giambra.
The county owes $16.67 million in Highmark Stadium debt. This year’s debt service payment is $5.8 million. Under the current schedule, the payment is set to increase to just over $6 million next year before steadily declining annually over a 13-year period until a final $170,000 payment is due in 2035.
However, in light of the new stadium deal, county officials are planning to retire the old stadium debt sooner.
Bob Keating, director of the Erie County Division of Budget and Management, said he anticipates the county will pay off all Highmark Stadium debt once the new stadium is built and the existing stadium is demolished.
“We would realize a cash savings in the one-time cost to get the debt off our books versus making continued payments through 2035,” he said.
New expenses
It’s not yet clear how much the county will need to borrow. Erie County lawmakers have so far agreed to commit $100 million in surplus county funds as a down payment, which would result in the need to borrow the remaining $150 million.
Majority Leader Joseph Lorigo, C-West Seneca, said, in light of first quarter budget figures that showed the county with a $23 million sales tax surplus, it’s possible even more upfront money could be added to lower the amount to be borrowed.
Lorigo said he’s interested in adding $25 million to the upfront payment, which would lower the amount to be financed to $125 million.
The move would require approval from the Legislature.
“It’s a perfect time to use one-time money for a one-time expense,” Lorigo said.
A variety of factors, including interest rate at the time of borrowing, will influence borrowing costs.
“Our office does not know when the bonds will ultimately be sold, when the maturity date of the prospective bonds will be, or whether they will be procured via the competitive bidding process or negotiated authority,” said Deputy Erie County Comptroller Jessica Schuster.
One of the two bond rating agencies the county uses recently upgraded the county’s bond rating, which could save about $50,000 a year in borrowing costs. Still, the office of Erie County Comptroller Kevin Hardwick told Investigative Post annual debt service on a 30 year bond is expected to cost about $8.5 million annually.
New obligations
Unlike Highmark Stadium, which the county owns, the new stadium will be owned by a state authority.
Under the memorandum of understanding outlining the terms of the new stadium deal, the state is on the hook for $6.7 million per year for stadium repair and maintenance during the first 15 years of the proposed 30-year lease.
The MOU obligates the Bills to pick up all game-day and operating expenses.
“Future stadium-related expenses will be borne by New York State and the Bills as will game-day operating and other costs, resulting in millions of dollars of savings over the life of the lease,” Poloncarz said in March when he announced the new stadium deal.
Poloncarz has also consistently claimed that the stadium deal is fair to Erie County taxpayers because it will not require an increase in property taxes.
“There will be no tax increase because of this deal,” Poloncarz said when announcing the stadium deal. “We can handle this with the dollars we have already.”
Well, not entirely.
In addition to the $250 million for stadium construction, Erie County has agreed to provide the Bills with revenue from taxes collected on tickets, parking and concessions. The tax revenue would be applied to the capital improvement fund for the new stadium
The MOU requires both the state and the county to contribute to a new stadium capital improvement fund.
The state’s obligation — $6 million — is specified.
The county’s obligation is open-ended.
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Under the MOU, the county is required to contribute whatever it collects from the surcharge on tickets, concessions and parking. An estimate in the MOU, which county officials said was provided by the Bills during the negotiation process, anticipates the surcharges will generate about $4 million in the first year of the new stadium’s operation.
“Whatever amount is generated is the amount contributed,” Poloncarz has said.
Poloncarz has suggested that the surcharges should not be considered a tax as they do not impact all Erie County taxpayers and are instead charged only to people attending Bills games.
“In effect, the capital improvements and the repairs that will be done in the future from the county’s portion, so to speak, will be paid for by the users of the facility,” Poloncarz has said.
DeMause, the editor who runs the website that covers stadium development, noted that in the majority of cases, stadium users are also going to be Bills fans from Western New York, who are also county and state taxpayers, who are being asked to cover the largest subsidy in the history of professional sports.
“I think it’s clear at this point that the only people that this is a fair deal for are the Bills owners, right?” DeMause said. “It’s obviously great for them and for everyone else it’s varying degrees of awful.”
