Seat deal? Cowboys don't think PSLs enough to build on
By DAVE MICHAELS / The Dallas Morning News
Here's one idea for who should pay for a new Dallas Cowboys stadium: The richest fans.
Personal seat licenses became a reliable way to help finance professional stadiums in the 1990s as the cost of stadiums shot up. PSLs are essentially a one-time fee, ranging from $100 to $17,000, that enables fans to buy the same season ticket year after year.
PSLs have been issued in Chicago, Houston and Philadelphia, among other cities, where owners and public officials weighed their value for raising money against their potential for annoying fans.
"Different communities have different viewpoints on them," said Marc Ganis, a Chicago-based stadium consultant. "You have to be careful not to alienate your existing fan base."
The issue has come up in Dallas with a proposal from Darrell Jordan, a Dallas lawyer and longtime Fair Park advocate, who suggests that personal seat licenses be sold at an average cost of $10,000. Sell 40,000 of those licenses, and you raise $400 million, two-thirds of the cost of the new stadium.
No city or team has ever generated so much money from PSLs.
"I am predicting the market here would bear substantially more than it might in some other places," Mr. Jordan said this week. "There is a precedent here, because this was the way the stadium was built in Irving."
To finance Texas Stadium, the city of Irving issued $30 million in bonds that have gradually been paid back with stadium revenue. The bond buyers were given the option to buy a season ticket.
Since then, there have been nearly as many approaches to stadium finance as there are NFL teams. Many markets – including Houston, where the public funds accounted for three-quarters of the cost – rely heavily on public money. Often, the public money comes from visitor taxes on hotel rooms and rental cars, a source the city of Dallas tapped to build American Airlines Center.
However, a few teams, such as the New England Patriots, have privately financed their stadiums. The Patriots borrowed the money for their $325 million stadium that opened in 2002.
Cowboys officials said they appreciate Mr. Jordan's proposal, but they can't sell $400 million worth of seat licenses. Besides, the team said, it considers PSLs to be part of team revenue.
"That is revenue we count on to run the team and help finance the stadium," team spokesman Brett Daniels said. "The value of the PSL is the Cowboy ticket."
Mr. Jordan anticipated such a reaction. He argued that if the stadium is owned by a local government – almost all stadiums are, because teams do not want to pay property taxes – then the government ought to be able to access all the revenue sources to pay for it.
"I am hoping that beverage-pouring rights, advertising and perhaps naming rights could be shared in a way that redounds to the benefit of the city," Mr. Jordan said.
Richard Knight, a former Dallas city manager who now owns Knight Oil Co., is helping Mr. Jordan push the plan. Mr. Knight did not return a telephone call seeking comment.
Mr. Jordan is a civic leader who ran unsuccessfully for mayor in 1995 and founded the Cotton Bowl Dome Foundation, dedicated to refurbishing and roofing the old stadium. He has been pushing for the Cowboys to return to Fair Park for the better part of a decade.
Mr. Jordan said he is not married to the idea of 40,000 licenses. The number could be lower, perhaps 30,000.
There is a science to measuring how many fans will buy PSLs, and at what price. Consultants consider the income of ticketholders and interview fans to gauge their reaction to the program.
"It is a very complex matrix of issues that have to be examined," said Max Muhleman, a Charlotte, N.C., consultant who pioneered the use of PSLs in the early 1990s. "Dallas is one of the places where, because of the power of the Cowboys' name and following, that something like that might be possible."
Mr. Muhleman devised the plan to sell personal seat licenses that nearly covered the cost of Bank of America Stadium in Charlotte. The Carolina Panthers sold $159 million in licenses. The stadium, opened in 1996, cost $164 million.
"You would have to examine it," Mr. Muhleman said of Mr. Jordan's proposal.
Mr. Jordan's plan would allow the city of Dallas to assume the dominant role in the project, thereby eliminating the involvement of Dallas County. And without a proposed tax increase, a public referendum would be unnecessary.
The Cowboys want to partner with Dallas County because the county, with voter approval, could levy a 3 percent hotel tax and 6 percent rental-car tax. Those sources would raise about $425 million, the amount the Cowboys are seeking from the public.
But Mr. Jordan argues it makes little sense to involve the county in a Fair Park stadium.
First, the city owns the land, but Dallas County would oversee the construction of the stadium and own the building. Then the city would have to approve the design and footprint of the stadium, to make sure it fits with Fair Park's art deco buildings.
There are other complications, including the need to secure legislative approval to use visitor taxes for a project on park land.
"Why not skip the bureaucracy and the delay the county brings to it and let city officials negotiate directly with the Cowboys?" Mr. Jordan said.
Dallas County's reaction to Mr. Jordan's plan has been mixed. But most elected officials said they would have no problem ditching their involvement in the project.
"I don't think of it in terms of doing it for county prestige," Dallas County Judge Margaret Keliher said. "I think of it only as a benefit for the Dallas County taxpayers, if there is one."
Mr. Jordan said he talked to Dallas City Council member Gary Griffith about the proposal, but not Mayor Laura Miller. Mr. Griffith was one of the earliest supporters of a Fair Park stadium for the Cowboys.
"Whether the one he describes is the right one, I don't know," Mr. Griffith said. "But it may spark a debate that causes another one to be proposed."
Mr. Ganis said $400 million is too much money to generate from seat licenses. To generate an average of $10,000 per seat license, the stadium's owner would have to charge perhaps $6,000 for upper-deck seat licenses.
"There is a line where you charge so much you make it cost-prohibitive for some people to go to football games," Mr. Ganis said.
John Neal, who paid $140,000 for a suite at Texas Stadium and also has six club seats, said fan reaction to such a high fee "would be totally negative."
"You throw that out, and there will be a mass exodus," said Mr. Neal, a Dallas resident.
Dallas is different
In Houston, where the team sold about 41,000 seat licenses, the average cost was about $1,800, said Sue Millican, comptroller for the Harris County-Houston Sports Authority. In Cincinnati, seat licenses cost between $100 and $1,500, said Don Schumacher, a marketing consultant who served as executive director of The Greater Cincinnati Sports and Events Commission.
"$10,000 a seat is completely impossible in Cincinnati," Mr. Schumacher said. "But Dallas is a major metropolitan area, with far greater population, and you don't compare the Dallas Cowboys and the Cincinnati Bengals."
Cincinnati is an example for other reasons – specifically, how not to issue seat licenses. The Internal Revenue Service is trying to force Hamilton County, the home of Cincinnati, to pay $14 million in federal taxes on the proceeds of seat licenses.
But that problem might be unique to Cincinnati, several consultants and attorneys said. Before the sale of the seat licenses, the Bengals said the money raised through seat licenses would count toward their contribution to construction cost.
Still, the case gives pause to the Cowboys, who predict that $136 million of the $400 million Mr. Jordan proposes to generate would be lost to federal taxes.
Several consultants said the revenue from seat licenses would not be taxed if the city of Dallas sold the licenses and used the money exclusively for stadium construction.
In St. Louis, where a nonprofit organization sold the PSLs, the proceeds were not taxed, Mr. Ganis said.
Proceeds from personal seat licenses have helped finance many of the NFL's newer stadiums. Muhleman Marketing Inc., a Charlotte, N.C., company that consults on such issues with NFL teams, provided these figures:
Team, year of program Seat licenses Proceeds
Carolina Panthers, 1993 62,000 $159 million
Tennessee Titans, 1996 57,000 $91 million
St. Louis Rams, 1994 53,550 $78 million
Houston Texans, 1999 40,000 $77 million
Chicago Bears, 2002 28,000 $71 million
Baltimore Ravens, 1996 61,000 $69 million
Philadelphia Eagles, 2002 29,000 $63 million
Cleveland Browns, 1997 55,000 $39 million
Pittsburgh Steelers, 1998 48,000 $39 million