Costly Play: Ravens Stadium

The Maryland Stadium Authority (MSA) and the State of Maryland were so anxious to make a deal with a pro football team, according to the Rockefeller Foundation-funded Good Jobs First Report called “Subsidizing the Low Road: Economic Development in Baltimore,” that they pretty much gave away the store to Art Modell, owner of the team that was then called the Cleveland Browns.

The state initially agreed to build a new $200 million stadium and maintain a fund for continuing improvements; allowed the team to use the refurbished (at a cost of $2 million) Memorial Stadium until the new stadium was completed; allowed the Ravens to pay the stadium’s operating costs—about $4 million annually—instead of paying rent; and let the team keep all profits from tickets, concessions, parking, and ad revenues during games, as well as half the proceeds from non-NFL events held at the stadium. Further, Modell gets to keep the estimated $75 million in revenue from the sale of “personal seat licenses.”

At the time the deal was cut, according to the report, the Maryland legislature was not happy, and sought to modify or even kill the deal. It was able to squeez out a $10 million upfront payment from Modell, with $2 million more to be paid out over 30 years—instead of $24 million initially agreed upon, which was to have been used for school construction. When stadium construction costs escalated, the MSA sold the “naming rights” of the stadium to the team for $10 million in 1997—and the team then sold the rights to PSINet for $79.5 million.

Construction ended up costing $229 million—with the Ravens paying about $13 million toward the expense. This doesn’t count the $6 million the State of Maryland spent for a light rail station for the stadium.

The actual economic impact of the stadium is “unclear,” according to the report, which cites conflicting information provided by the Maryland Department of Business and Economic Development (DBED) (2,730 new jobs, $11.3 million annual revenue) and the Department of Legislative Services (DLS) (889 jons, $7.7 million annual revenue). The DLS suggested that DBED overestimated the “ripple effects” of spending by the team and its fans.

The Maryland Stadium Authority’s 2001 budget, combining operating costs of both new stadiums and including the adjacent warehouse converted to office space, shows an operating loss of over $4.1 million—an improvement from the loss of $5.8 million in the 2000 fiscal year.

The report concludes, “A close examination of the Baltimore stadium deals demonstrates that the benefits of these projects do not outweigh the costs. More important is the opportunity cost of not investing taxpayer dollars in education, transportation or other programs that could yield more positive economic outcomes.”

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This story was published on December 4, 2002.