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 Steelers
not awash with cash for stadium
By Ed Bouchette, Post-Gazette Sports Writer
This is the eighth in a series of articles taking a
closer look at Plan B, the financing mechanism proposed
by Pittsburgh and Allegheny County officials to pay for
new baseball and football stadiums and the expansion of
the David L. Lawrence Convention Center.
Today's installment is about the Steelers' financial
position and how it affects the amount the team will
contribute toward stadium construction.
Q. The NFL's new $17.6 billion television
contract through 2005 averages $2.2 billion a year, an
average of $73 million a year for each of the 30 NFL
teams. Aren't the Steelers swimming in money?
A. They certainly are better off than the Pirates. But
unlike the Pirates, the Steelers cannot cut their payroll
to $9 million. Every NFL team is required to pay no less
than 54 percent and no more than 63 percent of the
revenue to its players. The Steelers -- and most NFL
teams -- pay out 63 percent.
Q. OK, so 63 percent of $73 million still leaves
more than $20 million for each owner, and that doesn't
even begin to count ticket revenue, local TV and radio
and merchandise sales. Isn't that still a lot of money?
A. If that were the case. First, the Steelers note, while
the television money averages $73 million a year, the
payments are lower in the early years of the contract.
Each team actually will receive about $58 million this
year.
From the more than $20 million of the TV revenue
remaining after players' salaries, all other expenses
must be paid: all nonplayer employee salaries and
benefits (including coaches), stadium rent, operating
expenses, game-day expenses, travel, food for the players
during the season (breakfast and lunch), training camp,
equipment, support costs, and all taxes, including player
Social Security taxes.
Q. With that formula, don't all the teams have
about the same money to spend on player salaries?
A. No. Teams such as the Steelers pay much more than just
the 63 percent of TV revenue to their players. While
every team gets the same amount of television revenue,
other sources of income vary greatly, and affect the
player payrolls.
Teams in the upper echelon of income, such as the Dallas
Cowboys, get as much as $40 million more from other
revenue sources -- from their stadium, sale of their
radio rights, etc. -- than a team in the lower echelon,
like the Steelers. So while both teams may get the same
amount from TV, the Cowboys are left with $40 million
more in profit to spend on whatever they like, whether
it's marquee players or new uniforms for the
cheerleaders.
Q. With all of these different sources of income
to factor in, how do they decide the salary cap?
A. The salary cap is based on the television contract
revenue. However, all of that revenue can't be used for
salaries. Because teams are limited to using up to 63
percent of that money for salaries, they must find other
sources to make up the difference. So if the team spends
the maximum amount it can on salaries, it must pay the
rest of its bills with whatever income it can generate
otherwise, including ticket sales, etc.
Q. Doesn't this still leave all of the teams
competing in generally the same salary range?
A. Ah, if it were only that easy. Teams with revenues
that are among the lowest 25 percent in the NFL -- the
Steelers are one of them -- run into trouble because of
''cash over cap,'' the loophole players and their agents
quickly found to get around the real salary cap.
Q. How does that work?
A. For salary cap purposes, signing bonuses are pro-rated
over the life of the contract. For instance, if the
Steelers sign their first-round draft choice to a
five-year deal and give him a $5 million signing bonus,
only $1 million counts against the salary cap each year.
However, they've actually paid out $4 million more than
the cap in that first year. Virtually every NFL team
exceeds the salary cap every year, some by many millions
of dollars.
The Dallas Cowboys, for example, signed Deion Sanders to
a multiyear contract two years ago and paid him a $13
million signing bonus. The bonus, for accounting
purposes, salary cap purposes, was spread out for six
years so that it looked on paper like only about $2.2
million a year. But that $13 million went into Deion's
pocket immediately -- and that's money that the poorer
teams can't afford to pay up front.
Q. Can't they refuse to pay big bonuses?
A. In order to compete, the Steelers have to pay them or
few good players would either sign as free agents or
choose to remain here.
Q. The Steelers have pledged $50 million toward
construction of a new football stadium. Shouldn't they
pay more because of all that money flowing into the NFL?
A. They still are negotiating that, but Steeler President
Dan Rooney says all that so-called new money won't change
the team's bottom line all that much. In fact, he said it
might hurt it.
Q. How?
A. Those dreaded signing bonuses have increased
dramatically, and they are a drain on teams such as the
Steelers, whose local revenue is low compared to other
teams in the league. That's why they say they need a new
stadium in the first place, to generate more local
revenue.
As it is, they likely will have to charge personal seat
licenses to their season ticket holders to raise at least
part of the $50 million. The more they must pay toward
the stadium, the more they must tap into potential local
sources of revenue -- the sale of private boxes, club
seats, etc. -- which hurts their cash flow for paying
those huge signing bonuses, which hurts their chances of
becoming competitive.
At some point, it would become a Catch 22 -- they need a
new stadium in order to produce more revenue so they can
survive and compete in the NFL, but if they must pay that
revenue to build the stadium, what have they
accomplished?
Q. Surely, though, if the city, county and state
can scrape up some money, can't the Steelers?
A. The Steelers could, of course, borrow money and put
that toward the stadium, but long-term debt can bring
long-term instability in the crazy world of professional
sports teams.
They also could take in a new partner, selling a
percentage of the team and using that money for the
stadium. Neither option seems palatable to the Rooney
family right now.
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