Last-minute conditions by state officials lead to breakdown in stadium talks.
East Rutherford, NJ - The Giants, ready to announce a deal for a new, privately financed $750 million stadium after months of intense negotiations, were blindsided this week when New Jersey officials insisted on two last-minute conditions the franchise deemed unacceptable.
The Giants had hoped to finalize the agreement and begin construction on a stadium on a site near their current facility in the New Jersey Meadowlands in time to play in the new building in 2008. But after refusing the state's latest demands, it is uncertain whether the stadium will ever be built.
John Mara, the Giants' executive vice president and chief operating officer, and Steve Tisch, who represented his father, Robert, the team's other co-owner, in the negotiations, are frustrated and uncertain what lies ahead.
"We've pretty much blown the 2008 season - only a miracle could save that," Mara said. "To be honest with you from my point of view - I'm speaking only for my family - this really reduces my appetite for wanting to do this deal. Because now you've added considerably higher costs to constructing this thing, not to mention the revenue we're losing in the '08 season."
"There was a question about what to do next," Tisch said. "Next hasn't really been defined yet. The whole process has been frustrating and somewhat disappointing. The governor sat in this room wanting to announce a deal the first week in January. We were totally in favor of that. We had no problem with that, letting the governor announce the state of New Jersey had reached a deal with the Giants for a new $750 million stadium. Now it's (mid) March, and we're not much closer to the deal we felt we had."
Tisch said there were 17 drafts of the 12-page, single-spaced agreement before a deal was presumably reached. The Giants agreed to pay for 100 percent of the costs of the new 80,000-seat stadium, as well as to Acting Gov. Richard Codey's request that the team pay rent to the state and taxes on the land being contributed by the state, totaling $6.3 million annually. But every time the Giants agreed to a provision, the state would make another demand.
"Seventeen times the goal line has moved, and each time we reluctantly moved," Tisch said. "We've gone as far as we can or will go."
The state moved it again Wednesday, after yet another issue was resolved, that of a $3 million payment to the state if the Jets do not build a new stadium in Manhattan and instead remain in New Jersey sharing a new stadium with the Giants.
After that was agreed upon, the Giants learned of the additional issues that eventually broke the deal.
The first was that the Giants learned within the last few days that Codey's recent budget proposal included the possibility of a tax on luxury-suite revenues, a key source of income for the team in a new stadium. Codey refused the Giants' demand that they be allowed to deduct such taxes from the $6.3 million in annual rent.
"We told them we will pay them the revenue they have asked for," Mara said. "But don't ask for a penny more. You don't get a second bite at the apple."
The state tried taking another bite by insisting the Giants immediately sign a deal approving the $1.3 billion Xanadu entertainment and retail project at the Continental Arena site. The Giants have numerous and serious concerns about the project, including whether it should be open on gamedays, and are not prepared to sign such an agreement.
"The state's governor wants the flexibility for future governors to impose taxes directed at sports venues - sales of tickets, sales of suites, sales of club seating, etc.," Shenker said. "We are not opposed to fiscal flexibility for the state. But obviously, we can't be in a position where we are privately financing $750 million of debt toward the stadium and then find the revenues are cut because the state slaps a tax on those revenues. To prove we can't be in that position, our memorandum of understanding - the one (NJSEA Chairman) Carl Goldberg said we were done with on February 16th - said there would be no taxes imposed on activities here. Our memorandum of understanding said that if any special taxes are imposed against our fans, against the people who use this - not as part of a statewide increase, but a tax directed at us - that we will credit that against the rent we are otherwise paying the state.
"Then there was another issue was raised by the staff of the NJSEA. They have been excluded from these negotiations. It's been done at a very high level. Their new demand is that we sign off today - before we sign this agreement - it's an ultimatum - on the Mills/Xanadu project as is. That is something that we're not in a position to do."
The Giants' lease with the NJSEA expires in 2026. But that advances to 2016 if construction on Xanadu begins without the franchise's approval. And Mara said the state has breached the lease agreement by failing to live up to a "state of the art" clause that was added in 1995. In order to induce the Giants to extend their lease, the state then obligated itself to maintain the existing stadium as a state of the art venue consistent with the finest stadia throughout the country. Despite its contractual obligation with the Giants to maintain the stadium as a state of the art facility, the NJSEA has failed to do so. The State's own financial advisors have indicated that it will cost New Jersey taxpayers hundreds of millions of dollars to comply with NJSEA's contractual lease obligations, which state the state must pay for periodically upgrading the field, seating, concession stands, locker rooms and other amenities.
Built more than three decades ago, the existing Giants Stadium is one of the oldest venues in the NFL, and it is in need of a substantial upgrade. Just to keep it open for business, the NJSEA has spent almost $5 million in publicly financed capital improvements annually during each of the past few years.
"We need a new stadium," Mara said. "We hope we don't have to litigate to get it."
Mara made that statement before the NJSEA today filed a declaratory judgment request with the Bergen County Superior Court in regarding the "state of the art" clause.
"We were made aware of the filing this morning," Mara said. "At this point, we can't comment specifically on the filing because we have not seen the paperwork. We are not surprised by this development. It reflects the tenor of our recent conversations with the Sports Authority and the State, and it gives new meaning to the term 'good faith negotiations.'"
In order to provide Giant fans and New Jersey residents with a first class football stadium and events venue, comparable to those in Philadelphia, Baltimore, Washington and around the country, but without subjecting New Jersey taxpayers to the additional costs that the state would need to tax them in order to comply with the NJSEA's contractual obligations to the Giants, the Tisch and Mara families agreed to build a 100 percent privately financed new stadium at the Meadowlands Complex.
Since 1992, taxpayers have contributed, on average, approximately two-thirds of the total costs of new and renovated NFL stadiums. In contrast to what has taken place in virtually every other state and municipality, the Giants have agreed to build the new stadium without any state or municipal proceeds other than a lease of land pursuant to which we would pay the rent that the Governor requested.
Despite the fact that this would have been an exceptional deal for the State, its taxpayers and Giants fans, the NJSEA has inexplicably made last minute demands that made the deal untenable.
New Jersey residents would reap the benefits of thousands of new jobs and tens of millions in direct and indirect tax revenues from both the construction of the new stadium and the ongoing operation and maintenance of the new facility. From construction alone, the state is expected to gain almost 8,200 new construction-related jobs and approximately $24 million in tax revenues.
A new Giants Stadium would relieve the State of New Jersey and its taxpayers from the increasingly burdensome capital costs associated with the maintenance and required upgrade of the existing – 30-year old – Giants Stadium. As Giants fans and other using the stadium can attest, it is not. The new Giants Stadium would ensure the long-term viability of the Giants as the anchor sports tenant at the Meadowlands Complex and create a viable site for other activities, generating millions more in tax and economic benefits.
With the current negotiations at an impasse, the Giants are now left with no choice but to explore all available options with respect to its rights against the NJSEA and all other solutions to its Stadium situation.
"All other options," Shenker said, "are going to be on the table now."
Copyright New York Giants 2005