LOS ANGELES — The National Football League's return to Los Angeles County, combined with the rising popularity of Major League Soccer, is fueling a jump in new stadium construction projects.
Twelve stadiums – twice as many as in the previous five years – are expected to be completed over the next three years, according to a Moody's Investors Service report released Tuesday.
If a provision in President Barack Obama's 2016 budget to repeal tax-exempt bond financing for professional sports facilities passes, state and local governments could end up carrying more of the costs, analysts said.
Stadiums range widely in scale, cost and regional economic impact, but Moody's said the majority are highly leveraged when initially financed and rely on potentially volatile revenue to fully repay the debt issued to fund construction.
"This can weaken a government's credit quality, owing to the reliance on the potentially volatile revenue streams, as well as budgetary strain due to higher debt and uncertainty about future government costs related to the stadium," says Alex Cimmiyotti, a Moody's vice president and senior analyst.
State and local governments also face the potential of having to deal with a stranded asset if a team relocates, a situation currently faced by St. Louis now that the NFL Rams have decamped for Los Angeles.
The NFL's decision in January to allow the Rams to relocate from St. Louis to Los Angeles – and the league's offer of an additional $100 million on top of the traditional $200 million for the San Diego Chargers and Oakland Raiders to rebuild in their current cities – could result in three new California stadiums.
Major League Soccer has added five new teams since 2009 and 11 new stadiums since 2005, and game attendance has grown from 3.6 million to 7 million over the past decade, Moody's said.
"Stadium projects can be publicly financed with dedicated or general tax support, privately financed from stadium-related revenue and owner equity contributions, or a mix of both," said John Medina, a Moody's vice president and senior analyst.
Nearly all stadium projects are considered public-private projects, analysts said, because the city typically funds related infrastructure projects like road and sewer or water improvements, even if the projects are privately-financed. Stadium owners often receive lower property taxes and funding for event day operations.
