NFL plans ‘flip tax’ if L.A. owner sells club
The NFL plans to charge a team owner who moves to Los Angeles and then sells the club a “flip tax” on the transaction, according to sources familiar with the league’s Los Angeles plans, adding another possible fee to the three clubs eyeing the nation’s second-biggest market.
The NFL’s six-owner Los Angeles committee met earlier this month in tandem for the first time with the league’s finance committee, underscoring the rapid progress being made toward returning the league to Los Angeles for the first time since 1994. In addition to conceptually agreeing on a flip tax, the owners debated the size and structure of a relocation fee, a topic that will be a main focus of a full ownership meeting scheduled for Oct. 7 in New York.
The relocation fee likely will be derived from a percentage of the increase in franchise value an owner would enjoy from moving his team to Los Angeles, with the amount to be paid over time out of increased cash flows, one source said. The size of the fee is undetermined, but it will be significant, this source said.
PJT Partners, the investment bank hired by the NFL to analyze relocation fees, presented to the league’s dual committee meeting on Sept. 16.
The three teams with designs on Los Angeles are the St. Louis Rams, whose owner, Stan Kroenke, wants to build a stadium in Inglewood, Calif.; and the Oakland Raiders and San Diego Chargers, who jointly have a stadium project planned in Carson, Calif.
The period during which teams can apply for relocation for 2016 is Jan. 1 through Feb. 15, though that window could get moved up to December, with an owners vote possible even before the new year, a source said. This source also said that a vote could occur as late as February as well, but no later.
Twenty-four owners must approve a team’s relocation, leading to all sorts of guessing games about what might happen if all three teams were to formally apply for relocation. No more than two teams would be expected to have their moves approved, and possibly only one team might have relocation approved.
For the league, the flip tax money would be incorporated into supplemental revenue sharing and stadium financing that receives league support.
“These are benefits given to teams, not the person,” a source said. “If the person leaves and the team doesn’t, you don’t want the person taking all the benefits.”
How long an owner would need to hold onto a team relocated to Los Angeles before the flip tax expires is an issue that owners must settle. The owners also will have to assess different valuation metrics. For example: Would the baseline for the Rams be the team’s current value playing in the Edward Jones Dome, or would it be what the team’s value would be if playing in a new stadium in St. Louis?
One source said the benchmark likely would be the teams’ current situations — meaning, in the Rams’ case, their value playing in the dome. That would mean a higher relocation fee.
The teams, and their respective cities, are not expected to present to the owners next week.