NATIONAL

FOOTBALL

LEAGUE

LOS ANGELES VIKINGS RELOCATION

PROPOSAL

Table of Contents

Table of Contents ....................................................................................................................................... 1

I. Overview and Proposal Hypothesis: .................................................................................................... 2

1.1 Historical Facts and Figures of the National Football League ............................................. 2

Snapshot of Statistical Facts and Figures in the NFL (through 2011) ....................................... 5

2.1 Report Objective and Hypothesis ............................................................................................ 6

3.1 Minnesota Vikings Franchise Historical Background and Current Position ...................... 8

II. Geographical Observation and Comparison: Facts and Statistical Information ..................... 11

1.1 Minneapolis Metropolitan Region versus Los Angeles Region: ........................................ 11

II. Feasibility Analysis: Metrics, Formulas, and Measurements ........................................................ 14

III. Stadium Comparative Analysis:........................................................................................................ 20

1.1 City of Minneapolis New Stadium Proposal ......................................................................... 20

Restating the Position in Favor of Minneapolis ........................................................................... 20

2.1 City of Los Angeles New Stadium Proposal ........................................................................ 25

Restating the Position in Favor of Los Angeles: .......................................................................... 25

IV. Closing Argument and Final Recommendation: ...................................................................... 29

Citations: .................................................................................................................................................... 31

Appendages: ............................................................................................................................................. 32

I. Overview and Proposal Hypothesis:

1.1 Historical Facts and Figures of the National Football League

It is fourth and goal and a football length from scoring and winning the

National Football League’s (NFL) Super Bowl, the ultimate prize in all of professional

sports in America in the first half of the 21st Century. Only a few seconds remain to

determine whether weeks and months of

preparation leading up to this moment was worth

the investment in time and money. Unfortunately,

time is an adversary and each tick of the clock

before the final decision is made and the play is

called and engaged only exacerbate the insatiable

anticipation of finally achieving monumental

success and thus solidifying the team’s efforts and

its final output as distinguishable and legitimate. If

you score, you will be the toast and talk of the town, positioned nicely to sustain

longevity and potentially long-run profitability as a viable entity in the industry and

the marketplace.

For one of the League’s most storied and venerable franchises, it is fourth

and goal and the moment of truth, a decisive point in a crucial time, to determine

whether they will be able to maximize profit on an annual basis in their current

market while remaining viable in the local community or if a fresh start in a new

environment is in store to provide the franchise with a better financial and economic

opportunity is at its doorstep. The crux of this issue is at the center of debate for

Photo 1: Courtesy of the National Football League

many of the League’s teams who are close to or on the verge of losing money and,

more importantly, their fan base. This dilemma is confusing to most insiders within

the League and its entertainment industry and to those who are rabid admirers of the

sport because the NFL, since the inception of its revenue sharing system in 1961

under former League Commissioner Pete Rozelle, has experienced exponential

growth and popularity more than any other professional sports’ league throughout

the period.

The NFL was founded in 1922 and comprised of eight teams. By 1960,

following its merger with the American Football League (AFL), the NFL grow to 13

teams. Today, the League has expanded to

32 teams, represented in every region in the

contiguous United States, with a slight

exception to the Mountain West region

composed of Montana, Wyoming, Utah, and

the Dakotas and the plains of the Midwest,

notably in states such as Nebraska, Iowa, and Oklahoma.

League attendance has remained on average at a steady clip over the past

25 years at roughly 61,000 fans per game, with games played on a 16-game

schedule for a majority for those years. (The previous seasons were designed

around 14-game schedule.) In a short-run cycle, this estimates to an average

equivalent to 90% capacity. Currently, the spirited popularity of the League is

running at 94% capacity and in order to maintain this attendance capacity rate,

marginal increases from stadium-generated revenue in ticket, concession, parking,

Image 1: Courtesy of the National Football League

and club paraphernalia and memorabilia prices must be sustain on year-to-year

basis.

At the end of fiscal year 2010, the NFL generate over $8 billion in revenue

from gate receipts, luxury boxes and suites, concessions, merchandise and apparel

license fees, stadium naming rights, trademark licensing, multi-year network, cable,

and satellite television and online media contracts, offseason appearance fees and

special programming, and advertising and special promotions.

The crown jewel that is at the heart of the enormous success of the League

and serves as the catalyst behind its phenomenal growth is the franchise stadium.

During a span of 14 years from 1990 to 2004, 19 new stadiums were built for

combined total of $6.2 billion. Prior to 1990,

many League stadiums were financed

proportionately with approximately 80% in public

funding and 20 % in private funding. Yet, since

1990, a dramatic shift occurred in stadium

financing that saw a significant increase in private

backing that literally split this bifurcated funding matrix in half: public funding at 54%

versus private funding at 46%.

However, it should also be noted that there are a number of newer fan-

friendly, corporate-centric arenas within last five years that are driven by private

contributions almost exclusively with 100% private financing in some cases. Public

funding is derived from various sources in the form of state and local bond initiatives,

state, county, and city sales and use taxes, excise and liquor taxes, tolls, rental, and

Photo 2: Courtesy of Jet Kingdom.com (2003-2011)

parking fee premiums, and other less intrusive forms of tax codes and initiatives. In

contrast, private funding for NFL stadiums is obtained through partnership alliances

from individual contributors who provide financing by direct cash, market securities

and other investment instruments such as short- and long-term bonds, or the sale of

capital assets in real estate and property.

Snapshot of Statistical Facts and Figures in the NFL (through 2011) NFL Financials (selected listing):

Total Annual Revenue – 2010 $8,742,998,000

Average Ticket Price (up 4% from 2009) $75

NFL Profit to Average Total Costs 7%

Industry Profit to Average Total Costs 8.5%

Broadcasting Fees through 2011 $8 Billion

Satellite Fees $4 Billion

Super Bowl Total Ad Revenue Over $400 Million

Super Bowl 30 Sec Ad Average Fee $3 Million

Average Fan Costs (FCI) per Year: Account for 4

average-priced tickets, 2 small draft beers, 4 small soft drinks, 4 regular-size hotdogs, parking for 1 vehicle, 2 game programs, and 2 of the least-expensive adult-size adjustable caps

$420 per Family of Four

Player Average Salary < $2.0 Million

Player Wages as a Percentage of Total Revenue 52.5%

Stadium Rent Costs as a Percentage of Total Revenue

4%

Average Depreciation Costs of Franchise Assets as a Total Percentage of Revenue (%): excluding player’s contracts

6%

Utility Costs for Stadium Use as a Percentage of Total Revenue (%)

5%

Percentage of Franchise Total Revenue Generated from Endorsements

12.5%

2009 Advertising Spending: NFL, NFL.Com Shop

Website, NFL.Com Fantasy Association, NFL.Com $139,486,000

NFL Statistical Facts (selected listing):

2010 NFL Regular Season Attendance Total 16,570,000

2010 Average Attendance per Game 64,978

US Viewership of 2010 Super Bowl 100 Million

Average Percentage of All US Households to Watch Super Bowl since 2000

42%

Sports Industry Expected Annual Growth Rate 3.5%

Average NFL Viewer Earnings per Year (highest of all four major sports)

$62,200

Gender Viewership Ratio: Male to Female 4 to 1

Ethnic Viewership Percentage Breakdown: Whites, Blacks, and Latinos

75%; 70%; 65%

2.1 Report Objective and Hypothesis The National Football League (NFL) is classified as a private organization

composed of 32 independently privately-owned and operated franchises. The head

of the League is run by a League’s commissioner who is elected by majority vote

from the League’s owners.

These owners are not only responsible for daily business operations of their

respective franchises (teams) but are also the main drivers and facilitators behind

the construction of the stadium facilities their teams perform. Depending largely on

the initial capital structure of stadium funding at its inception, many of the League’s

stadiums are funded solely by private or public finance or either by a mixed

combination of the two. The source

components that generate the funding

needed for building a stadium is derived

from various financial and investments

streams in the form of state and local

taxes, public or private bond initiatives,

and a percentage of sales revenue

obtained through merchandise, gate receipts, concessions, parking and rental fees,

advertisement, national and local media, and other minor avenues.

Although the popularity of the sport has grown rapidly, becoming the nation’s

number one sports league out of four professional sports’ leagues – the others being

MLB, NBA, and NHL, a few of the League’s legacy franchises in smaller markets

have struggled to compete with other more profitable franchises in the League

Photo 3: Courtesy of New Ballpark.org (2011)

primarily due to economic stagnation and antiquated stadiums that failed to stimulate

the local economy’s existing fan base and create new growth opportunities in fan

attendance. When a macro-economic crisis occurs, the sports and entertainment

industry become greatly affected, because revenue is mostly generated by individual

and corporate discretionary income. Therefore, if a venerable franchise is

established in a metropolitan area where low growth rates in population, business,

and personal income along with unfavorable rankings in lifestyle and quality of life

become the norm, it could find financial sustainability difficult to maintain. One of the

League’s highly celebrated and respected franchises has recently found itself at the

crux of this dilemma and currently is considering ways to increase revenue and

profitability of their organization and is the subject of this feasibility report: The

Minnesota Vikings.

The purpose of this report analysis is to assess and evaluate the current

financial and economic health of the

Minnesota Vikings franchise in the City of

Minnesota by using a preferred set of

financial concepts and principles, models,

formulas, metrics, and equations used in

corporate finance to determine whether a

proposal to build a new stadium in the

Minneapolis region will create long-run

growth for the organization and its surrounding community or whether a motion to

relocate to another national market with substantially better expected growth

Image 2: Courtesy of the Minnesota Vikings and the National Football League

potential within a newly constructed stadium: For the purpose of this report, the

preferred competing market that will be the basis of this argument is the City of Los

Angeles.

Thus, the report hypothesis is confirmed and stated as follows: Should the

City of Los Angeles build a new football-exclusive stadium to accommodate the

relocation efforts of the NFL’s Minnesota Vikings franchise from the City of

Minneapolis?

3.1 Minnesota Vikings Franchise Historical Background and Current Position

Known around the League as the “Purple People Eaters,” the Minnesota

Vikings began as an expansion franchise – the League’s 14th - which was founded

by an ownership team of businessmen lead by Bill Boyer, H.P. Skoglund, Max

Winters, Ole Haugsrud, and Bernie Ridder in 1960 but yet started its first full season

a year later in the Fall of 1961 as a part of the NFL’s National Football Conference

(NFC). Due to the strong Scandinavian influence in the metropolitan area of

Minnesota, the team was officially

awarded the name of the Vikings

by the League.

Fomented by an

aggressive marketing campaign

during the team’s inaugural

season, the franchise sold on

average nearly 26,000 tickets with an average capacity peaking at 85% for its home

games at a stadium named the Metropolitan stadium, a stadium with a maximum

Photo 4: Courtesy of NowPublic.com (2007)

capacity of 40,800 seats. A few years later, seating capacity at Met Stadium - a

name commonly referred to by the locals – was expanded to 47,900.

For several years leading up to the mid ‘80s, the Minnesota franchise had

been one of the League’s most storied and successful franchises, the first team in

League history to make an unprecedented four Super Bowl appearances in four

straight years. Since many of the games were being broadcast nationally, these

early achievements attracted fans across the country and created a fan base that

still remains one of the League’s largest. What soon precipitated from the growing

popularity of the franchise in 1979 was a new stadium initiative to capitalize on

increased demand. Two years following a much-anticipated ground-breaking

ceremony, the Hubert H, Humphrey Metrodome was finally constructed and became

the team’s new home to the present.

For the purpose of this report, we will not cover in in depth detail the history of

the franchise and its days under the roof of this uniquely inflatable geodesic dome

design, but will focus on the main point of addressing the feasibility study to

determine the viability of the organization’s continued presence in the city of

Minneapolis. The primary argument does not solely rests on a new stadium initiative

but rather the inclusion of other direct and indirect factors – social, economic, and

environmental - that support new finance projects such as the existence of a stadium

and the professional organization (s) it serves.

For in the case of the proposal to retain the franchise in its current host’s city,

it should be noted that one of the critical factors – environmental - that is part of the

entire evaluation process had recently made its negative impact on the decision-

making process for franchise, the League, and many of external investors who are

fans but, more importantly, equity partners in the overall financial success and health

of the organization. Additional capital expenditures were required for structural

improvements to the indoor, air-

supported roof of the Hubert H.

Humphrey Metrodome,

caused by heavy accumulation of

snowfall that was slightly abnormal

for a short period but was not

atypical of average seasonal winter conditions for the region throughout the course

of any given year.

Therefore, it is reasonable to surmise that this among the other factors

offered in this report will leverage the decision-making process in one direction or

the other. We hope to prove our argument and succinctly and precisely make the

case for the relevance of those factors in the assessment process. And based on

final analyzes we will offer our recommendation that is substantiated on those

premises.

We will first provide a breakdown of preferred factors that are used as

assumptions in many of the statistical and data analyzes, to establish the premise

for the basis of our assessment, evaluation, and final analysis and

Photo 5: Courtesy of Deadspin.com

recommendations. These assumptions have been carefully identified, investigated,

and selected for relevance purity, a typical methodological strategy employed by

financial analysts in the marketplace is to calculate the present value and evaluate

financial position of a company, or entity, for comparative analysis purposes. This

procedure and financial tactic used by decision makers and their team of analysts

worldwide is in line with a similar standardized financial assessment and analytical

toolkit used in this report.

The first series of items to discuss in our breakdown analysis are facts and

statistical matters concerning geography, demographics, climate, transportation, and

cost of living between the two proposed regions: Minneapolis and Los Angeles. The

following section gives you a statistical breakdown of these component factors.

II. Geographical Observation and Comparison: Facts and Statistical Information

1.1 Minneapolis Metropolitan Region versus Los Angeles Region:

Demographic, Economic, Climate, Transportation, Cost of Living Statistics

Economic Impact Component Variables Minneapolis,

MN

% of or Above/Below

National Benchmark

Los Angeles

, CA

% of or Above/Below

National Benchmark

Demographics:

*Population 385,058 0.13% 3,958,251

1.29%

*Pop. Change 0.63% -1383% 7.17% -30%

*Median Age 35.7 -2.52% 35.1 -4.27%

*Household Size 2.24 -15.18% 2.88 10.42%

Demographic, Economic, Climate, Transportation, Cost of Living Statistics

Male Population 50.91% 3.14% 50.02% 1.42%

Female Population 49.09% -3.26% 49.98% -1.42%

Married Population 28.84% -63.49% 35.54% -32.67%

Single Population 71.16% 25.73% 64.46% 18.01%

Economic

Unemployment Rate 6.10% -49% 13.40% 32%

Recent Job Growth 0.61% 120% -0.59% 80%

Future Job Growth 35.12% 11% 25.42% -23%

Sales Taxes 7.15% 5% 8.25% 18%

Income Taxes 7.85% 20% 9.30% 33%

Income per Cap. $28,016 3% $25,274 -7%

Household Income $47,043 -13% $47,387 -12%

POPULATION BY OCCUPATION

Management, Business, and Financial

14.62% 6% 11.58% -19%

Professional 31.18% 27% 20.60% -10%

Service 16.93% 14% 15.84% 8%

Sales and Office 24.17% -4% 23.36% -8%

Farming, Fishing, and Forestry 0.15% -353% 0.18% -278%

Construction, Extraction, and Maintenance

4.39% -113% 7.75% -21%

Production, Transportation, and Material Moving

13.03% -22% 14.49% -9%

Climate

*Rainfall (in.) 34.2 -7% 18.1 -102%

*Snowfall (in.) 54.5 54% 0 0%

*Precipitation Days 101 1% 26 -285%

*Sunny Days 198 -4% 284 28%

*Avg. July High 87 1% 77 -12%

*Avg. Jan. Low 6.3 -225% 49.8 59%

Demographic, Economic, Climate, Transportation, Cost of Living Statistics Transportation

Commute Time 23.6 -17% 32.2 14%

COMMUTE MODE

*Auto (alone) 59.94% -27% 66.53% -14%

*Carpool 9.92% -8% 11.27% 5%

*Mass Transit 13.99% 65% 11.30% 57%

Work at Home 4.19% 3% 5.07% 20%

COMMUTE TIME TO WORK

Commute Less Than 15 min. 26.96% -6% 18.55% -54%

Commute 15 to 29 min. 49.55% 27% 34.47% -5%

Commute 30 to 44 min. 16.47% -20% 26.42% 25%

Commute 45 to 59 min. 3.36% -123% 8.95% 16%

Commute greater than 60 min. 3.66% -121% 11.61% 30%

Cost of Living

Overall 108 7% 147 32%

Food 109 8% 108 7%

Utilities 97 -3% 109 8%

Miscellaneous 114 12% 106 6%

Favorable Index: <100

Unfavorable Index: >100 *The asterisk indicates key assumptions factored into the report.

2.1 Minneapolis Region vs. Los Angeles: Other qualifying variables not included: Ethnicity and Racial Composite:

The City of Minneapolis racial groups are 60.34% of people are white,

19.04% are black, 6.47% are Asian, 2.17% are Native American, and

11.99% claim 'Other'. 12.70% of the people in Minneapolis, MN, claim

Hispanic ethnicity (meaning 87.30% are non-Hispanic).

In contrast, Los Angeles racial groups are 45.67% of people are white,

9.48% are black, 10.48% are Asian, 0.80% are Native American, and

33.57% claim 'Other'. 50.74% of the people in Los Angeles, CA, claim

Hispanic ethnicity (meaning 49.26% are non-Hispanic).

Average Viewers by Ethnic Groups:

Figure 40: Professional sports viewership, by race/Hispanic origin, February 2011

Total White Black Asian Hispanic

Base: Adults aged 18+ with access to the internet

2000 1495 300 100 300

% % % % %

Any viewership 85 85 88 84 83

Football 70 70 75 51 65

Baseball 53 55 49 46 52

Basketball 43 38 71 41 44

Hockey 26 28 21 16 20

Average # of sports followed 3.2 3.1 4 2.8 3.1

Source: Mintel

Education Comparison:

Education Minneapolis, MN Los Angeles

2 yr. College Grad. 6.22% 5.86%

4 yr. College Grad. 25.73% 18.78%

Graduate Degrees 15.67% 10.00%

High School Grads. 87.06% 72.06%

The information indicated above represents many of the assumptions that factor

into the feasibility study report and sets the foundation for interpreting our various

mathematical analyzes to help formulate and arrive to our final argument and

conclusion, and recommendation, which we elaborate in detail in the ensuing section.

II. Feasibility Analysis: Metrics, Formulas, and Measurements

Before executing the feasibility analysis, it is important to gain insight on the

general success of the League and its financial performance record during a specific

period of 5-10 years. By analyzing KPIs (key performance indicators) such as League’s

revenue streams, attendances, player salaries - which makes up a substantial portion of

all costs (51%) on average per squad - and other variable costs notably associated with

concessions, parking, stadium and corporate facilities maintenance, and fixed costs

such as stadium and corporate utility, leasing, some corporate administrative salaries

that are unlevered by multiple bonus package incentives as one would find in players

multi-year contracts, developing a credible feasibility analysis report for the Minnesota

Vikings franchise to determine which market is more conducive to long-run profitability

and sustainability will be achieved.

The table below on the following page is a scaled-down sample version of some

KPIs generated by the League that function both as an exploratory and comprehensive

feasibility study analysis. With all things being relatively equal, since the primary source

of revenue generated is predicated on gate receipts and various forms of PSLs and

luxury boxes, etc., the most crucial key performance indicator must be “city population”

because of the obvious implications involved in creating a sufficient fan base and

demand for the product on the field, the main catalyst behind revenue sales..

Immediately following this chart is a regression analysis report. As mentioned in

the previous paragraph, the KPI that this report will focus its research between the two

proposal regional sites regards variables urban areas where populations tend to be a

driving force behind mounting a fan base large enough to provide an annual ROI and a

steady marginally steady growth rate that is inflation adjusted. However, for the integrity

of this report, it must be noted that there is only one outlier in the League for which

urban population size does not impact the success of the franchise and that is

demonstrated in the League’s reigning Super Bowl champions, the Green bay Packers,

a team in which the population of its metropolitan area is roughly 300,000 inhabitants,

as compared to an average of approximately 1.5 million.

You will discover in this report that the population size is a clear determinant and

the independent variable designated when feasibility analysis is conducted by

engineering design firms who are usually the facilitators behind new stadium proposals

and possible relocation agendas. The old adage states that success on the field puts

“butts in the seats.”

A Sampling of NFL Stadiums and Selected Variables used In Regression Analysis

Team and Stadium Name

Stadium Owner

Metropolitan Area

Population Team Value ($ in

billions) Stadium Total

Costs

Average Ticket Price

Total Annual Revenue

(weighted) for Home Games:

2006-2010

Dallas Cowboys: Cowboys Stadium

City of Arlington 6,300,000 $1,850,000,000 $1,200,000,000 $110 $403,692,300

Washington Redskins: FedEx Field Team 5,358,100 $1,555,000,000 $251,000,000 $79 $341,509,890 New England Patriots: Gillette Stadium Team 4,522,900 $1,401,000,000 $325,000,000 $118 $405,660,400 New York Giants: MetLife Stadium

New Meadowlands Stadium Co. 19,006,800 $1,300,000,000 $1,400,000,000 $112 $441,428,960

Green Bay Packers: Lambeau Field

City of Green Bay 307,000 $1,089,000,000 $259,000,000 $72 $254,669,760

Denver Broncos: Sports Authority Field at Mile High

Metropolitan Football Stadium District 2,506,600 $1,046,000,000 $401,000,000 $77 $291,438,070

San Francisco 49ers: Candlestick Park

City of San Francisco 4,274,500 $991,000,000 $25,000,000 $76 $260,797,040

Minnesota Vikings: Hubert H. Humphrey Metrodome

Metropolitan Sports

Authority Commission 3,229,900 $796,000,000 $55,000,000 $76 $236,213,320

Sample Linear Regression Chart:

Y Variable = Population Total for NFL Metro Regions: Variables of significance are

total Team Value and total Stadium Costs/Price, which was expected.

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.839169968

R Square 0.704206235

Adjusted R Square

0.660384936

Standard Error

2497472.346

Observations 32

ANOVA

Df SS MS F Significance F

Regression 4 4.00937E+14 1.00234E+14 16.06995 7.58E-07

Residual 27 1.68409E+14 6.23737E+12

Total 31 5.69346E+14

Coefficients

Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept 877917.9484 3075741.855 0.28543291 0.777491 -5432983 7188819 -

5432983 7188819

Team Value ($ in billions)

-0.007394966 0.003179404

-2.325896978 0.027778 -0.01392 -0.00087 -0.01392 -0.00087

Stadium Total Costs 0.007414349 0.001909151 3.883583436 0.000602 0.003497 0.011332 0.003497 0.011332

Average Ticket Price

-14311.31906 88075.78212

-0.162488697 0.872131 -195028 166405.3 -195028 166405.3

Total Annual Revenue (weighted) for Home Games: 2006-2010 0.036169336 0.023633726 1.530411895 0.137548 -0.01232 0.084662 -0.01232 0.084662

The independent variable (population) in the regression analysis chart shows that

both multiple regression and regression squared is comfortably 70 percent or higher,

meaning that there is a strong relationship, or correlation, between the independent

variable and dependent variables. If we test our hypothesis, our null hypothesis, based

on this scenario, that states that any marginal increase or decrease in population does

not have any effect on the selected dependent variable in the above short-form

example, then we can test the validity of this hypothesis in one way by evaluating the

regression charts p-value results. Since the level of significance is set at 5 percent, if

the p-value is lower than the LOC (level of confidence) at 5 percent, then the null

hypothesis must not be accepted.

The chart above indicates that of the four dependent variables, only one has a p-

value less than the level of significance and that is reflected in the relationship between

total stadium cost and population, which is understandable because of the one-time fee,

fixed-charge effect and the inflationary pricing of stadiums not reflected in the constant

year-to-year growth rate and variations incurred from annual increases in prices.

The data plot below illustrates the relational trends between the independent

variable, metropolitan population, and the dependent variables. As mentioned before

there are few outliers indicated in the regression analysis because of the disparity of

spread from two of the US largest cities, New York and Chicago.

The standard coefficient at Y-intercept stands at 877,917 rounded. The slope

below (111,162) serves as a very important statistic because it pertains to the value

place on population size being the key non-exclusive factor that affects revenue,

attendance, and the team’s overall fan base, the lifeblood and most sustainable

y = 111162x - 1E+06 R² = 0.5782

-5000000

0

5000000

10000000

15000000

20000000

25000000

0 20 40 60 80 100 120

Po

pu

lati

on

p

er

Fran

chis

e

Axis Title

NFL Franchise Regression Analysis

Series1

Linear (Series1)

component in the entire feasibility analysis. For each unit increase of 111,162 in

population growth, three of the four dependent variables are positively affected.

Now that the form and outline of the feasibility report purviews from both

historical context and technical description, the heart of the report analysis is primed

and ready for full disclosure. In reiteration, the primary objective, due to the nature of

this course assignment and degree program, is to demonstrate in this term paper a

comprehensive understanding of corporate finance concepts and applications by

deploying them in a practical and useful manner that illustrates sufficient competency of

materials discussed in the course. (Please refer the appendage section at the end

for a detailed description of various corporate finance methodologies and

analytical tools used in our analysis.)

Again, it must be restated that National Football League, also known as the

“League,” and its membered body of 32 independent franchises (referred to as “teams”)

are by law called “private entities” and as a result are not subject to federal mandates

set by the US Securities & Exchange Commission, a federal institution responsible for

all US businesses who have filed an initial public offering and are categorize as a

“public’ company. So, the gathering of important financial data and information that is

easily obtained for public companies ‘s 10-Q and 10-K quarterly and annual reports is

much more difficult but not impossible.

Where the lack of sufficient information and data that could be used in this

feasibility study is evident, this problem and other such-similar problems were rectified

adequately by paralleled analysis against a closely-related industry. Statistical

information used from these industries involved general growth rates in revenue from

sales generated by ticket and concessions operations, merchandise and memorabilia,

stadium leasing and other capital asset revenue enhancers and capital asset

investments, advertising, special licensing fees, radio and television contract fees,

expected rate of return on debt instruments for stadium funding and several others that

added to the total value for the franchise. These and other minor and less accessible

factors formulated a portfolio of basic assumptions that were used in the report.

We begin our analysis in the following two sections, first for the City of

Minneapolis followed by the City of Los Angeles. Immediately following our

comparative analysis will be a section describing our final conclusion and

recommendation.

III. Stadium Comparative Analysis:

1.1 City of Minneapolis New Stadium Proposal

Restating the Position in Favor of Minneapolis

Since it has already been well-established in previous paragraphs the history

and current economic and social positions of the Minnesota Vikings franchise in the

city of Minneapolis, it is important now to take a closer look at the team’s current

new Ramsey County at Arlen Hills stadium proposal and some of the key economic

indicators that will shed light on the City’s probability to retain its team for the

foreseeable future. As in the case of LA’s stadium proposal, the Minneapolis Sports

Facilities Commission for the City requested the services of two local firms to

conduct two separate independent studies on the overall economic impact by RSM

McGladney, Inc. and the Convention Sports and Leisure Company.

Although these studies are complete, some of the basic assumptions, as

often the case with impact study report, are subjective for the most part. Therefore,

existing forecast data and information were slightly adjusted on a conservative basis

to reflect current market conditions, as noted earlier. There are three areas that will

be analyzed in this section to how those adjustments differ from studies generated

by the firms mentioned and how those newer outcomes might be subjugated to

negative and recessive influences in the marketplace.

For instance, the CSL study reports the NPV of annual ongoing operations

(under a 30-yr stadium lease agreement) and jobs for the local economy projects

marginally lower inflation rates, which will affect long-term forecasting. Now, let’s

take a look at the NPV of four specific economic drivers outlined in the report and

adjusted to an annual inflation rate of 3.5 percent which will contribute to the local

economy long-run. The nominal discount rate of 8.675% was used, a rate that is

reasonable and should remain in the adjustment. The formula used for the NPV

(inflation adjusted) is NPV = [Cash Flow x (Inflation Rate)] ÷ Nominal Discount Rate

= [CF x (1+ri)t] ÷ [(1+rreal) x (1+Inflation Rate) – 1]t. Now, let’s analyze and compare

the figures in the table below.

Table 1 Sampling: Direct Spending - Adjusted NPV (30-Year Lease Horizon) Interest rate 5% Real Inflation rate 0.035 $150,178,500.00

Nominal Inflation rate 0.08675

Year 0 1 2 3

CFs $145,100,000 $150,178,500 $155,434,748 $160,874,964

FV of CFs $0.00 $138,190,476.19 $131,609,977.32 $125,342,835.55

NFV $2,375,642,644

Table 2: Annual Economic and Jobs - Adjusted NPV (30-Year Lease Horizon) Estimated Annual Economic and Jobs Impact Generated in Minnesota by On-Going Operations

NPV @ 5% Discount Rate

Year 1 30-Year NPV

Adjusted 30-Year NPV (@ 8.675% nominal discount rate)

Direct Spending $145,100,000 $3,664,000,000 $2,407,969,349

Total Output $274,500,000 $6,933,000,000 $4,494,237,807

Personal Earnings $105,700,000 $2,687,000,000 $1,730,568,074

Employment 3,400 n/a

Before offering a comparative analysis on tax revenue generated by a multitude

of on-going operations activities at the Hubert H. Humphrey Metrodome, reviewing the

current tax bracket will help to understand which areas taxes are levied against. Table

3 below shows tax rates for both the State of Minnesota local municipalities.

Table 3: State and Local Tax State Taxes: City Taxes:

• 6.875 percent sales tax • 0.5 percent sales tax (Mpls. and St. Paul) • 2.5 percent liquor tax • 3.0 percent liquor tax (Minneapolis) • Personal income tax • 3.0 percent entertainment tax (Minneapolis) • 10.0 percent admissions tax • 3.0 percent restaurant tax (Minneapolis) • 3.0 percent hotel tax (Minneapolis) • 6.0 percent hotel tax (St. Paul) Hennepin County Taxes: Other Taxes: • 0.15 percent sales tax • 0.25 percent five-county transit sales tax

As noted previously, today’s stadium funding is often comprised of a mixture of

capital investments from long-term bonds, investment securities, private investments,

to, as in a majority of the cases, state and local tax revenue. The new proposed

Metrodome stadium at Arlen Hills is estimated to cost $1.057 billion. Unlike the average

residential home or commercial building, yet similar to players’ contracts, NFL stadiums

are considered depreciable assets and thus all depreciable assumptions must be

included in the analysis where the combination of leasing payments along with all tax

revenue and operating expense will attribute to NPV. Below is an estimated NPV 30-

Year comparison of all tax revenue collected for the Arlen Hills’ stadium between CSL’s

impact study and the adjustable NPV proposed in this report.

Estimated Fiscal Impacts

Tax Type Year 1 30-Year NPV Adjustable 30-

Year NPV State Taxes Sales $10,067,000 $254,300,000 $164,821,464 Personal Income 12,380,000 327,700,000 $202,690,944 Liquor 253,000 6,100,000 $4,142,230

Total State Tax Revenues $22,700,000 $588,100,000 $371,654,638

5-County Transit Sales Tax $325,000 $8,200,000 $5,321,047

Hennepin County Sales Tax $165,000 $4,200,000 $2,701,454

City Taxes Sales $531,000 $13,400,000 $8,693,771 Restaurant 375,000 9,200,000 $6,139,669 Hotel 321,000 7,900,000 $5,255,557 Entertainment 1,716,000 44,000,000 $28,095,126 Liquor 255,000 6,200,000 $4,174,975

Total City Tax Revenues $3,198,000 $80,700,000 $52,359,098

Total Tax Revenues $26,388,000 $681,200,000 $432,036,238

Admissions Tax $5,813,000 $149,300,000 $95,173,058

Total Including Admissions Tax

$32,201,000 $830,500,000 $527,209,296

Tax Assumptions:

NPV of estimated tax revenues over the first 30 years of stadium operations assuming a 5

percent discount rate.

Represents a combination of taxes assessed by cities in which stadium-related spending is assumed to take place.

Includes the 0.375 percent sale tax increase effective July 1, 2009 due to the passage of the Clean Water, Wildlife, Cultural Heritage and Natural Areas Amendment.

The initial cash contribution from the Minnesota Vikings applied to the new

stadium cost is $407 million (37% of all project costs). The Team is also expected to

contribute $14 million annually towards operating expenditure at our adjustable NPV of

$229,214,314. With all things being equal, thus far the adjustable NPV amount that will

be attributed to annual team-generated activities plus initial cash contribution equals

$1,163,423,610. Other revenue-generating activities such as interest payment from

bonds and other securities and miscellaneous items in the form of tax increases will

marginally or substantially add to this total. Under these aforementioned assumptions,

the current adjustable NPV gross profit totals $106,423,610.

Even though original cash flow figures have been adjusted with a higher inflation

rate, because of the immense popularity of the National Football League, you can see

from our proposed results that the League, in general, and the Minnesota Vikings’

franchise specifically, in spite recessive downturns, are capable of making a handsome

profit. Yet, as this paper referenced earlier regarding KPIs, the most crucial component

in driving revenue for an NFL franchise is largely attributed to regional population size

and population growth, the primary impetus behind sustaining an existing fan base and

obtaining newly acquired fanatics for the Team worldwide.

So, how does the City of Minneapolis new stadium initiative compare and

compete with the City of Los Angeles proposal to persuade this venerable franchise to

uproot and relocate nearly 3,000 miles away to a region that is diametrically opposite in

several ways from one to another? What are some of the benefits offered by

Minneapolis’ competitor that is convincing enough to support a franchise when the city

failed miserably on two separate occasions in recent memory? Are there logistical

attractions – some newly established – in the LA region that can assure the Franchise if

it elects to relocate that things are different this time around? To address these and

other questions, we now turn to the City of Los Angeles’ new stadium proposal at the

Grand Crossing location to better answer these and other questions.

2.1 City of Los Angeles New Stadium Proposal

Restating the Position in Favor of Los Angeles:

NFL fans regularly arrive at games wearing apparel purchased prior to the

event, pay entrance fees, and freely order food and memorabilia for three hours in

an attempt to capture the atmosphere forever. The issue, however, is that the most

recently built NFL stadium, Cowboys Stadium, cost $1.15 billion, which would result

in a tax increase that Governor Mark Dayton of Minnesota ruled out as an option to

help pay for a new stadium thus pushing a vote out to possibly as late as November

2012. This delay is too long to wait for a decision partly because most people

believe voters will reject the new tax anyway. Instead, Minnesota politicians are

considering building a new casino with the intent to apply partial state revenues from

the casino to help fund a new stadium.

“If you build it, they will come.” If the Vikings are considering using other

entertainment tax revenue as a source of financial support, the ownership should

also consider the Los Angeles (LA) Stadium at Grand Crossing complex, which is

designed by the team that built the Staples Center, home of the LA Lakes, Clippers

and Kings professional teams. Because the Grand Crossing complex is the size of

600 acres, some marketing plans include non-football entertainment daily ranging

from restaurants, shopping, a theater and even a hospital, which would make this a

small community where people may want to visit regardless whether a football game

is being played and investors wouldn’t have to worry about people being forced to

stay at home due to brutal winter weather. The complex’s proximity to more than 15

million people within an hour has resulted in a fully private financing option, no new

tax payer dollars. Also supportive are the local governments that stand to create

18,000 new jobs and earn new tax revenue, particularly if a team from outside

California moves into the state.

The economic synergies appear to favor LA as well from a marketability

perspective. While Minneapolis is home to several Fortune 500 companies, it is the

13th largest metropolitan area compared to LA being the 2nd, so prior to committing

to relocate, the Vikings should be able to secure new marketing contracts of greater

value. Comparisons between team merchandise sales are often difficult to predict

when relocating. Initially, LA Vikings merchandise would be a highly demanded

commodity for many reasons. Southern California fans appreciate the most recent

fads and they would certainly get that with the news of a new NFL team, especially

given that the mascot symbolizes toughness often thought of as a modern day

pirate. Additionally, the team would immediately compete for the NFC West division

lead in part because some of the weaker teams in the entire League are in that

division and also because the Vikings are just one full season removed from the

NFC Championship game and led by young stars including NFL’s best running back

arguably.

But what stands out the most is the potential collaboration of two storied

franchises that showed life in Minneapolis, but relocated during difficult financial

times only to be rejuvenated in sunny LA. At the time the Vikings were joining the

NFL, the Minneapolis Lakers professional basketball team was declining. As

fortunate as the team was to survive a plane crash during a winter storm, the NBA

placed the franchise on financial probation$ in 1960, ultimately leading to the

decision to relocate to LA to achieve economic prosperity. Coincidently, a year after

a winter storm caused havoc resulting in the collapsed Metrodome roof, another

Minneapolis’ professional sports teams finds itself facing financial questions as well

as being courted by opportunities in LA. People say that history repeats itself. If the

Vikings choose to join the Lakers in LA, the fan base marketing leverage is already

established and can be leverage relative to a big brother paving the way.

It is possible to imagine the cross pollination of purple Vikings apparel worn to

Lakers games and purple Lakers merchandise shown off by fans at Vikings games,

but the risks loom for ownership on fourth down when deciding what play to call for

the franchise’s future considering the team has been a successful staple in the local

community for decades. An enormous driver referenced is the private funding of a

new stadium complex saving the Vikings ownership $450mm> as well as saving

local constituents the expense of new taxes related to the stadium construction. On

the other hand, the team must quantify intangibles: will fans support and embrace a

team that left its home city; what happens to the franchise if fans are disappointed by

the team’s success; would this situation lead to the same result as the Rams and

Raiders, two professional football teams that relocated away from LA?

Predicting an optimistic outcome is generally more enjoyable to consider

by human nature. That said, contingency plans will become more valuable in times

of crisis than any forward looking marketing plan. Given the long term success of

the franchise and the short term positive financial success though new benefits

including a privately funded stadium complex, predetermined advertising contracts

and defined seating revenues, the fans will be in the seats and the same successful

product on the field is anticipated. The more concerning scenario is that two NFL

teams have already tried to establish a franchise in LA, only to depart. As often

happens in business, the Rams and Raiders relocations appear to be politically

driven. First, the Rams chose to play home games in the Olympic Coliseum seating

90,000 fans which is too large and resulted in several local TV blackouts, so fans

could not keep in touch with their team in the same city. Once the former owner

passed, new ownership relocated the team. Then, the Raiders made the same

move into the enormous Coliseum, which was never approved by the League, but

people speculate the move was meant to leverage the demand for improvements to

the Oakland Coliseum where the Raiders returned.

While the future cannot be predicted, this opportunity for the Vikings to

relocate appears to have been thought out in more detail than previous relocations.

That said, businesses must continue to strive for improving the brand or a competitor

will take market share. The Vikings’ franchise is on a short term downwardly trend.

Had the team avoided a fumble or two, the franchise would have been expected to

win the Super Bowl and perhaps Governor Dayton and taxpayers would instead

support financing a new stadium. Clearly, a transition to Southern California would

give the Vikings a new perspective and the most important first step is to make the

community feel involved and part of the organization. Instead of a fan sitting in an

oversized Olympic track and field stadium, bring the team to the fans. Leverage the

existing economic struggles, by hiring enthusiastic fans to spread the word that the

Vikings have anchored in LA. Emphasize the addition of 18,000 anticipated new

jobs, send the lower paid enthusiastic fans on a political bus tour through greater LA

because enthusiastic face time can be remembered for a long duration. Sail a

Vikings’ ship along the heavily populated Southern California beaches. Want to

make someone’s day? Give away low valued common shares of the franchise along

with ticket purchases. The bottom line is to make an effort to make it easier for fans

to support the team.

IV. Closing Argument and Final Recommendation:

Decision time has arrived. It’s still forth down, now with fewer seconds on the

clock and while the commentary has been understandable, business decisions must

be justified. Below is a weighted average analysis of topics analyzed, some

subjective, but each given a value in order to determine the future of the NFL Vikings

professional football franchise.

Multi-million dollar decisions are not completely one-sided, but the data above

reflects that the Vikings will be better off by relocating to LA. The most influential factor

is the sacred stage for athletes, the stadium, where fans of all ages share the

Weighted Average Analysis

Component Weight MN vs CA

Financials

Financing New Stadium 30% CA

Cost of Relocation 20% MN

Risk Management

Customer Base 15% MN

Franchise Reputation 10% MN

Change of Direction

Complex Development 15% CA

Local Marketing 10% CA

Decision 55% CA

*Appendix 5 for justification

camaraderie to support their team together. The Vikings have maintained excellence

on the field for decades.

Citations:

Literary Sources (sample):

World Almanac Book of Facts (1923-). World Almanac: Book of Facts. New York: Press

Pub. Co. (The New York World).

Web Sources:

Convention and Sports Leisure.com (2011). What’s New. History. Retrieved September

30, 2011, from http://www.cslintl.com/whatsnew.php

Deadspin.com (2011). Deadspin: Top Stories. Retrieved September 30, 2011, from

http://deadspin.com/5823017/the-metrodome-should-be-condemned

Forbes.com (2007). Lists: The Business of Football. Retrieved September 30, 2011,

from http://www.forbes.com

Jet Kingdom.com (2003-2011). New Giants Stadium Getting Big. Retrieved September

30, 2011, from http://www.jetkingdom.com/fans/jake/new-jets-stadium-getting-big

Metropolitan Sports Facilities Commission.com (2011). The Metrodome: MSFC Reports

History. Retrieved September 30, 2011, from http://www.msfc.com/

New Ballpark.org (2011). Day 5: Cowboys Stadium. Retrieved September 30, 2011,

from http://newballpark.org/2010/08/15/day-5-cowboys-stadium

NFL.com (2011). National Football League: History. Retrieved September 30, 2011,

from http://www.nfl.com/

North Oaks Homeowners Association.com (2010). News: Vikings Stadium Site.

Retrieved September 30, 2011, from http://www.nohoa.org/news/vikings

NowPublic.com (2007). Newsroom Tools. Retrieved September 30, 2011, from

http://www.nowpublic.com

Appendages:

Formulas to be used for LA new stadium proposal feasibility analysis:

Capital Asset Pricing Model (CAPM)

Weighted Average Cost of Capital (WACC):

NPV and Value of Leasing

Investment, Strategy, and Economic Rents

Measuring and Rewarding Performance: Residual Income and EVA

Debt Financing

Analytical Results: The Local Revenue Model: P(T) = AT–aT–q = cTc–1

Weighted Average Analysis

1) Financing New Stadium: win LA due to no taxpayer or team involvement. Resources : MN:

http://espn.go.com/nfl/story/_/id/7178766/governor-balks-new-taxes-new-minnesota-vikings-

stadium LA: http://www.losangelesfootballstadium.com/

2) Cost of Relocation: MN advantage due to location

3) Customer Base: difficult analysis as initial relocation would be very high for LA, but the

tradition of MN is strong and merchandise sales for MN are 4th among all teams:

http://www.cnbc.com/id/30111451/Saints_Are_NFL_s_Top_Sellers

4) Franchise Reputation: It is perceived that if the team stays at home, there will be little change

compared to a risk if the team chooses to relocate during difficult financial times. Due to the

level of subjectivity the weighting is relatively low.

5) Complex Development: Large advantage to LA due to the complex and proximity of 15mm+

fans within 1 hour. MN is proposing to build a casino, which on can argue the sustainability of

the casino, closer to Las Vegas or Detroit? http://www.losangelesfootballstadium.com/

6) Local Marketing is merely based on dollars available in the economy. Minneapolis 14th

ranked LA 2nd, as well as support of fans historically for present/future Hall of Fame players

such as Kobe/Shaq (LA Lakers), Marcus Allen (LA Raiders).

http://www.sporcle.com/games/Mulyahnto/USMetroEcon