Shortfall In State Payment To Saints Was Predicted

BATON ROUGE (AP) — Few people should have been shocked by the fact that Louisiana was short in its annual payment to the New Orleans Saints, part of a deal to keep the NFL team in Louisiana.

The arrangement made in 2001 was predicated on quite a few assumptions: that tourism dollars in New Orleans would continue to boom, that an interested company would buy the naming rights to the Superdome — a facility the Saints derided as outdated — and that local cash could keep up with an increasing payment schedule.

This isn't even the first time for the problem. The state ran into difficulties making its payment last year and had to be bailed out. Then, several lawmakers predicted the shortages would only grow worse each year.

Nearly a year ago in June, Sen. John Hainkel issued a warning after officials worked out a one-time deal with the company that manages the Superdome to come up with some dollars for the Saints payment. Hainkel knew it was a stopgap measure, postponing routine problems the state would face in keeping its end of the financial deal.

"In everybody's conscience and heart, they know there's going to be a worse problem next year, and we're just putting it off," Hainkel said at the time.

So, the news that the same type of shortfall returned for a second year wasn't unexpected. The only thing that really was shocking was just how large a hole in the $15 million payment there was — almost all of it, nearly $12 million.

And the solution isn't quite as simple the second time around.

Former Gov. Mike Foster made the $186 million deal to keep the Saints in Louisiana through 2010, despite many legislators' complaints that the state had more deserving money needs.

The Saints claimed they needed the boost from the state to keep them competitive with other NFL teams in larger, wealthier markets. Foster argued the team was important to economic development in New Orleans and around the state.

The arrangement raised the payments over time, making it even harder for the state to meet its end of the deal, with annual installments rising to $20 million in 2006 and $23.5 million in 2008.

While the Legislature had to approve parts of the deal, it was pitched as involving almost entirely local dollars generated in the New Orleans area — a hole-ridden premise that had its nay-sayers who worried the state would be left on the hook routinely when the city money came up short.

The shortfall in the payment due July 5 mainly stems from a tourism hit that dropped the New Orleans-area hotel-motel tax revenue. The Sept. 11 attacks and an economic slump have hit travel dollars hard, and projections don't seem to indicate that revenue will rebound to reach the projections assumed in the Saints deal anytime soon.

In addition, the Superdome naming rights have not been sold. They were projected to bring in about $3 million a year.

A new governor now is saddled with the problem of how to pay the Saints, and Gov. Kathleen Blanco is looking at ways to renegotiate the deal.

It was much simpler to cover the last shortfall.

Last year, the state emergency board granted a six-year contract extension to SMG, the private company that operates the Superdome and the New Orleans Arena for the state, in exchange for a $2 million bailout loan of sorts so the state could make its payment to the Saints.

SMG got to keep managing the facilities through 2012 without Louisiana requesting formal bids that would compare the company's rates to similar managing firms. SMG earns the money it loaned the state back over the six years through higher management fees for running the facilities.

The state effectively was over a barrel: agree to the SMG deal or dip into Louisiana's general operating dollars, known as the state general fund.

Lawmakers were adamant at the time about steering clear of general fund cash to fill in the shortfall and keep the state from defaulting on its agreement with the team.

So, the emergency board made the agreement with SMG, officials avoided a huge fight over using general fund dollars and lawmakers didn't have to go home to explain to their constituents that other items had to be cut to keep the Saints in Louisiana.

Though there was some gnashing of teeth, in retrospect that deal seems pretty simple. Renegotiations promise to be much more complicated.