The State of Louisiana may be as much as $27.5 million short on the subsidy payments due the Saints and NBA's New Orleans Hornets next year, it was learned last week.
Doug Thornton, senior vice president of SMG, the company that runs both the Superdome and New Orleans Arena, where the Hornets play, warned lawmakers of the shortfall during a visit to the State Capitol.
Louisiana pays the two pro teams direct cash payments each year to retain the clubs, subsidies the team owners said are needed to make operating in the relatively small New Orleans market worthwhile. Both deals were negotiated during the administration of former Gov. Mike Foster.
The yearly payments come from the budget of the Louisiana Stadium and Exposition District or LSED, which operates the stadium and arena where the NFL and NBA teams play.
"We have revenues that are not sufficient to cover the debts," Thornton said in addressing the members of the House Appropriations Committee.
The 10-year deal with the Saints, which expires after the 2010 season, guaranteed the team a total of $186.5 million in state subsidies. They are to receive $23.5 million next summer, but could leave the city without penalty if the state doesn't come up with the money.
The state has had trouble making some of the payments in the past, but those were primarily because of economic woes created by decreased tourism after the 2001 terrorist attacks, hurricanes Katrina and Rita in 2005, and hurricanes Gustav and Ike in 2008.
The money paid out to the two franchises comes from a hotel and motel tax earmarked for the annual payments, but the state has had to use surplus cash, refinanced Superdome debt and borrowed from an economic development fund to fill gaps in the past.
The problem is the state is facing a $1.2 billion budget shortfall in the fiscal year that begins July 1.
"We hope that an eventual solution will address both the short- and long-term challenges that face the Saints and the state," said Saints spokesman Greg Bensel.
