How sweet it is, for the Texans.
As county leaders and officials with Bob McNair’s nascent football team were closing in on a deal for a new football stadium in the early 2000s, the Texans landed a late concession that would prove to be a financial triumph for years to come.
The Harris County-Houston Sports Authority, a joint city-county venture responsible for financing all of Houston’s major sports stadiums, would take out bonds to build the new football facility for the Texans and Houston Livestock Show & Rodeo. It would pay off the debt over several decades, mostly with money from increased taxes on rental cars and hotel rooms. The tenants would each pay $1.5 million a year in rent that would go toward the bonds as well, and contribute some money from the events they hosted, including taxes on parking and tickets.
But there was a late snag in the negotiations: Financial analysts approving the framework wanted the tenants to guarantee more money. To address that snag, the Texans agreed to pay a higher rent, upping their annual payment from $1.5 million to $4 million over the course of the 30-year contract.
In exchange, the team would get a major tax break. Instead of paying taxes on parking and ticket sales, it would receive rebates from the sports authority – and the rebates would not be capped. They were in addition to a rebate on local sales taxes for all NFL-related transactions.
These concessions have proved costly for local officials – and a boon to the Texans. From 2002 through 2023, the rebates have totaled roughly $58.9 million in today’s dollars, adjusting for inflation. The sales tax rebates have added another $58.5 million to the team’s coffers, helping to wipe out – nearly entirely – the rent the team agreed to pay over two decades ago.
As the Texans consider whether to push for public money to build a new football stadium, a Houston Chronicle analysis shows the team’s current lease agreement with the county has dramatically benefited the team and its billionaire owners, saving them over $100 million when compared to their Houston professional sports peers, the Astros and the Rockets.
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The result for the Texans is one of the best rent structures – if not the best – in the NFL. Geoffrey Propheter, a professor of public finance at the University of Colorado Denver who studies stadium financing, said the only NFL teams who pay less either own their stadiums or have to cover maintenance costs. The Texans’ average rent payment is what you would expect from about two McDonald’s locations in Houston, he said.
“Being the landlord of a McDonald’s would be a wiser investment than being the landlord for the Texans under the current lease terms,” said Propheter.
Yeah. And as the story notes, the Texans have not had to pay much in maintenance costs for NRG. They want a new stadium, they can pay for it.