Taxpayer Exploitation in Sports

The irresponsible behavior of the sports industry is certainly the reason for many problems in sports today, but it's also the cause of some concerns that have nothing to do with sports. The sports powers that be have learned how to manipulate state and local governments and turn tax dollars, meant for vital public services, into private profit through corporate welfare.

Across the country, for over a decade, cities and states have spent billions of dollars to attract and keep professional sports franchises. Team owners and league commissioners have played cities off each other, extorting more and more lucrative deals. Sold on the highly dubious ground that such sweetheart deals are good for the local economy and will allow the team to remain competitive, threats to move the team are always a part of the typical stadium debate. These threats, made by team owners or management, are always enforced by league action authorizing the moves of franchises elsewhere.

Suppose that you are the Mayor or a Council Member in a city with one or more professional sports teams. Now, suppose that you are presented with the following scenario where budgetary choices must be made:

Many parts of your city are falling down; some of your citizens can't get safe, clean drinking water; the children in your schools attend class in crumbling and leaking facilities; your public transit can not adequately transport the citizens of your city from home to work and back; you can't keep your libraries open; your ancient sewer system is causing city communities to be flooded with raw sewage; there are very few playgrounds for kids and parks for families; housing renovation is almost non-existent; your police department is spread far too thin for sufficient public protection; and the infant mortality rate in your city is no better than that of a third-world nation.

But at the same time, the owner of a major sports franchise in your city is demanding a new stadium, built with hundreds of millions of dollars in taxpayer money. As the Mayor or a City Councilmember, what do you do?

This has been the situation in many of our cities across the country. And it is glaringly obvious what the elected leaders decided to do over the past decade. Take the taxpayer funds and build the well-financed owner a new stadium and ignore the needs of the city hoping they go unnoticed.

Even though virtually every independent economic study shows that there is no real economic benefit to cities from public subsidies of sports stadiums, our politicians have a difficult time questioning the motives of team owners when lobbied relentlessly, promised campaign funding and reassured of their luxury box seats in the new stadium.

Subsidies for wealthy team owners encourage waste, inefficiency, and inflated costs. If city and state officials, team owners, business leaders and local citizens believe a sports stadium is needed and financially sound, private capital should be raised independently to finance the entire project.

We are all impoverished when a city government chooses to subsidize billionaires instead of taking care of their city's needs. And we all benefit from the sound decisions of leaders in well-maintained cities where every citizen has a part in decisions and no one is taken for granted. A municipality should not be given the title "Major League City," simply because of the number of sports teams it hosts and for which it builds stadiums and arenas.

It is truly a shame that despite the largest period of economic growth in history, we have witnessed how the public assets of our once great cities are neglected and left to fail while the profits of the robust economy of the last decade, reach only those at the top. Those, like wealthy sports team owners, who can certainly take care of themselves.

A few examples regarding the problems with taxpayer exploitation in sports:

Monopoly sports leagues and their abuse of power:

The structure of the sports industry is the biggest reason for the excess demand for teams among cities across the country. All major sports are controlled by monopoly leagues that keep the number of teams in each sport substantially lower than the number of cities or markets that can support a major league team.

By creating a system in which many cities that are viable franchise sites do not have teams, the leagues have enormous leverage through competitive bidding for any franchise that becomes available, whether by expansion or relocation. The leagues then profit when they pit cities against each other, bidding for the right to host a team.

This situation causes the price for franchises to soar, and the cost for the taxpayer subsidy that a city must be willing to pay to skyrocket in order to keep their team or attract a new one. The monopoly sports leagues and franchise owners are abusing their power and blackmailing cities and taxpayers out of hundreds of millions of dollars that are meant for basic services and unmet needs. The greed has drifted so far out of hand and the leagues have become so arrogant in the face of ethics that it may be time to start enforcing standard methods to control this monopoly: antitrust and regulation.

Politicians acting outside the public interest when negotiating sports industry objectives:

There exists a disturbing relationship between the sports moguls that stand to profit from sports industry objectives, like stadium financing schemes, and politicians who try to sell such deals to the public. It appears that most of our elected politicians have a difficult time questioning the motives of these plans when lobbied relentlessly and promised substantial campaign funding from owners.

Given an objective presentation of huge projects involving corporate welfare for sports corporations, fans, taxpayers and voters tend to be very skeptical. But politicians are essentially hired by sports moguls to promote their objectives and persuade the public to be sympathetic. It is the job of elected state and local leaders to protect the public interest and make sure that tax money is used only for public purposes, not to further the profits of private sports corporations.

Professional team owners' extortion and blackmail of cities:

Along with franchise owners' incredible exaggeration about the stadiums in which their teams play (i.e.: the current stadium is obsolete and can not meet the demands of modern sports fans; the current stadium is on the verge of collapse; the team can not remain competitive in the existing stadium), and what a new stadium will do (i.e.: a new stadium will boost the city's economy; it will create jobs and spawn new businesses; it will draw millions of new people to the city; it will greatly improve the team's chances of winning a championship; it will turn this struggling city around), there are always statements made by team management threatening to pick up and leave town if the owners don't get a new taxpayer-financed stadium, free of rent and with all revenue rights (luxury boxes, PSLs, naming rights, concessions, parking, etc.).

As this extortion continues, team owners will show their hatred for the democratic process by making more threats. They will insist that a deal must be worked out right away, or they will be forced to move the team. By doing this, owners are sometimes successful in limiting deliberations in state legislatures and city councils, and preventing the issue from facing a referendum before the voting public.

Professional team owners' secrecy about profits:

Whenever demands are made by sports franchise owners to improve their financial standing, whether it be for a new stadium or tax incentives, they always proclaim that their business is struggling and that they are losing money. But at the same time, despite expecting taxpayers to pay for their expenses, owners refuse to open up their financial books to the public. Full disclosure of team finances must become a prerequisite to any legislative debate or public referendum.

Tax breaks and incentives for sports owners seeking the best available deal:

When shopping their franchise around in an attempt to find a host city for relocation, team owners pit cities against one another to see from whom they can squeeze the most money. In addition to a new publicly-funded stadium or arena with all revenue-generating rights and free rent, owners now demand relocation fees. This is basically an up-front guaranteed payment, typically worth tens of millions of dollars, from the new host city to the team owner for an extra incentive in choosing that city.

Taxpayers forced to finance new stadiums and arenas for the benefit of team owners:

Across the country, for over a decade, cities and states have spent billions of dollars to attract and keep professional sports franchises. Team owners and league commissioners have played cities off each other, extorting more and more lucrative deals. Sold on the highly dubious ground that such sweetheart deals are good for the local economy and will allow the team to remain competitive, threats to move the team are always a part of the typical stadium debate. These threats, made by team owners or management, are always enforced by league action authorizing the moves of franchises elsewhere.

Even though virtually every independent economic study shows that there is no real economic benefit to cities from public subsidies of sports stadiums, our politicians have supported team owners in taking taxpayer money, meant for real life city needs, and giving it to the well-financed team owners to build a new stadium that caters to wealthier patrons and prices out the average diehard fans.

Subsidies for wealthy team owners encourage waste, inefficiency, and inflated costs. If city and state officials, team owners, business leaders and local citizens believe a sports stadium is needed and financially sound, private capital should be raised independently to finance the entire project.