Put Pro Sports Blackmailers Out of Business
By Grant Gulibon, John Hood

Taxpayer subsidies for new sports stadiums have been responsible for some of the biggest expansions of government during the 1990s. Cities have used public money to engage in unseemly bidding wars, with pro teams playing government against government in quest of an ever-more-lucrative stadium deal. As the bidding has risen, even teams with stadiums as young as 15 to 20 years old (like the domes used by the Minnesota Twins and the Seattle Seahawks) are demanding new playpens costing upwards of $400 million.

When the desperate desire of city leaders to declare that they are "major league" meets a sports owner’s lust for more money, the result is often a state-of-the-art facility with high-priced seats, shops, restaurants, and advertising opportunities—all constructed at taxpayer expense. By decade’s end, at least 45 new sports stadiums and arenas will have been built, with four-fifths of the multi-billion dollar tab picked up by taxpayers (according to the Reason Foundation).

Yet there is simply no reason for governments to construct expensive buildings for private, profit-seeking businesses like pro sports teams. The demands for new stadiums now mushrooming around the country are attempts by team owners to escape jams of their own making. Because of the multi-million-dollar salaries they have agreed to, and the multi-million-dollar team purchase prices some of them are paying, owners are searching for new sources of revenue. To make their finances work, teams are playing a new game called "stadium extortion." Where the ploy has succeeded, new parks built by taxpayers have become cash machines channeling money to teams via luxury suite leases, club seats, food service revenues, parking fees, and other amenities.

Pittsburgh, Pennsylvania, is just one of many cities now experiencing such a shakedown. An organization called the Regional Renaissance Partnership recently mounted an aggressive, well-funded lobbying campaign seeking a sales tax increase in 11 southwestern Pennsylvania counties, with most of the proceeds earmarked for new stadiums for the Pittsburgh Pirates baseball team and the nfl’s Steelers. This followed the script laid out previously by pro sports blackmailers in Baltimore, Cleveland, and other cities, where veiled or open threats were made to move the franchise to a more "reasonable" community if a new, publicly funded facility wasn’t built to order.

In a November referendum, however, Pittsburgh-area voters finally said no. What will happen to the local sports teams? Probably the same thing that happened a few years ago when taxpayers in Columbus, Ohio, turned down a sales tax increase for arena funding—sources of private financing stepped forward within weeks.

Defenders of public funding for stadiums claim that stadium construction has always been the job of government. This goes back to the days of the ancient Greeks and Romans. Yet until the middle of this century virtually all major league baseball and football stadiums in the U.S were private. In 1950, only one American League baseball field was publicly owned (Cleveland Municipal Stadium); no National League ballparks were publicly owned. The most revered parks in the country, including Boston’s Fenway and New York’s Yankee Stadium, were privately built.

Even during the 1960s—the zenith of government-funded stadium construction before the 1990s—arenas were successfully built without public money. Take St. Louis’s Busch Stadium, for instance. Privately financed and privately operated, it has turned a profit every year since it opened. The public’s only contribution to its development was a $6 million bond issue for new streets and sewers.

More recently, the claim that new stadiums can only be built with government financing has been disproved by numerous cities that refused to knuckle under to extortionist threats. Since 1988, 15 new or totally renovated major league sports facilities have been financed privately. Governments have sensibly limited their involvement in these projects to the construction of legitimate infrastructure like sewer and water connections and transportation improvements.

Here are some ways to finance professional sports arenas privately:

• The "naming rights" to a facility can be sold to a corporation or individual. The Ottawa Senators received $25 million from the Corel software company for their privately financed $200 million Corel Centre. Many existing stadiums and arenas in need of renovation have also raised cash this way, including San Francisco’s 3Com Park, Cincinnati’s Cinergy Field, and New Jersey’s Continental Airlines Arena.

• Teams can "pre-sell" luxury suites, premium seating, advertising rights, concessions, and "pouring rights." The home of the Miami Dolphins and Florida Marlins, Pro Player Park (previously Joe Robbie Stadium), was built with $115 million in private money, most of which came from the advance sale of executive-suite leases.

• Owners can recruit private investors—banks, corporations, or individuals—to provide construction financing in return for a share of the profits generated by a new facility. In Boston, the $160 million Fleet Center received no public funding save a commitment by the state and local governments to improve parking and mass transit service around the complex. In Philadelphia, the new CoreStates Center received only $13 million from the state and local governments for infrastructure; its $200 million cost was paid by private sources. The Rose Garden in Portland was privately financed to the tune of $262 million; the City of Portland’s $34.5 million loan to the project will be repaid from parking and ticket fees.

• Teams have begun to sell "permanent seat licenses" (psls), which give the holder an exclusive right to buy those seats in perpetuity. The nfl’s Carolina Panthers, after receiving $40-45 million in land from the city of Charlotte, privately financed a new $160 million stadium through private investment that included $100 million from the sale of psls, plus other private funds and revenue from naming the stadium for the Ericsson Corporation.

• Some owners have financed stadiums and arenas from their personal fortunes. The Washington Redskins’ new Jack Kent Cooke Stadium was built with $180 million of its namesake’s money. The only public contribution to the project was a $75 million commitment by the state of Maryland for water, sewer, and transportation improvements on the site. The late Mr. Cooke also built the first privately financed indoor arena in the United States, the Forum in Los Angeles, in 1967. Detroit Tigers owner Mike Ilitch will spend $145 million of his own money to build a new downtown stadium in Detroit, and the sole public contribution to the project is $45 million from the city for new roads and sewers around the site. Ilitch had originally proposed that the government play a larger role in financing, but a firm stand against public subsidy by local officials and the state legislature changed his mind.

• One promising private financing concept that has not been explored is the formation of a private stadium corporation to raise construction funds. Instead of conscripting taxpayers to pay for a project, regardless of their interest in professional sports, small-scale community financing would allow those locals who believe they would benefit from a stadium’s construction to assume the investment risks directly. Shares could be priced at a level accessible to small investors, and then be freely bought and sold on the market. The Green Bay Packers have been community owned in a manner something like this for over 60 years. This method should be tried for building stadiums as well.

While many cities and teams have done quite nicely without coughing up taxpayer funds for stadiums, several of the supposed "successes" built with public funds are in dire straits. The much-hyped Cleveland Gateway Complex, which includes the baseball Indians’ Jacobs Field and the basketball Cavaliers’ Gund Arena, is just a "long fly ball" away from bankruptcy. Cost overruns, combined with inaccurate tax and operating revenue estimates, have pushed the Gateway Economic Development Corporation, which built and operates the facilities, into a precarious financial position. While the tenant teams have prospered as the direct result of generous government support, local taxpayers have been left with staggering bills—perhaps totaling as much as $1 billion—and threats of legal action from the firms that built the complex without being paid in timely fashion.

As the Cleveland Indians prepared to host the third game of the 1995 World Series, 22 contractors seeking payment of an overdue $21.5 million in construction costs actually threatened to foreclose on Jacobs Field. Meanwhile, as the city begins construction of a new football stadium for the Browns, its bankrupt, state-controlled school district has all but eliminated funding for interscholastic sports, and local companies like National City Bank have found they have to run all city high school graduates through a supplemental curriculum to make them employable.

If local sports boosters spent their time, energy, and money on entrepreneurial financing and management efforts, instead of campaigns to extract contributions from already heavily taxed citizens, perhaps professional sports teams could begin to produce real economic benefits. But the stadium blackmailers don’t want Americans to know that private funding is a better option.

Professional sports teams are private businesses like any other. They should be responsible for building their own facilities, with government restricting its activities to the provision of legitimate infrastructure. Free-market discipline and initiative—coupled with a little backbone on the part of elected officials—are the keys to ending stadium extortion before it contributes its bit to the bankrupting of American cities.

Grant Gulibon is assistant research director at the Allegheny Institute for Public Policy in Pittsburgh.