Wednesday, March 18, 2009

Can't afford the cost of a sports event? Blame Reagan and Congressional Democrats in 86

Evan WeinerBusiness of Sports Examiner
Can't afford the cost of a sports event? Blame Reagan and Congressional Democrats in 86

March 18, 1:51 PM

Major League Baseball Commissioner Bud Selig has in recent interviews admitted that he is not sure what to expect when it comes to how many tickets will be sold to Major League Baseball games this season. Given the economic news that comes out daily, it is probably a good bet that ticket sales along with corporate sponsorship dollars will plummet this year. If that happens, it will be the first time since the Reagan years that baseball revenues will tumble except for the strike era in the mid-1990s.

Big time sports, whether it is Major League Baseball, the National Football League, the National Basketball Association, the National Hockey League, Major League Soccer or major college sports like football and basketball have been on an upward financial projection since the 1986 Tax Act, which inadvertently changed the entire sports industry. If people have been priced out of sports events, blame Ronald Reagan and the Democrats who controlled Congress back in 1986.

With a strike of the pen, President Reagan who changed league dynamics and accelerated the movement to build new stadiums and arenas complete with huge sources of potential income from luxury boxes and club seating. The National Football League Commissioner Pete Rozelle knew all about luxury boxes back in 1982, telling this reporter that “it was the bane of football.” Dallas and the New York Giants had boxes and were able to make more money that the teams could spend on players and Rozelle predicted that NFL owners would start moving around hoping to find stadiums with luxury boxes. NFL owners starting in the 1970s with Baltimore’s Robert Irsay were looking for greener pastures.

Reagan and the Congressional Democrats have allowed sports owners to practice sports segregation, a practice that forces owners to go after well-heeled customers instead of blue-collar fans. Those customers can afford the high prices for luxury boxes and club seats, high prices for foods and drinks, high prices for parking and merchandise. Poorer fans had two choices; cough up more money for less desirable seats or watch games from home on TV, generally on cable TV where they paid for the service as opposed to over-the-air television. It was Reagan who put the mechanism in place in 1986 that really started ownership free agency and a battle between cities for National Football League, Major League Baseball, National Basketball Association and National Hockey League teams.The Tax Reform Act of 1986 opened a loophole in the tax laws and gave owners ammunition in their battles with cities and states to get stadiums. The new tax law capped revenues that were raised inside the new or renovated facility that went into the cost of building the facility at eight cents on every dollar. An owner could get 92 cents out of every dollar spent in the facility in theory and also keep all of revenues from stadium naming rights, although leases could be negotiated that would give the municipalities more money to help pay off the construction. Municipalities also paid off stadiums through various taxing schemes including hikes in sales taxes, hotel and hotel taxes, rental car taxes, cigarette taxes, alcohol taxes, and breaks in property taxes including payments in lieu of taxes (PILOT).

With the new or renovated stadiums on line, owners were able to met players salary demands and those owners who did not have the revenue sources provided by new or renovated stadiums played city against city to get new facilities in an attempt to keep up with those owners who were in upgraded facilities.The law gave municipalities a federal tax exemption on bonds to build new stadiums. The results are stunning. In 2009, 26 of the NFL's 32 teams have new stadiums or renovated facilities with enhanced revenue streams.Of the six that have not gotten new stadiums, the New York Giants and the New York Jets ownerships have partnered on a new stadium that will open in 2010 that is getting tax breaks and incentives from New Jersey. Tom Benson’s New Orleans Saints franchise is getting handouts from Louisiana, although Benson should be the 27th team to get an updated facility as the New Orleans Superdome was renovated because of the damage from Hurricane Katrina on August 29, 2005. Benson’s handouts end following the 2010 season and that could set up a possible departure from the Crescent City. San Diego’s Spanos family is still looking for a new stadium for their Chargers franchise and Minnesota’s Zygi Wilf wants a new stadium for his Vikings franchise. The York family still is hoping Santa Clara, California will still build a new facility for their 49ers even though San Francisco Mayor Gavin Newsom would still like the family to reconsider and look at a plan to keep the team in “The City.”Sports-team owners started putting pressure on municipalities shortly after Congress sent the completed bill to Reagan for his approval. In 1988, Bill Davidson’s Detroit Pistons began making all sorts of extra money at the Palace of Auburn Hills with the leasing of 180 luxury suites. Davidson built the facility without public money and other sports owners noted his success.

The need for a new stadium/arena frenzy really kicked in by 1989 as the Chicago White Sox ownership threatened to move to a publicly funded stadium in St. Petersburg, had the Illinois General Assembly not given approval for building a new ballpark on Chicago's South Side. Baseball expanded to taxpayer-funded stadiums in Denver, St. Petersburg and Phoenix. Most cities built new ballparks for their Major League teams. The Cubs, Red Sox, Dodgers, Royals and A’s and Marlins still play in old facilities. Baseball is looking for a taxpayer-funded stadium for the Florida Marlins in Miami. Kansas City and Jackson County, Missouri are paying for renovations for the Royals ball park. Washington opened a new stadium for the Nationals last year, new stadiums in New York for the Yankees and Mets open in less than four weeks and Minneapolis’ new stadium opens for Twins baseball in 2010. It is possible that A’s owner Lewis Wolff will be the only owner with a stadium problem in the near future if Miami-area elected officials give the go ahead to build a Marlins StadiumSpring training is different, too, with little cities being forced to build state-of-the-art complexes in a bid to keep teams from leaving for better offers in other areas of Florida or Arizona.In 1990, Major League Baseball and Minor League Baseball signed a new agreement that mandated cities and states across the country to either build new facilities or renovate existing parks by 1994, or Major League owners could pull out of those cities. It's no coincidence that independent baseball minor leagues sprung up, using cities that Major League Baseball deserted as the basis for their business ventures.The National Hockey League was able to expand from 21 to 30 teams and relocate two Canadian-based franchises to the United States during the 1990s because of the 1986 Tax Act. The only non-U.S. city the league added was in Ottawa. Quebec City moved to Denver, Winnipeg ended up in Phoenix and the league added teams in new facilities in San Jose, Tampa, Miami, Anaheim, Nashville, Atlanta, St. Paul and Columbus, and Hartford relocated to Raleigh, N.C., when Connecticut said no to a new arena. Almost every NHL franchise has a new building with the exception of the two New York-area teams.The NBA expanded in 1987 to Orlando, Miami, Minneapolis and Charlotte. Minneapolis eventually had financial difficulty and nearly moved to New Orleans in 1994. The Minnesota Legislature bailed out the team. The NBA awarded teams to Toronto and Vancouver; the Vancouver team moved to Memphis, Charlotte ended up in New Orleans; and Charlotte built a taxpayer-funded arena for its new team. Seattle ownership was unable to get a new building and decided to move to Oklahoma City Only the New York-area teams; Sacramento and Orlando have old buildings, although the Magic ownership is getting a new building next season. Having a new building doesn’t guarantee financial success as the owners of the Indiana Pacers, the Simon Brothers, are looking for financial help from Indianapolis officials as running the city’s new arena along with the money-losing franchise has become too costly.

College programs have new or renovated facilities. The renovations included the building of luxury boxes and concession areas. With the enhancements came hikes in ticket prices, concessions and parking. Students like sports fans had to make a decision, buy higher priced seats in the same locations or watch games from home in front of a television.

Major League Soccer, which did not exist when Reagan signed the tax bill in 1986, has also benefited from the rush to build new stadiums. Seven new soccer stadiums have been built since 2002 with others scheduled to open in the next few years.

Going to a major league sports event or a big time college football game is no longer an option for everyone. In fact, a survey cited by Paul Pelosi, one of the major backers of the new United Football League, said that 66 percent of those of identified themselves as NFL fans never expected to see an NFL game in person. Why? The cost of attending a game.Are the games too costly these days? Blame Ronald Reagan. His signature on the 1986 Tax Reform Act changed the world of

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