Thursday, April 8, 2010

Minnesota and Glendale Lawmakers Inch Closer to New Sports Deals

Minnesota and Glendale Lawmakers Inch Closer to New Sports Deals

By Evan Weiner

April 8, 2010

(New York, N. Y.) -- Local governments and sports teams have a partnership; there is no getting around that. In cash-strapped states like Arizona and Minnesota, elected officials are trying to figure out the best way to go in keeping local franchises put. Glendale, Arizona has a relatively new, publicly financed, arena that houses a bankrupt National Hockey League franchise, the Phoenix Coyotes.

Now Glendale is weighing two proposals from Coyotes suitors who would purchase the team and keep the franchise in Glendale.

In the St. Paul, Minnesota statehouses, it appears that lawmakers are warming up to some sort of deal to build the National Football League's Minnesota Vikings a new facility so that Vikings owner Zygi Wilf can utilize revenue streams that an unavailable from the Minneapolis-based Metrodome, to help fund the team.

Government support for athletic facilities stretches out over six decades with Oakland officials back in 1944 thinking of using public money to build a stadium. The real breakthrough in government support of professional sports franchises came in 1950 when Milwaukee elected officials decided to build a new stadium with public funding that they hoped would attract a Major League Baseball team and keep the Green Bay Packers playing a portion of the team's NFL schedule in town. The gambit paid off as Milwaukee officials enticed Boston Braves owner Lou Perini to move his Braves in March 1953 just a few weeks prior to the season. The stadium was enough of a lure to keep the Green Bay Packers.

Perini made a ton of money in Milwaukee and it got Brooklyn Dodgers owner Walter O’Malley to worry that Brooklyn would not be able to compete with Milwaukee financially. O’Malley would eventually take an offer from Los Angeles and move his team from Brooklyn even though O’Malley’s Dodgers led the National League in revenue in 1957, the final year O’Malley had a team in Brooklyn.

Perini's move started sports free agency long before an arbitrator gave Dave McNally and Andy Messersmith free agency in baseball in 1975. Owners decided to play city against city in an effort to get the best stadium or arena deal available, and the 1986 Tax Act poured gasoline on smoldering flames as the new law restricted the amount of revenue generated inside an athletic facility that went off to pay the public debt on a municipally funded stadium to just eight cents on every dollar.

Major League Baseball expanded to Denver, Miami, Phoenix and St. Petersburg and moved the Montreal Expos to Washington. Virtually every team in Major League Baseball got a new or renovated facility with the exception of Oakland.

Oakland A's owner Lew Wolff is looking to move his team with San Jose the object of his affection after flirting with Fremont, California near San Jose.

The National Football League got a publicly financed stadium in Jacksonville and expanded into that city while Jerry Richardson built a privately funded facility in Charlotte using personal seat licenses to fund the stadium.

Richardson's stadium created another monster. People had to buy a seat license and then buy a ticket to use the seat.

Wilf is one of the last of the NFL owners who has not taken advantage of government money to build a "factory" for his business. Wilf may have state legislators and Minnesota Governor Tim Pawlenty over a barrel in his quest for a new facility. The state has spent hundreds of millions of dollars in the past few years for a new baseball stadium for the Twins and a new facility for the University of Minnesota Golden Gophers using various taxes to fund the venues. Wilf's Metrodome deal with the state is up after the 2011 season and there is a possibility that Wilf could use the possible construction of a new stadium east of Los Angeles as leverage in his battle to get a new Vikings stadium somewhere in the Minneapolis-St. Paul area.

Wilf is not the only NFL owner looking for public funding. The York family, the owners of the San Francisco 49ers, is hoping that Santa Clara, California voters will look favorably at them and give them a new stadium in a June vote. Should that fail, look for both Oakland and San Francisco to start wooing the Yorks again and might ask Al Davis to join the Yorks and put his Oakland Raiders in a new stadium. The Buffalo Bills/New York State lease in Orchard Park is up after the 2012 season.

Wilf, the Yorks, Al Davis and possibly Wayne Weaver in Jacksonville have limited options though. Weaver’s Jaguars franchise is struggling to sell seats at Jacksonville’s stadium and there is no stadium available in LA equipped to handle the NFL's needs at this point. Ralph Wilson has sold a number of Bills home games to Toronto through the 2012 season. Toronto does not have a "suitable" NFL facility but there is a lot of money on Bay Street and the NFL knows that.

Meanwhile there seems to be action in Glendale regarding the sale of the Coyotes. Glendale has memoranda of understanding with two groups vying to but the bankrupt franchise, Ice Edge Holdings and the group led by Chicago White Sox and Bulls owner Jerry Reinsdorf. Although the National Hockey League has the final say on the future owner of the Coyotes, Glendale apparently feels uncomfortable that the city can go ahead with an agreement. Whatever the final deal is, Glendale will have to make major concessions to keep the team skating in the arena. Glendale plans to hold a public hearing on the matter on April 13.

Many cities, counties and state governments have used a variety of mechanisms to attract and keep sports teams including payment in lieu of taxes instead of full property tax payment or tax incremental funding or creating special tax districts around a facility whereby an owner keeps all of the taxes that would normally flow into municipal coffers. Cities, counties and states have assumed the responsibility of paying off the entire cost of a stadium and in one case, New Orleans Saints owner Tom Benson was given a cash payment in exchanging for keeping his Saints in the New Orleans Superdome. In July, Benson will get a $23 million check from Louisiana as a thank you for sticking around as part of a $186 million bailout between 2002 and 2010. Benson and the state crafted a new deal that substantially reduces Louisiana's annual payment but Benson gets to own an office building near the Superdome that will house state government offices and create an entertainment zone around the Superdome in exchange. Benson will get Louisiana money but not a straight handout starting in 2011.

New arenas do not mean success however. Memphis and Charlotte are prime examples of financial failures in the NBA despite new surroundings and the Phoenix Coyotes have a poor financial legacy.

But sports leagues are monopolies and city, county and state officials like being branded “Big League.” It takes a long time for a city to replace a team in most circumstances with Cleveland being a lone exception. The NFL got a municipally funded stadium agreement with Cleveland Mayor Michael White not long after Browns owner announced that he was taking his team to Baltimore for the 1996 season in the fall of 1995. Cleveland threatened to sue the NFL and by February 1996 a plan was worked out and the NFL "expanded" into Cleveland in 1999. Cities that lose teams seemingly are punished and eventually work their way back in but that is a long and expensive process which is why Glendale officials and lawmakers in Minnesota are looking to resolve their situations and keep the teams. It is cheaper to keep them now than going after replacement teams in the future.

Evan Weiner is an author, lecturer and radio-TV journalist on the "Politics of Sports Business."

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