NFL lockout, failure of Atlanta Thrashers, and other sports struggles can be blamed on Ronald Reagan
WEDNESDAY, 25 MAY 2011 08:29
http://www.newjerseynewsroom.com/professional/nfl-lockout-failure-of-atlanta-thrashers-and-other-sports-struggles-can-be-blamed-on-ronald-reagan
BY EVAN WEINER
NEWJERSEYNEWSROOM.COM
THE BUSINESS AND POLITICS OF SPORTS
If and when the Atlanta Thrashers National Hockey League franchise is sold and moved to Winnipeg, Manitoba, there will be those who will analyze the failure of the business to catch on in Georgia. Yes, the Thrashers ownership was bad, and there is enough evidence to completely convict the ownership of being thoroughly incompetent as a court proceeding proved.
But it is far more than just bad ownership that doomed the Atlanta Thrashers franchise and after a quarter of a century it is time to place the finger of blame on the real culprit on the potential Thrashers move along with the National Football League lockout, the potential National Basketball Association lockout and the struggles of various franchises to succeed economically in the sports arena.
It was the 99th Congress that revised the 1986 tax code and President Ronald Reagan who signed those changes into law.
A good number of cities should never have had "major league" sports franchises but those cities decided to go into the sports business by building stadiums and arenas and handing out leases to owners that became an albatross around the necks of taxpayers.
The smaller market cities went after teams to show other businesses that their city was a great area for business. Memphis, Nashville, Jacksonville and other smaller towns all of a sudden became big league and paid handsomely for the “title."
The 1986 tax code revision redistributed the wealth and shifted the burden of paying for new facilities from team owners to taxpayers. Only eight cents of every dollar generated in new facilities could go to pay down the debt of the municipally built facility unless a local government got tough and negotiated a better deal.
In most cities, the local governments who were so desperate to build "major league" structures rolled over and gave owners whatever they wanted in an attempt to be "major league" and forced all sorts of tax hikes on local residents. The stadiums and arenas were peddled to voters as "economic engines" that would provide first construction jobs then build up an area. Local residents who had to vote on the expenditure were told that they would pay nothing (in some cities) that the money would come from hikes in hotel and motel taxes and car rentals. Other tax hikes were imposed on beer, alcohol, cigarettes, cigars, tobacco, water, sewer and a general sales tax hike to fund facilities. There were breaks given on property tax payments (the combined Giants-Jets real estate holding pays East Rutherford, NJ about $6 million a year in combined rent and taxes on the Meadowlands facility on a property that is probably worth about $13 million a year on the tax roll.)
Sports owners jumped on the 1986 Congressional act which Ronald Reagan approved. This is what the change in the tax code has brought. A 2011 NFL Lockout, the probable move of the Atlanta hockey team to Winnipeg, the Glendale, Arizona government paying the National Hockey League $25 million to keep a franchise in the city, the delay of a move of the National Basketball Association's Sacramento Kings to Anaheim, California until cash-poor Sacramento along with other local governments in the area find an arena funding formula. The move of the New Jersey Nets to Brooklyn has New York City and New York State politicians fingerprints all over it. The building will be heavily subsidized by New York taxpayers as are the new Yankees Stadium, the Mets ballpark in Flushing (complete with the logos of the taxpayers bailed out corporate sponsor--Citibank) and New Jersey kicked in well over $300 million for infrastructure for the Giants-Jets new stadium. New Jersey still owes hundreds of millions of dollars in paying down the debt at the departed Giants Stadium. New Jersey is not alone in paying for sports facilities that were blown up. Pittsburgh was paying off the debt at Three Rivers Stadium for years, Seattle and King County will be paying off the bonds on the long gone Kingdome until 2014. Those stadiums were replaced after the changes in the 1986 tax code.
The NFL lockout's roots can be directly traced to Ronald Reagan's signature in 1986. It is no coincidence that the majority of NFL cities built new venues after the 1986 legislation. As more and more stadiums were opening on the public dime, revenues kept rising. By the late 1990s, the New Orleans Saints ownership claimed it could no longer compete in the NFL unless they got a new stadium in the city because the team no longer was in the top of the NFL in stadium revenues and fell to the bottom.
Eventually the state of Louisiana came up with a $186.5 million deal to satisfy the owner, Tom Benson, and handed him direct checks every July 1 between 2002 and 2010 to make him happy and keep the team in town. As far as anyone could tell, it was the first time a state gave money to a team. New York State gives $3 million annually to make Ralph Wilson elated in Orchard Park, New York. Indianapolis virtually gives away the new football facility and all of the revenues generated inside the place to Colts owner Jim Irsay. Small market owners need help from governments.
In places like Cincinnati, the local government has to take money from other services to pay down the debt at the football stadium. The new stadiums have helped the owners but in cities like Minneapolis, Oakland and San Diego where the stadiums are old (although renovated in Oakland and San Diego) and cannot produce the revenues that are found in Arlington, Texas (Dallas Cowboys), East Rutherford, Philadelphia, Houston, Foxboro and Washington (Landover, Maryland) and that has hurt the franchises in Minneapolis, San Diego and Oakland. Those teams cannot keep up with the salary floor as NFL revenues rose. The old stadium franchises cannot keep up with the Joneses, Maras-Tischs, Johnsons, Krafts, Snyders, Laniers and the other big boys in revenues.
The NFL lockout is designed to help the old stadium owners who don't have the revenue sources in the local market that new stadium owners have. That's the whole reason behind the NFL lockout strategy. It's not a difficult concept to grasp even though the league and players continue to slug it out in the judicial system. The NFL has been reluctant to spell out the real reason it has locked out the players. They need taxpayers dollars to fix the problem in Minneapolis, Oakland, San Diego, San Francisco (Santa Clara) possibly Buffalo and certainly in Los Angeles and it is a tough sell for the prosperous NFL to beg for tax dollars to build stadiums to help the lower revenue teams. But the league needs taxpayers dollars to make everyone equal.
The National Hockey League came up with a grand plan to expand the business in 1990 from 21 franchises to 30 with most of the nine franchises to take root in the United States. The expansion scheme was hatched long before Gary Bettman became National Hockey League commissioner, something that seems to be conveniently forgotten by sportswriters who don't have any understanding of business and politics and sports.
The official line was the NHL needed to expand their United States footprint for television purposes and the unofficial line was that Wayne Gretzky popularized the NHL because he was in Los Angeles and attracted the Hollywood crowd to Los Angeles Kings games. But the truth was that cities were building arenas and ready to give away the house in exchange for a franchise. In Anaheim, the Walt Disney Company decided to capitalize on the success of the Mighty Ducks movie franchise and bought a team from the league after securing a sweetheart lease in the new Anaheim arena. Disney ended up with everything at the arena and apparently would not share revenues with say Donald Sterling and his National Basketball Association Clippers. Sterling and other potential NBA owners could not get into Anaheim because there was not enough money available for an NBA team to be financially successful thanks to the Disney lease.
Before Bettman got to the NHL, the league split the Minnesota North Stars franchise with some players staying in Bloomington, Minnesota and the rest ended up with an expansion team in San Jose although the franchise started at the Cow Palace in Daly City south of San Franchise. The league expanded into Ottawa and Tampa and then Anaheim and Miami. The NHL owners began splitting a lot of money, $50 million per new franchise. Bettman joined when they league had 26 teams. Bettman came into the league in 1993 when Norman Green was attempting to move his Minnesota North Stars franchise to either Anaheim or Dallas. Green moved to Dallas. In 1995, Quebec City officials refused to provide funding for a new arena and the franchise moved to Denver. Winnipeg officials did not build a new arena and the Winnipeg Jets franchise ended up in Phoenix in a poor conceived arena that was built to satisfy Phoenix Suns owner Jerry Colangelo need for a new basketball arena for his team. The facility was built in such a way that it had thousands of obstructed seats making it unusable for anything but basketball.
In 1997, the NHL expanded to planned new buildings in Nashville and Atlanta (two cities that could hardly be called hockey mad cities), along with St. Paul, Minnesota and Columbus. St. Paul Mayor Norman Coleman pushed heavily to build a taxpayers subsidized arena in St. Paul while private money was found to build a venue in Columbus, Ohio. Also in 1997, Hartford Whalers owner Peter Karmanos moved his franchise to Raleigh, North Carolina. That deal also came with Karmanos promising to move a piece of his Compuware business to the Raleigh area. Connecticut Governor John Rowland was too busy trying to get Robert Kraft to move his New England Patriots NFL franchise to Hartford. Kraft listened said yes and then got a deal in Massachusetts abandoning Rowland.
The NHL expansion gave owners $450 million which was split between 21 owners. That was not Gary Bettman's plan but it was the NHL's business plan was developed by league owners in 1990.
The NBA added four franchises after Reagan changed the tax code but those arenas in Orlando, Charlotte, Miami and Minneapolis were online prior to the change in the law. All four cities became problems for NBA Commissioner David Stern and the league. The buildings were not state of the art 21st century buildings as they were designed in the 1980s. Orlando, Charlotte and Miami didn't have the real revenue producers, club seats and luxury boxes for corporate customers. All three cities replaced arenas that were 20 year old or less. Minneapolis's building was funded by private money---which nearly snuck the franchise---and by the mid 1990s the building was taken over by the government.
The NBA lockout of 2011 will be caused by reckless spending. The NBA went into markets that cannot compete with New York, Los Angeles, Chicago, Boston and other large markets without a real revenue sharing plan. Those markets will never have had franchises without the Reagan signature. Memphis, Charlotte, New Orleans, Oklahoma City, Salt Lake City, San Antonio have teams because of new arenas, Seattle lost a team because local politicians would not spend money for a new build some 12 years after renovating the city's arena bringing the building up to 1990s standards. Despite giving all the revenues away at the arena in Indianapolis, Pacers owner Herb Simon may eventually move his team. Indianapolis cannot make money even though the city has given away the building.
Major League Baseball went through the same dance. New stadiums, great leases and broken promises of stadiums being an economic engine.
Major League Soccer owners learned their lessons well as they sold local politicians on the benefits of new stadiums starting with the failed economic engine theory.
The NHL is still playing the arena game. Charles Wang's New York Islanders franchise needs a new building and Nassau County voters will be asked on August 1 to sell bonds for a building. Edmonton is seeking a new arena, Columbus wants the city to take over the building, and Calgary is looking for a new building. Major League Baseball wants new venues for the Tampa Bay Rays and Oakland A's. The NBA could become a league with three New York area teams, three Los Angeles area franchises and two franchises in the San Francisco Bay Area.
Taxpayers are on the hook for billions thanks to Ronald Reagan's signature. Reagan supporters and apologists will probably try to debunk the impact of the 1986 tax code changes on sports. It would be a futile argument. There is plenty of blame to go around starting with the House and then the Senate. Two Senators, New York's Daniel Patrick Moynihan, a Democrat, and then Republican Arlen Specter of Pennsylvania (before he switched parties) tried to close the 92 percent loophole in the tax code but to no avail.
Reagan and Congress changed sports in 1986. A quarter of a century later the impact is astounding. The NFL lockout, the NBA lockout, the Sacramento arena problems, the Glendale subsidies, the Louisiana subsidies which continue to this day for Benson's NFL Saints and the NBA Hornets, Nassau County's vote, the Atlanta relocation, baseball's "Bay" problems in St. Petersburg and Oakland. It goes on and on with no relief in sight for sports fans.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, The Business and Politics of Sports, Second Edition is available at bickley.com, Barnes and Noble or amazonkindle.
Showing posts with label Ronald Reagan. Show all posts
Showing posts with label Ronald Reagan. Show all posts
Wednesday, May 25, 2011
Thursday, March 24, 2011
Sports owners are entitled to lion’s share of stadium revenues – and here’s why
THURSDAY, 24 MARCH 2011 06:39
http://www.newjerseynewsroom.com/professional/sports-owners-are-entitled-to-lions-share-of-stadium-revenues-and-heres-why
BY EVAN WEINER
NEWJERSEYNEWSROOM.COM
Washington Post sports columnist Sally Jenkins asked a question in a column written after the NFL lockout started on March 11. It was a simple query that the writer could not answer. "Where is it written that (NFL) owners are entitled to the lion’s share of revenues from structures we help build and support?"
There was no answer in the piece – although if Jenkins did some research (all she would have to do is go back almost 25 years) and read her own newspaper, which covers the politics of Washington, D. C., she would have found it.
It actually is written and the document with Ronald Reagan's signature sits somewhere in Washington.
The answer is the 1986 Tax Reform Act, signed into law by President Reagan, which says only eight cents of every dollar generated in a facility goes off to pay down the debt. That is the starting point for leases. Before the change in the federal tax code in 1986, municipalities got more money from stadium- or arena-generated revenue and used that money to pay down the debt.
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 new or renovated stadiums with the opportunity to cash in on newly found revenue streams like luxury boxes and club seats.
The owners pitted city versus city. In the NFL, Art Modell took his Cleveland Browns to Baltimore (and got a loan from the state to help him out financially as part of the deal), Bud Adams moved his Houston Oilers to Nashville, Al Davis returned his Raiders to Oakland after failing to get a new stadium in Inglewood and left the Los Angeles Coliseum. Georgia Frontiere went home to St. Louis with her Rams leaving Anaheim behind. Robert Kraft played ball with Connecticut Gov. John Rowland and thought about going to Hartford but stayed in Foxboro with his New England Patriots working out a deal, although he put up money for his stadium.
Houston outbid Los Angeles for the NFL’s 32nd team, an expansion franchise in 1999 thanks to a new stadium. The Glazier family stayed in Tampa after considering a Baltimore bid. Cleveland built a new stadium after Modell left. Pittsburgh voters said no to a new stadium but elected officials decided to construct one anyway. Cincinnati paid for a new stadium. Indianapolis found money for Jim Irsay who might have moved his Colts elsewhere. Jacksonville built a new stadium for an NFL expansion team. Oakland renovated the Coliseum for Davis. Kansas City-area voters put up funding to renovate the Chiefs’ home field. Denver OK’d a new stadium while San Diego upgraded the city’s stadium for the Chargers and the Super Bowl.
Arlington, Texas raised the city’s sales tax again for a stadium, this time for Jerry Jones’ Dallas Cowboys; Philadelphia built Jeffrey Lurie a new Eagles park. Dan Snyder may want a new Redskins facility in Washington replacing his Landover, Maryland structure. Chicago rebuilt Soldier Field, Detroit put up money for William Clay Ford’s Lions. Green Bay got a renovation job at Lambeau Field which included funding from a 0.5 percent sales tax hike in 2000. Seattle replaced the Kingdome with a baseball stadium (which was approved by the state legislature after voters said no) and a football facility.
More than $310 million went into the construction of a Glendale, Arizona stadium for Bill Bidwill’s Cardinals. Louisiana rebuilt the Superdome after Hurricane Katrina in 2005 and the state is spending millions on yet another renovation at the building. Arthur Blank wants to replace the soon-to-be 19-year-old municipally funded Georgia Dome with a new stadium for his Atlanta Falcons.
In some cases, NFL owners like Jones, Bidwill, Ford and others threw some money into the projects. In some cases, NFL owners double dipped selling personal seat licenses and then asking those who bought the licenses to pay for tickets for a game to pay off owners’ debt.
The 1986 law gave municipalities a federal tax exemption on bonds to build new stadiums. The results are stunning. In 2011, 29 of the NFL's 32 teams have new stadiums or renovated facilities with enhanced revenue streams stemming from the 1986 legislative action. Only San Francisco and Minneapolis have not upgraded facilities for NFL owners.
Sports-team owners started putting pressure on municipalities shortly after Congress sent the completed bill to Reagan for his approval. The frenzy then started 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, and A’s still play in old facilities but Chicago, Boston and Los Angeles have renovated their ballparks. Spring 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 minor league teams sprung up, using cities that Major League Baseball deserted as the basis for their business ventures.
The National Hockey League decided to expand the league's United States "footprint" in 1990 claiming that the league needed to expand for television purposes. With the help of municipal governments leagues did expand and owners got a slice of expansion money. The new venues also raised the value of franchises.
The United States government, along with state and city governments, is partners with sports, whether it is on the professional or college level. National Basketball Association Commissioner David Stern freely admits that government is a sports partner.
According to Stern, there are three elements needed for sports teams to succeed: Government, cable TV and corporate support. Government has funded stadiums and arenas, provided tax breaks and incentives to build facilities and through the Cable TV Act of 1984 and the Tax Act of 1986 provided more revenues for sports owners. Without the Cable TV Act of 1984, ESPN might have folded; the tax act capped revenues that were generated inside a facility to pay off the debt of a publicly funded stadium or an arena at eight cents on a dollar. Neither New York Senator Daniel Patrick Moynihan nor Pennsylvania Senator Arlen Specter could close the loophole that exists to this day.
Arizona Senator and one-time Republican Presidential candidate John McCain wanted to end the stadium and arena building process that has taken place since the 1986 tax reforms that were passed by Congress, called for the elimination of the tax exemption for bonds for stadiums and arenas. McCain has said little about the legislation since his Presidential run.
The 1986 law that capped revenues at a municipally built facility for sports franchise had a significant consequence. There was no way to pay off the debt with just eight cents being collected from every dollar spent in a stadium or an arena so other taxes were used to make up the difference.
There was a "sin tax" in Cleveland with an extra levy put on cigarettes, cigars and alcohol. Many areas raised sales tax while others hit local residents with "tourist" taxes from tax hikes on motel, hotel, restaurant and car rentals bills. There was also a water tax, some owners were able to negotiate deals for rent and agreed to a formula called payment in lieu of taxes (PILOT) and didn't have to pay full property taxes on stadiums they controlled that were municipally financed. The sports facilities, proponents argue from both sides of the political aisle. If that wasn't enough, team owners received cash from states to help out with some bills.
The worst deal that was signed was between Louisiana Governor Mike Foster and New Orleans Saints owner Tom Benson. Louisiana gave Benson $186.5 million in checks as a thank you for keeping the team in New Orleans between 2002 and 2010. The city of San Diego was buying unsold San Diego Chargers tickets as part of a lease arrangement in the late 1990s.
New York State is heavily invested in Ralph Wilson's Buffalo Bills by virtue of a 1998 lease agreement between Wilson and Erie County that called for $63.25 million worth of improvements at the Orchard Park facility. The Empire State Development Corporation gives $3 million a year to Orchard Park for stadium maintenance.
In the summer of 2010, the giveaways kept coming despite belt tightening around the country. Jacksonville politicians gave up the city's right to collect 25 percent of the revenue for naming rights of the city owned football stadium to the National Football League's Jaguars or about $4 million through 2014.
NFL owners fear the municipal gravy train may be heading to the station and one of the disputes in the 2011 lockout centers around stadium costs and that the players should be kicking in money to help build stadiums. The reason why there has been no work on the new Santa Clara, Calif., stadium that will eventually house the San Francisco 49ers franchise is that the NFL doesn't want any funding to go into the construction until there is a new agreement between the owners and players. Minnesota and San Diego are seeking new stadiums. Two Los Angeles groups are planning to build new stadiums with the operative word being "planning."
As the new stadiums that came into existence in the 1990s, Rupert Murdoch’s struggling FOX television syndication company which is misidentified as a network threw an enormous amount of money at NFL owners and wrested the rights to NFC games from CBS. That deal helped establish FOX as a TV power and caused NBC and Disney to ante up billions for the right to televise NFL games.
The NFL was swimming in money and a lot of it, more than 57 percent, ended up in the players’ pocket.
"Where is it written that (NFL) owners are entitled to the lion’s share of revenues from structures we help build and support?"
It was written in Congress and signed into law in the Oval Office in 1986. Ronald Reagan's signature opened the floodgates for the owners to get their hands on revenue streams in new facilities at bargain basement prices as taxpayers’ dollars were used to build stadiums and arenas. The Gipper's greatest football role wasn't in the movies but at 1600 Pennsylvania Ave. in 1986.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at bickley.com, Barnes and Noble or amazonkindle.
THURSDAY, 24 MARCH 2011 06:39
http://www.newjerseynewsroom.com/professional/sports-owners-are-entitled-to-lions-share-of-stadium-revenues-and-heres-why
BY EVAN WEINER
NEWJERSEYNEWSROOM.COM
Washington Post sports columnist Sally Jenkins asked a question in a column written after the NFL lockout started on March 11. It was a simple query that the writer could not answer. "Where is it written that (NFL) owners are entitled to the lion’s share of revenues from structures we help build and support?"
There was no answer in the piece – although if Jenkins did some research (all she would have to do is go back almost 25 years) and read her own newspaper, which covers the politics of Washington, D. C., she would have found it.
It actually is written and the document with Ronald Reagan's signature sits somewhere in Washington.
The answer is the 1986 Tax Reform Act, signed into law by President Reagan, which says only eight cents of every dollar generated in a facility goes off to pay down the debt. That is the starting point for leases. Before the change in the federal tax code in 1986, municipalities got more money from stadium- or arena-generated revenue and used that money to pay down the debt.
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 new or renovated stadiums with the opportunity to cash in on newly found revenue streams like luxury boxes and club seats.
The owners pitted city versus city. In the NFL, Art Modell took his Cleveland Browns to Baltimore (and got a loan from the state to help him out financially as part of the deal), Bud Adams moved his Houston Oilers to Nashville, Al Davis returned his Raiders to Oakland after failing to get a new stadium in Inglewood and left the Los Angeles Coliseum. Georgia Frontiere went home to St. Louis with her Rams leaving Anaheim behind. Robert Kraft played ball with Connecticut Gov. John Rowland and thought about going to Hartford but stayed in Foxboro with his New England Patriots working out a deal, although he put up money for his stadium.
Houston outbid Los Angeles for the NFL’s 32nd team, an expansion franchise in 1999 thanks to a new stadium. The Glazier family stayed in Tampa after considering a Baltimore bid. Cleveland built a new stadium after Modell left. Pittsburgh voters said no to a new stadium but elected officials decided to construct one anyway. Cincinnati paid for a new stadium. Indianapolis found money for Jim Irsay who might have moved his Colts elsewhere. Jacksonville built a new stadium for an NFL expansion team. Oakland renovated the Coliseum for Davis. Kansas City-area voters put up funding to renovate the Chiefs’ home field. Denver OK’d a new stadium while San Diego upgraded the city’s stadium for the Chargers and the Super Bowl.
Arlington, Texas raised the city’s sales tax again for a stadium, this time for Jerry Jones’ Dallas Cowboys; Philadelphia built Jeffrey Lurie a new Eagles park. Dan Snyder may want a new Redskins facility in Washington replacing his Landover, Maryland structure. Chicago rebuilt Soldier Field, Detroit put up money for William Clay Ford’s Lions. Green Bay got a renovation job at Lambeau Field which included funding from a 0.5 percent sales tax hike in 2000. Seattle replaced the Kingdome with a baseball stadium (which was approved by the state legislature after voters said no) and a football facility.
More than $310 million went into the construction of a Glendale, Arizona stadium for Bill Bidwill’s Cardinals. Louisiana rebuilt the Superdome after Hurricane Katrina in 2005 and the state is spending millions on yet another renovation at the building. Arthur Blank wants to replace the soon-to-be 19-year-old municipally funded Georgia Dome with a new stadium for his Atlanta Falcons.
In some cases, NFL owners like Jones, Bidwill, Ford and others threw some money into the projects. In some cases, NFL owners double dipped selling personal seat licenses and then asking those who bought the licenses to pay for tickets for a game to pay off owners’ debt.
The 1986 law gave municipalities a federal tax exemption on bonds to build new stadiums. The results are stunning. In 2011, 29 of the NFL's 32 teams have new stadiums or renovated facilities with enhanced revenue streams stemming from the 1986 legislative action. Only San Francisco and Minneapolis have not upgraded facilities for NFL owners.
Sports-team owners started putting pressure on municipalities shortly after Congress sent the completed bill to Reagan for his approval. The frenzy then started 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, and A’s still play in old facilities but Chicago, Boston and Los Angeles have renovated their ballparks. Spring 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 minor league teams sprung up, using cities that Major League Baseball deserted as the basis for their business ventures.
The National Hockey League decided to expand the league's United States "footprint" in 1990 claiming that the league needed to expand for television purposes. With the help of municipal governments leagues did expand and owners got a slice of expansion money. The new venues also raised the value of franchises.
The United States government, along with state and city governments, is partners with sports, whether it is on the professional or college level. National Basketball Association Commissioner David Stern freely admits that government is a sports partner.
According to Stern, there are three elements needed for sports teams to succeed: Government, cable TV and corporate support. Government has funded stadiums and arenas, provided tax breaks and incentives to build facilities and through the Cable TV Act of 1984 and the Tax Act of 1986 provided more revenues for sports owners. Without the Cable TV Act of 1984, ESPN might have folded; the tax act capped revenues that were generated inside a facility to pay off the debt of a publicly funded stadium or an arena at eight cents on a dollar. Neither New York Senator Daniel Patrick Moynihan nor Pennsylvania Senator Arlen Specter could close the loophole that exists to this day.
Arizona Senator and one-time Republican Presidential candidate John McCain wanted to end the stadium and arena building process that has taken place since the 1986 tax reforms that were passed by Congress, called for the elimination of the tax exemption for bonds for stadiums and arenas. McCain has said little about the legislation since his Presidential run.
The 1986 law that capped revenues at a municipally built facility for sports franchise had a significant consequence. There was no way to pay off the debt with just eight cents being collected from every dollar spent in a stadium or an arena so other taxes were used to make up the difference.
There was a "sin tax" in Cleveland with an extra levy put on cigarettes, cigars and alcohol. Many areas raised sales tax while others hit local residents with "tourist" taxes from tax hikes on motel, hotel, restaurant and car rentals bills. There was also a water tax, some owners were able to negotiate deals for rent and agreed to a formula called payment in lieu of taxes (PILOT) and didn't have to pay full property taxes on stadiums they controlled that were municipally financed. The sports facilities, proponents argue from both sides of the political aisle. If that wasn't enough, team owners received cash from states to help out with some bills.
The worst deal that was signed was between Louisiana Governor Mike Foster and New Orleans Saints owner Tom Benson. Louisiana gave Benson $186.5 million in checks as a thank you for keeping the team in New Orleans between 2002 and 2010. The city of San Diego was buying unsold San Diego Chargers tickets as part of a lease arrangement in the late 1990s.
New York State is heavily invested in Ralph Wilson's Buffalo Bills by virtue of a 1998 lease agreement between Wilson and Erie County that called for $63.25 million worth of improvements at the Orchard Park facility. The Empire State Development Corporation gives $3 million a year to Orchard Park for stadium maintenance.
In the summer of 2010, the giveaways kept coming despite belt tightening around the country. Jacksonville politicians gave up the city's right to collect 25 percent of the revenue for naming rights of the city owned football stadium to the National Football League's Jaguars or about $4 million through 2014.
NFL owners fear the municipal gravy train may be heading to the station and one of the disputes in the 2011 lockout centers around stadium costs and that the players should be kicking in money to help build stadiums. The reason why there has been no work on the new Santa Clara, Calif., stadium that will eventually house the San Francisco 49ers franchise is that the NFL doesn't want any funding to go into the construction until there is a new agreement between the owners and players. Minnesota and San Diego are seeking new stadiums. Two Los Angeles groups are planning to build new stadiums with the operative word being "planning."
As the new stadiums that came into existence in the 1990s, Rupert Murdoch’s struggling FOX television syndication company which is misidentified as a network threw an enormous amount of money at NFL owners and wrested the rights to NFC games from CBS. That deal helped establish FOX as a TV power and caused NBC and Disney to ante up billions for the right to televise NFL games.
The NFL was swimming in money and a lot of it, more than 57 percent, ended up in the players’ pocket.
"Where is it written that (NFL) owners are entitled to the lion’s share of revenues from structures we help build and support?"
It was written in Congress and signed into law in the Oval Office in 1986. Ronald Reagan's signature opened the floodgates for the owners to get their hands on revenue streams in new facilities at bargain basement prices as taxpayers’ dollars were used to build stadiums and arenas. The Gipper's greatest football role wasn't in the movies but at 1600 Pennsylvania Ave. in 1986.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at bickley.com, Barnes and Noble or amazonkindle.
Thursday, April 15, 2010
Sports and taxes, a perfect marriage
Sports and taxes, a perfect marriage
By Evan Weiner - The Daily Caller 04/15/10 at 1:21 PM
http://dailycaller.com/2010/04/15/sports-and-taxes-a-perfect-marriage/
Today is T-Day — as in Federal Income Tax Day. The 1040s and their tax relatives have to be finished and sent to the Internal Revenue Service. But those aren’t exactly the only taxes that individuals will have to pay.
In the United States, there are all sorts of taxes that people pay that end up going to sports, and all of these “hidden” sports taxes are rarely noticed. The United States government has created tax breaks for corporations that buy big-ticket sports items, like club seats and luxury boxes, that allow a fifty percent write-off of the cost of the ticket.
The higher the cost of the ticket, the more corporate can write off, and that has a trickle-down effect on people who cannot write tickets off as a business expense. (Minnesota Twins fans have found out just what a new stadium means, as ticket prices are more than thirty percent more on average.)
The government has given big-time colleges and university sports programs a tax-exempt status, which means that college football factory schools that play, say, in the Rose Bowl do not have to pay taxes on their share of the revenue generated. Owners can depreciate players’ contracts like an individual taxpayer can depreciate a car.
Every day, it’s tax day for sports.
Some athletes even have to pay “the Michael Jordan tax.” In the 1990s, California lawmakers passed a bill that taxed athlete’s earnings for the days they spent playing in the state. There are similar taxes in New York and Philadelphia. Conversely, a good many athletes have moved to Florida or Nevada because they don’t have to pay state income tax there.
A myriad of taxes go to pay municipally built sports facilities. Every day, it is tax day as people pay restaurant, motel, hotel, car rental, sewer and water and other taxes to assist sports owners, whether it is in Florida, Arizona, Texas, Washington or Ohio.
In Pittsburgh, proceeds from slot machines help to pay for the new Penguins arena. In Minnesota, “racinos” slot machines at race tracks could end up financing a new Vikings football stadium. “Racinos” have saved the standard bred racing industry in Delaware, West Virginia and New York. The racetracks would be malls today without the casinos, but the casinos would not exist without the standard bred racing.
Americans love sports, even if they cannot any longer afford to pay high prices for games. But why aren’t sports teams held accountable for raising taxes to pay off the debt at municipally owned venues which, in many cases, has forced municipalities to cut services for the elderly, for education, and even for snow removal?
As Jim Bouton, the former Major League Baseball pitcher and author of the greatest book ever written about sports, Ball Four, once said, “Hey it’s our guys.” Americans love sports and their teams, and sports can do no wrong — even if the evidence suggests otherwise.
Politicians go after sports teams because they figure if their city is big league, then businesses that create good jobs will locate in their burg. The stadium and arena will be economic engines (that’s actually not quite true, since most stadium/arena jobs are not exactly permanent). Of course, there is no evidence that any of their assumptions true, but why let facts get in the way of a good yarn?
In 2003, financially strapped Pittsburgh elected officials, who had just opened a new baseball park and imploded the old Three Rivers Stadium even though there was still debt on the extinct building, were breathing a sigh of relief that an expected heavy snowfall fizzled out, and with good reason. They saved a million dollars for every inch of snow that did not fall. That was the cost of cleanup in 2003. They could not afford big snows because of cost.
In New York City, Mayor Michael Bloomberg plans to cut a large number of city workers because of a gaping budget deficit, yet Knicks fans, some of whom are facing the Bloomberg chopping block, are hoping that the Jim Dolan family-owned Madison Square Garden business can lure Lebron James with a contact offer of, say, $14 million a year. That would roughly be equal to the Garden’s property tax value, if the Dolan’s were paying property tax on the building.
Because one of the Garden’s previous owners, Sumner Redstone and Gulf and Western, somehow convinced New York politicians that the Knicks and the National Hockey League Rangers were no longer financially viable in Manhattan and had to move, New York City and New York State waived collecting property taxes on a piece of valuable Manhattan real estate between Seventh and Eighth Avenue and 31st and 33rd Streets.
Most major markets, mid-size markets and a good number of smaller markets around the country are subsidizing sports enterprises. Louisiana politicians in 2002 decided to hand New Orleans Saints owner Tom Benson some $186 million over a nine year period as thanks for not moving his football from the Crescent City. Benson will get two more stipends, each for about $23 million, in July 2010 and in July 2011. Louisiana Governor Bobby Jindal and Benson recently renegotiated a new deal that cuts the amount of the stipend and caps the handout at $6 million a year under a new lease arrangement, but Benson gets a building near the stadium which he will renovate and then rent out to the state, which will move offices into that building. Benson will also build an entertainment center around the Superdome, which officials think will be an economic engine.
The state will continue paying Benson, but the rules have changed a bit. Benson will become a major real estate developer, thanks to the new deal, and he stands to make a great deal of money. If the money does not materialize, he will get a state handout.
In Glendale, local officials are trying to keep the Phoenix (soon to be called the Glendale or Arizona) Coyotes in the city-built arena. Glendale has approved a lease agreement with a potential Coyotes owner, Chicago White Sox and Bulls front man Jerry Reinsdorf. Reinsdorf’s group is expecting vast subsidies from a financially challenged Glendale, and Glendale seems to be willing to work out deals that would make sure that the National Hockey League team would get generous revenue streams to keep the team in the arena. The Goldwater Institute is looking into blocking the Glendale-Reinsdorf deal.
In nearby Mesa, officials are trying to reach a deal that would keep the Chicago Cubs in the city for spring training after the team’s lease expires in a couple of years. A proposal to charge an additional tax on the sale of tickets at “Cactus League” or spring training games in Arizona was met with stiff resistance from the other teams that train in the Phoenix area. But Arizona politicians are looking for other tax schemes to keep the Cubs in Mesa, including tax increment financing.
In Maryvale, Arizona, local elected officials know the Milwaukee Brewers deal with the city to use the city’s facility for spring training is done in two years, and city officials know that they will have to come up with a financial plan to keep the team in Maryvale or the franchise will be gone, possibly to Phoenix, where the Oakland A’s facility needs an upgrade. Phoenix is broke, though, and the Arizona Sports and Tourism Authority is facing an economic shortfall of $10 million.
The federal government is the backbone of sports in the United States. Because of a loophole in the Tax Act of 1986, municipalities can only use eight percent of the revenues generated inside of a publicly funded facility to pay down the hundreds of millions of dollars worth of debt. Other deals that have been cut with sports owners include hikes in water taxes, sewer taxes, car rental taxes, hotel and motel taxes and restaurant taxes to build new or renovate old facilities. There was even a “sin tax” in Cleveland to build a new baseball park, with some of the funding coming from a sales tax hike on cigarettes and alcohol.
You name it; politicians will tax it for sports facilities.
Cable television provides yet another revenue stream. Because of the Cable Television Act of 1984, many people are totally unaware that they are supporting sports through cable fees. The legislation signed by President Ronald Reagan created something of a socialist cable television apparatus, in which everyone who buys into the basic expanded tier of television also pays for all the channels on the tier and supplements sports networks like ESPN – whether they watch the channel or not.
That legislation has enabled ESPN (and others) to become financially successful without worrying about advertising support. In turn, ESPN, TNT, Versus and regional sports cable networks are paying billions of dollars in sports fees to various leagues and teams, with just a fraction of their 95 million subscribers actually watching the product.
It’s one of many ways that the government is aiding sports. It is not quite taxation without representation — in fact, it’s not even quite taxation — but the mechanisms allow sports owners to generate revenues that go to pay athletes, managers, and coaches and allow college programs to pay millions of dollars for football and basketball coaches.
This week is tax week, but it is always tax day in the United States for sports. Without taxes, big time sports in the America would have been downsized a long, long time ago.
Evan Weiner is an author, columnist, lecturer and radio/TV commentator on the “Politics of Sports Business.”
Read more: http://dailycaller.com/2010/04/15/sports-and-taxes-a-perfect-marriage/print/#ixzz0lC5JHOMO
By Evan Weiner - The Daily Caller 04/15/10 at 1:21 PM
http://dailycaller.com/2010/04/15/sports-and-taxes-a-perfect-marriage/
Today is T-Day — as in Federal Income Tax Day. The 1040s and their tax relatives have to be finished and sent to the Internal Revenue Service. But those aren’t exactly the only taxes that individuals will have to pay.
In the United States, there are all sorts of taxes that people pay that end up going to sports, and all of these “hidden” sports taxes are rarely noticed. The United States government has created tax breaks for corporations that buy big-ticket sports items, like club seats and luxury boxes, that allow a fifty percent write-off of the cost of the ticket.
The higher the cost of the ticket, the more corporate can write off, and that has a trickle-down effect on people who cannot write tickets off as a business expense. (Minnesota Twins fans have found out just what a new stadium means, as ticket prices are more than thirty percent more on average.)
The government has given big-time colleges and university sports programs a tax-exempt status, which means that college football factory schools that play, say, in the Rose Bowl do not have to pay taxes on their share of the revenue generated. Owners can depreciate players’ contracts like an individual taxpayer can depreciate a car.
Every day, it’s tax day for sports.
Some athletes even have to pay “the Michael Jordan tax.” In the 1990s, California lawmakers passed a bill that taxed athlete’s earnings for the days they spent playing in the state. There are similar taxes in New York and Philadelphia. Conversely, a good many athletes have moved to Florida or Nevada because they don’t have to pay state income tax there.
A myriad of taxes go to pay municipally built sports facilities. Every day, it is tax day as people pay restaurant, motel, hotel, car rental, sewer and water and other taxes to assist sports owners, whether it is in Florida, Arizona, Texas, Washington or Ohio.
In Pittsburgh, proceeds from slot machines help to pay for the new Penguins arena. In Minnesota, “racinos” slot machines at race tracks could end up financing a new Vikings football stadium. “Racinos” have saved the standard bred racing industry in Delaware, West Virginia and New York. The racetracks would be malls today without the casinos, but the casinos would not exist without the standard bred racing.
Americans love sports, even if they cannot any longer afford to pay high prices for games. But why aren’t sports teams held accountable for raising taxes to pay off the debt at municipally owned venues which, in many cases, has forced municipalities to cut services for the elderly, for education, and even for snow removal?
As Jim Bouton, the former Major League Baseball pitcher and author of the greatest book ever written about sports, Ball Four, once said, “Hey it’s our guys.” Americans love sports and their teams, and sports can do no wrong — even if the evidence suggests otherwise.
Politicians go after sports teams because they figure if their city is big league, then businesses that create good jobs will locate in their burg. The stadium and arena will be economic engines (that’s actually not quite true, since most stadium/arena jobs are not exactly permanent). Of course, there is no evidence that any of their assumptions true, but why let facts get in the way of a good yarn?
In 2003, financially strapped Pittsburgh elected officials, who had just opened a new baseball park and imploded the old Three Rivers Stadium even though there was still debt on the extinct building, were breathing a sigh of relief that an expected heavy snowfall fizzled out, and with good reason. They saved a million dollars for every inch of snow that did not fall. That was the cost of cleanup in 2003. They could not afford big snows because of cost.
In New York City, Mayor Michael Bloomberg plans to cut a large number of city workers because of a gaping budget deficit, yet Knicks fans, some of whom are facing the Bloomberg chopping block, are hoping that the Jim Dolan family-owned Madison Square Garden business can lure Lebron James with a contact offer of, say, $14 million a year. That would roughly be equal to the Garden’s property tax value, if the Dolan’s were paying property tax on the building.
Because one of the Garden’s previous owners, Sumner Redstone and Gulf and Western, somehow convinced New York politicians that the Knicks and the National Hockey League Rangers were no longer financially viable in Manhattan and had to move, New York City and New York State waived collecting property taxes on a piece of valuable Manhattan real estate between Seventh and Eighth Avenue and 31st and 33rd Streets.
Most major markets, mid-size markets and a good number of smaller markets around the country are subsidizing sports enterprises. Louisiana politicians in 2002 decided to hand New Orleans Saints owner Tom Benson some $186 million over a nine year period as thanks for not moving his football from the Crescent City. Benson will get two more stipends, each for about $23 million, in July 2010 and in July 2011. Louisiana Governor Bobby Jindal and Benson recently renegotiated a new deal that cuts the amount of the stipend and caps the handout at $6 million a year under a new lease arrangement, but Benson gets a building near the stadium which he will renovate and then rent out to the state, which will move offices into that building. Benson will also build an entertainment center around the Superdome, which officials think will be an economic engine.
The state will continue paying Benson, but the rules have changed a bit. Benson will become a major real estate developer, thanks to the new deal, and he stands to make a great deal of money. If the money does not materialize, he will get a state handout.
In Glendale, local officials are trying to keep the Phoenix (soon to be called the Glendale or Arizona) Coyotes in the city-built arena. Glendale has approved a lease agreement with a potential Coyotes owner, Chicago White Sox and Bulls front man Jerry Reinsdorf. Reinsdorf’s group is expecting vast subsidies from a financially challenged Glendale, and Glendale seems to be willing to work out deals that would make sure that the National Hockey League team would get generous revenue streams to keep the team in the arena. The Goldwater Institute is looking into blocking the Glendale-Reinsdorf deal.
In nearby Mesa, officials are trying to reach a deal that would keep the Chicago Cubs in the city for spring training after the team’s lease expires in a couple of years. A proposal to charge an additional tax on the sale of tickets at “Cactus League” or spring training games in Arizona was met with stiff resistance from the other teams that train in the Phoenix area. But Arizona politicians are looking for other tax schemes to keep the Cubs in Mesa, including tax increment financing.
In Maryvale, Arizona, local elected officials know the Milwaukee Brewers deal with the city to use the city’s facility for spring training is done in two years, and city officials know that they will have to come up with a financial plan to keep the team in Maryvale or the franchise will be gone, possibly to Phoenix, where the Oakland A’s facility needs an upgrade. Phoenix is broke, though, and the Arizona Sports and Tourism Authority is facing an economic shortfall of $10 million.
The federal government is the backbone of sports in the United States. Because of a loophole in the Tax Act of 1986, municipalities can only use eight percent of the revenues generated inside of a publicly funded facility to pay down the hundreds of millions of dollars worth of debt. Other deals that have been cut with sports owners include hikes in water taxes, sewer taxes, car rental taxes, hotel and motel taxes and restaurant taxes to build new or renovate old facilities. There was even a “sin tax” in Cleveland to build a new baseball park, with some of the funding coming from a sales tax hike on cigarettes and alcohol.
You name it; politicians will tax it for sports facilities.
Cable television provides yet another revenue stream. Because of the Cable Television Act of 1984, many people are totally unaware that they are supporting sports through cable fees. The legislation signed by President Ronald Reagan created something of a socialist cable television apparatus, in which everyone who buys into the basic expanded tier of television also pays for all the channels on the tier and supplements sports networks like ESPN – whether they watch the channel or not.
That legislation has enabled ESPN (and others) to become financially successful without worrying about advertising support. In turn, ESPN, TNT, Versus and regional sports cable networks are paying billions of dollars in sports fees to various leagues and teams, with just a fraction of their 95 million subscribers actually watching the product.
It’s one of many ways that the government is aiding sports. It is not quite taxation without representation — in fact, it’s not even quite taxation — but the mechanisms allow sports owners to generate revenues that go to pay athletes, managers, and coaches and allow college programs to pay millions of dollars for football and basketball coaches.
This week is tax week, but it is always tax day in the United States for sports. Without taxes, big time sports in the America would have been downsized a long, long time ago.
Evan Weiner is an author, columnist, lecturer and radio/TV commentator on the “Politics of Sports Business.”
Read more: http://dailycaller.com/2010/04/15/sports-and-taxes-a-perfect-marriage/print/#ixzz0lC5JHOMO
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