August 24, 2005

Pro Sports Owners and Athletes: Supersized Welfare Queens

Filed under: Corporate Outrage,Economy,Taxes & Government — Tom @ 10:33 am

BizzyBlog, a former avid sports fan, is sick and tired of taxpayer subsidies of sports stadiums, and increasingly absurd campaigns by the coddled owners of professional sports franchises to have ever-bigger palaces built.

First, Washington, capital of colossal subsidies, applies the pork barrel approach to pro sports in a big way:

In its quest to bring professional baseball back to Washington, the D.C. Council agreed to build a new stadium for the Washington Nationals that is to be largely financed by taxpayer dollars. This is a sweetheart deal that will allow Major League Baseball to sell the team at a price that virtually guarantees it a profit while likely creating a burden for D.C. taxpayers.

In February 2002 Major League Baseball purchased the lackluster Montreal Expos for $120 million. Three years later, it agreed to bring the team to Washington on the condition that a publicly funded stadium would be built. The league now is trying to sell the Washington Nationals.

The prospect of a free stadium is tantalizing to prospective buyers, who are expected to bid between $300 million and $400 million for the team. That would make the Nationals one of the highest-priced professional baseball teams ever, and the sale would be one of the most lucrative deals Major League Baseball has ever made.

With construction costs estimated at $535 million, Major League Baseball and a few well-connected investors stand to make a killing, while D.C. residents and businesses are left to pay the bill.

The D.C. Council has said that construction of a new stadium will spur economic development in a neglected area of the District. However, this is a promise the city may be unable to keep.

Economists seldom agree, but the many studies done over the past decade all arrived at the same conclusion: Publicly funded stadiums do not deliver the benefits they promise. A recent paper by the Cato Institute concluded, “The academic research overwhelmingly concludes that the presence of professional sports teams has no measurable positive impact on economic growth.”

On to Indianapolis, where the crybaby Irsay family, who moved their football team from Baltimore in the dead of night in 1984 when they didn’t get their way in that town (scroll down a little less than halfway), have been pleading poverty for eight years:

Since at least 1997, only 14 years after the 63,000-seat Hoosier Dome was built for $82 million, Indianapolis Colts owner Jim Irsay was publicly lobbying for a new stadium to host his team.

….. He has repeatedly said that his NFL franchise cannot survive on the revenues provided from the RCA Dome, and that a new stadium is needed sooner or later.

It’s tough making big money on an NFL franchise in a market this size without taxpayers subsidizing much of the costs. Taxpayers coughed up $20 million in 1998 to enlarge the RCA Dome’s suites and enhance the value of its expensive box seats. This actually cut the dome’s capacity to 57,900 seats, making it the smallest stadium in the league. In 2003 the team ranked 27th out of 32 NFL teams in terms of revenue and 29th in value.

“We’re significantly, significantly below the average (in revenue), and that disparity is growing, Irsay told Indianapolis television viewers. Yet the average determines what our expenses are with the salary cap. That’s what makes things so difficult.”

However, as the Cincinnati Bengals have proven, a new stadium does not ensure a better profit. Even with a new stadium, the Bengals were 24th in revenue in 2002, with only $4 million more in revenues than the Colts.

Oh, Cincinnati. How is Cincinnati doing with its two stadiums? Not well:

Stadium sales tax coming up short
Deficit looms, county says

The fund used to pay off stadium debt and cover property tax rollbacks could be $8 million in the red as early as next year, according to Hamilton County projections. The deficit could hit almost $300 million by 2032, when the debt is to be repaid.

“‘Wow’ is right,” said County Commissioner Todd Portune.

“Any way you slice it, you’re still looking at big numbers,” County Commissioner Pat DeWine said.

“We are in serious financial difficulties,” County Commissioner Phil Heimlich said.

The commissioners’ alarm comes as they are set to prepare a county budget for next year. The biggest issue for them is the sales tax fund and projections that show more money going out than coming in as early as next year.

Measures being considered to address the deficit are refinancing the debt, stretching the debt beyond the current 30 years, and using money now spent on daily county operations.

The last option in the previous sentence means that Hamilton County’s overburdened taxpayers could see money for essential services diverted to paying off stadium debt.

But what does this have to do with the high salaries of the athletes who play the games? Plenty.

Apologists will say “These salaries are just the result of the free market at work.”

Baloney. Stratospheric salaries occur because owners who have conned taxpayers into paying for the places their teams play in are therefore able to devote extra money to buying on-field talent. Collectively, this works to bid up players’ salaries well beyond what they would be if the owners had to pay for all of their operating costs.

Hence the title of the post. What has been taken from taxpayers effectively goes into the pockets of the owners and players. It is totally ridiculous, and as Cincinnati has shown, has the potential to be financially ruinous. The fact that the money goes to public-trough feeders who publicly pose as “businessmen” and too many spoiled brats on the field who never grew up just adds to the outrage.

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2 Comments

  1. By financing the stadiums with taxpayer monies, it has essentually taken all power away from the consumer, and placed that control in the hands of the owner. Even a boycott of attending these sporting events is useless. If cities are going to continue to build stadiums for professional sports teams, shouldn’t the cities collect the revenues for admissions and concesssions at the very least. It seems that cities are letting pro sports team owners and organizations reap all the profits, but none of the liabilities. To sum it up, pro atheletes are getting to participate in an occupation they love and should not get paid these outragious salaries. Owners are not providing any necessary services to the public and should have to compete just like any other business, in the open market.

    Comment by BIGROBBIE — November 23, 2005 @ 11:44 am

  2. #1, exactly, thanks for the comments. Good to know folks are reading older posts.

    Comment by TBlumer — November 23, 2005 @ 12:03 pm

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