It's Time to Get Government Out of the SPORTS BUSINESS

USA Today (Society for the Advancement of Education), March, 2000 by Raymond J. Keating

In the foreseeable future, considering what is already agreed to and what various clubs and cities are seeking or proposing, another conservative estimate indicates that at least $13,500,000,000 more may be spent on new ballparks, stadiums, and arenas. Taxpayers can expect to pick up more than $9,000,000,000 of that amount.

Politics and subsidies

Is there any justification for such extravagance? Do the lavish handouts to sports franchises stand up to economic analysis?

The sports fan is particularly susceptible to pleas from team owners that a new facility is needed in order to compete with other teams that are getting new venues chock full of revenue-generating club seats, luxury suites, and skyboxes. After all, who wants to root for a team that has a miniscule payroll (by professional sports standards) and thus, perhaps, little chance of winning a championship?

Surely, though, the competitiveness of a team is a matter to be dealt with by the particular organization or league. Taxpayers--many of whom are not even sports fans--should not be forced to contribute to a club's payroll. Indeed, the only people regularly calling for subsidies to keep franchises competitive are the owners and the players--a fact that should surprise no one, since those two groups are the real beneficiaries of sports subsidies.

Taxpayer funding of stadiums and arenas provides enormous benefits to teams. First, they are relieved of facility financing costs, which can run $10-20,000,000 or more annually. Second, new and expanded revenues are tapped through luxury suites, club seats, stadium naming rights, signage and other advertising, income from other facility events, and higher ticket prices.

As for ticket prices, sportswriter Tom Farrey has noted: "But what goes unsaid during the campaigns to get public money approved is the facilities are largely for new fans--wealthier individuals and corporations that can afford the seats in these often, ironically, smaller stadiums and arenas. Cheap seats remain at these facilities, but not that many and not as close to the action as they used to be [especially in basketball and hockey arenas]. The net effect is long-time fans and middle-income families are increasingly driven from the games, replaced by corporations that can buy larger blocks of tickets and use them as tax writeoffs."

Third, teams often do not have to pay property taxes on new facilities. For instance, no property taxes are paid to New York City on Madison Square Garden so long as the Knicks and Rangers use it as their home. The new revenues or alleviated costs mean more dollars are available to boost owners' bottom lines and players' salaries. Roger Noll and Andrew Zimbalist authors of Sports, Jobs and Taxes, have asserted: "Professional athletes receive salaries that are roughly proportional to the revenues that they generate, so that much of the revenue enhancement from a new stadium inevitably goes to players." Mark Rosentraub, author of Major League Losers, has estimated that the players garner about 55% of the gains from subsidies and the owners get 45%. It doesn't take a math degree to see what that leaves for everyone else.