Beating the Sports Subsidy Trap

Presented to the United Organizations of Taxpayers Woodland Hills, California, March 21, 1998

Rick Henderson | March 21, 1998

As you no doubt know, the Los Angeles Dodgers were sold to the Fox Group this week for $311 million. The Dodgers story is important for the sports fan and for the concerned taxpayer in a number of respects:

The Dodgers are one of the last financially successful major sports franchises that has remained under family ownership for a long period. The O'Malleys have owned the Dodgers for a half-century. Most other teams with national followings that are financial successes even if they haven't always performed well on the fieldthe Atlanta Braves, the Chicago Cubs, the Baltimore Orioles, the New York Yankees, the Cleveland Indiansare owned by large conglomerates like Fox or by ownership groups. In recent years, you associate the Orioles with principal owner Peter Angelos or the Yankees with George Steinbrenner.

And while a few family owned franchises remain successfulthe Lakers, the Washington Redskins, and the San Francisco 49ers come to mindmany others are struggling, like the Minnesota Twins and the Milwaukee Brewers.

The Dodgers story is important in another, less-reported respect: The team built Dodger Stadium in the early 1960s and has owned it from the day it opened. Indiana University economist Mark Rosentraub, whose book Major League Losers is the most accessible story of sports welfare I've seen, believes that Dodger Stadium may well be the only major sports arena that operates profitably, and it may be the only one that has turned a profit consistently since World War II.

Think of that: there are dozens of major sports arenas across the country, yet only one may operate profitably. And with few exceptions--indeed, you can probably count the exceptions on the fingers of both hands--all the major sports arenas are publicly owned. The losses these facilities incur are picked up by taxpayers.

At this time nearly three dozen cities, counties, and states have tax-financed stadium proposals of at least $100 million possible, pending, or already under construction. And the list keeps growing every day.

Cincinnati's 30-year-old Riverfront Stadium (now called Cinergy Park) is unpopular with both the Reds and the Bengals. After threatening to move the Bengals to Cleveland, the city's hated rival, Cincinnati has agreed to build the $280-million Paul Brown Stadium; area taxpayers will pick up at least $240 million of that cost.

The Minnesota legislature voted 84 to 47 against funding a new $410 million, retractable roof arena for baseball's Twins last November. So the franchise may move to North Carolina to play in a yet-to-be constructed facility in a yet-to-be determined location. In early April, taxpayers in Winston-Salem will vote on a sales tax increase that would finance a new stadium, but if that doesn't pass, would-be owner Don Beaver says he'll try to get a taxpayer-financed stadium in Charlotte.

The Twins have been a financially viable franchise only when the team has played well on the field; even after the team won the World Series in 1991, management had to clean house because the local market wasn't large enough to support a championship payroll. You may have recently read that when the World Champion Florida Marlins visited the White House last month, only 13 of the 25 players from that team were still on the roster; the team had dumped the salaries of almost all their stars.

Andreturning to Minnesotasince the Twins aren't getting a new ballpark, the football Vikings are threatening to leave if they don't get a new domed stadium. We could see the Vikings move to L.A. and play in a refurbished Coliseum (retrofitted, no doubt, at taxpayer expense).

George Steinbrenner is threatening to move the New York Yankees to Jersey unless he gets a new ballpark for free. Mayor Rudy Giuliani wants the team to move to Manhattan. But guess how much it will cost to build a new Yankee Stadium in the high-rent district? Upwards of $700 million.

I'm a big fan of the free enterprise and hate welfare, especially corporate welfare. I suppose anyone who has worked eight years for a publication with the subtitle "Free Minds and Free Markets" ought to. But if there's a socialist sector in the U.S. economy, big-time sports is itfrom outright subsidies to sweetheart deals for the politically connected to monopoly profits. In the public eye, stadium battles tend to swirl around civic pride, fan support, and regional development, but they're really all about one thing and one thing onlymoney.

The Dallas Cowboys get something like $75 million in revenues a year from luxury seating alone at Texas Stadium. The Cleveland Cavaliers get around $20 million a season from luxury revenues in Gund Arena. And, once you figure in parking, luxury seating, and all concessions, the Atlanta Braves took in more than $100 million last season, its first at the brand-new Turner Field.

The opening of Camden Yards in Baltimore in 1992 kicked off a rash of new arena contruction, featuring buildings with state of the art facilities, terrific sight lines, lots of restaurants and rest rooms, and luxury boxes. As you may have picked up from my earlier comments, the price of stadiums has skyrocketed: The then-state-of-the art Florida Suncoast Dome in St. Petersburg was completed in 1990 for about $110 million; the proposed ballpark for the Minnesota Twins would cost almost four times that much. The typical outdoor arena runs $200 million or more. And despite a small flurry of arenas that got most of their money from private sources, in Washington, D.C., Charlotte, Chicago, and the downtown arena that will go up soon in L.A., the typical arena under construction or on the books will get almost every dollar from taxpayers.

The arrangements can get pretty perverse. My favorite horror stories used to be in Seattle, where Microsoft co-owner Paul Allen got taxpayers to give hime $300 million for a new stadium for the Seahawks, even though he's worth billions and hadn't yet bought the team. Or San Francisco, where earlier this year taxpayers narrowly approved a $110 tax subsidy for a new football-only stadium for the 49ers. The tax itself was pretty outrageous. But if the tax had failed, the 49ers would have received $125 million from taxpayers to renovate Candlestick/3Com Park, and then could have walked out on their lease. The locals were being blackmailed however the vote turned out.