Here's a Deal We Can Afford to Refuse
Sports arena: Public money shouldn't be spent on fat cats who expect huge profits.
Let's see, now: The Los Angeles City Council has voted by an overwhelming 11-3 margin to authorize a new $200-million downtown sports arena to house the Lakers, the Kings and perhaps the Clippers. Taxpayers will have to come up with $6.8 million a year to service the city's portion of the resulting debt. And this is cause for celebration?
The proposal is a bad deal on every level: Even though Lakers owner Jerry Buss, Kings owner Philip Anschutz and (if he gets in on the deal) Clippers owner Donald Sterling will further line their pockets from luxury seating revenue, the developers of the project are demanding taxpayer subsidies before agreeing to build the arena. Any money taxpayers cough up to subsidize these multimillionaire owners will crowd out spending for other public services or preclude more general tax relief. And the politicians who approve the new arena are merely perpetuating what may be the most egregious corporate welfare program in the nation–the taxpayer underwriting of profitable sports franchises.
From Cleveland to Baltimore to Chicago, cities nationwide have repeatedly been suckered by team owners who claim they can't operate profitably without state-of-the-art, taxpayer-funded facilities offering luxury boxes and other high-dollar seating arrangements. And these arenas can indeed provide plenty of money for the owners and players: The Dallas Cowboys, for instance, collected more than $75 million in revenues from aging Texas Stadium alone in 1994 and 1995. The Cleveland Cavaliers generated almost $17 million from luxury-box and club seating in the team's first season in the city-owned Gund Arena. And that doesn't count the money the Cavs got from the working stiffs of Cleveland who purchased regular tickets.
The plan endorsed by the L.A. City Council differs from most because the downtown sports arena would be nominally owned by the developers. Taxpayers are supposed to be on the hook for no more than $70 million, only about one-fourth of the project's projected cost. But servicing that debt will cost $6.8 million a year, which is supposed to be repaid through taxes on tickets, parking and concession sales at the arena.
No doubt the Lakers' Buss, who also owns the three-decade-old Great Western Forum, would love to play in a shiny new facility like Gund Arena or Chicago's United Center with dozens of luxury boxes that could attract millions of dollars in revenues from businesses and entertainment moguls. Yet as a recent Times profile observed, the Lakers owner may be one of the shrewdest entrepreneurs in all of professional sports. By indicating his desire to leave the Forum and become a mere tenant in a new facility, Buss must expect to be financially rewarded by the move.
But taxpayers shouldn't have to foot even a portion of his dream house. Both the Lakers and Kings are valuable and profitable franchises that should easily be able to simultaneously absorb all the costs of the new arena and boost their profits. Assume, quite conservatively, that the Lakers could attract as much luxury-seating revenue as the Cavs get in Cleveland. In little more than four seasons, the new arena would generate the $70 million that developers want from taxpayers. And that $70 million would come just from Laker luxury seating, not including the additional ticket, concession and parking revenue the Lakers would bring in, let alone money from Kings games or any other events the arena might sponsor.
Economist Mark Rosentraub has aptly called the transfer of taxpayer dollars to pro franchises the "sports welfare system." The proposed downtown sports arena would continue this tendency to redistribute wealth from the poorest Angelenos to the richest. Neither the Lakers nor the Kings deserve a taxpayer handout, which suggests a question to the elected officials who signed onto this scam: Whom do they represent–the citizens of their districts or a handful of fat-cat team owners?
Rick Henderson is managing editor of Reason magazine. This article appeared in The Los Angeles Times June 11, 1997.