Wayne's World

New at Reason: Will this year's fall classic result in even more taxpayer cash going into Wayne Huizenga's pocket? Matt Welch follows the money.

Comments

[Brad S]

If anyone ever wondered why pro athletes are so highly (over)paid, this is one big reason why. Their employers' physical facilities are completely subsidized by the government. As such, said employers incur no depreciation costs on their facilities, and avoid the cost of capital associated with building the facilities in the first place. I mean, the taxpayers don't build a facility for General Motors or any other manufacturer, why should they build facilities for pro baseball teams?

[chthus]

I'm not really sure why they bow to sports teams more so than a car manufacturer, for example, but it may have something to do with the tax revenue. Let's say GM plant employs 1,000 people at an average of $40,000 a year, that's $40mil that's getting hit with the local income tax, but the vast majority at a rather low level. Whereas, the ball team has 40 players making an average of a million a year, but since the lowest paid guy makes a couple hundred grand a year, the local income tax draw is at a much higher level. Add to this all of the other salaries (coaches, team docs, vendors, security) and it adds even more. On top of that, they can gouge all of the visitors to the park on high amusement/refreshment/parking taxes. On top of that, not to many people travel from out of town to go to the GM plant, but plenty will come to see a ball team. This adds more in high hotel and restaurant taxes.

I'm not trying to justify it, just giving a reason why they might think it's worthwhile. I've also never added up the numbers, but it seems possible that the tax burden on the public at large may be made up by all of the extra taxes from those playing and watching the game. Not that the public at large will ever see this money back in the form of lowered taxes. That would just be too fair.

[Jean Bart]

Any relation to the philosopher? 🙂

[Adam]

Matt's article sums it up pretty well. The way pro sports is run in this country makes me shake my head at times. You have these team owners making fairly substantial profits, charging extortionate amounts of money for everything to do with the game, then crying poor!!! The thing that galls me the most is that they hit up the cities for their ego stroking stadiums then threaten (and sometimes actually do) to move the team somwhere else. What are sports fans in a city to think of all this? The worst example this season was the Reds, who got their flash new ballpark then proceeded to sell the whole f*cking team. All too often the owners get off scott free with giving their fans the almighty shaft.

I say if these bloody owners want a stadium, do what the Giants did and build their own! Or, if the city is to pay, charge the team market rates for rent on the facilities. A system I like is how a lot of soccer teams are run in the UK (or football teams in my home country of Australia) and run them either as listed companies or give season ticket holders memberships, both of which give the fans a stake in the teams/clubs. This way, Joe Fan can vote out the board of directors if they are unsatisfied with the job they're doing. This does a couple of things: generates greater loyalty (and more revenue) for the club and provides a certain amout of goverance over its activities. It seems to have worked pretty well for listed companies over time...

Stop distorting the market and let these teams stand or fall on their own two feet.

[Umbriel]

I think chthus is substantially right about the reasoning, though the tax bracket part would vary by locality. My home of Philadelphia and the state of Pennsylvania, for example, have flat tax rates, and thus would not benefit in the manner chthus describes.

There's also the relative portability of sports teams to consider. A team can relocate cross country practically overnight, whereas a car manufacturer would have the outlay for a new facility, would be walking away from its investment in the old one, and would have to hire replacements for the substantial portion of its workforce unwilling or unable to move.

Team owners can and do engage in blackmail, playing off one city against others to get custom facilities built. Over and above their economic importance to the city, there's the prestige factor, and the sensitivity of politicians to being blamed for "losing the team". Our previous mayor (now Governor Rendell) came under pressure to subsidize construction of a new stadium (seperate football and baseball facilities were demanded at one point, as I recall), but the team owners made the mistake of applying the pressure well into Rendell's second term, and since he wasn't going to be up for reelection anyway, he essentially gave them the finger. Score one for term limits. Once a new mayor was in, funding and construction proceeded promptly.

All that said, I think it would be fantastic for professional sports and for local economies if the subsidies were cut off, and they had to invest in their own stadia. I doubt it will ever happen though. In fact, other industries /are/ beginning to extort the same concessions, though usually in the form of tax breaks and abuses of eminent domain law.

[nm156]

Brad is in error on one point though. While municipalities arenot (yet) building GM a factory, they are offering obscene tax breaks in other areas to attract the company.

[John]

Yeah, but when tax dollars do subsidize pro sports; just think of all the jobs that are created for strippers, steroid dealers, bail bondsmen and criminal defense attorneys.

[nm156]

The Air Canada Centre in Toronto was built without subsidies from the government. Also, in Europe, where soccer is the biggest pro sport going, the thought of a team moving to another location is anathema to the point of near riot. The only time it has occurred, to my knowledge, is with Wimbledon FC.

[joe]

Public spending on ballparks is sold as an economic development tool, but major league stadiums are a really lousy one. Just about anything - tax breaks, community college programs, repaving bad roads - gives you more bang for the buck. Only mega-convention centers are worse investement.

[tom]

Convention Centers and Sports Stadium are just corporate welfare. In Massachusetts the head of the convention center was give a contract for life (that?s legislator welfare).

I believe the article is wrong ? the stadium with the highest gate receipts is Fenway park. ? Also privately owned.

[Tim Cavanaugh]

The article said revenue, not gate receipts, and on that it is correct. Pac Bell is super-sponsored, with ads on cupholders, every wall and fence, every kids amusement and napkin, etc. Even with the bust of the dotcoms (the dearly departed WebVan had its moniker on every single cupholder in the joint), advertising is still bringing in a big kick at Pac Bell, the best thing to happen to San Francisco since Rice-a-Roni.

[joe]

I don't know about gate receipts, but Fenway has the highest ticket prices.

It has been hypothesized than many of the fans go to see a ballgame at Fenway first, and the Red Sox second it at all. Whatever the true breakdown, the ambiance of the place is clearly important in its appeal, which could explain why higher ticket prices, and not more advertisements, are a better way to secure revenue.

[Brad S]

Tim - that's a good point. A lot of people like to bitch and moan about advertising being placed all over pro ballparks these days, but I say better to have advertisers pick up the bill than taxpayers.

[Rob]

Brad S:

Why should cities build stadiums for pro sports?

Bread and circuses.

[Flem Snopes]

ever been to pro player? man, it BLOWS. there is not one good thing about it, not one redeeming characteristic. in no other sports forum that i've ever seen have i found myself thinking "i can't stand this, this is 100% bad." only The Juicer in St. Pete is in pro player's league for soup to nuts badness

it takes a pro player stadium to make a joint like the old cap centre in landover maryland look inviting

[chthus]

Here's another little twist, taxing the visiting players.

http://eastbay.bizjournals.com/eastbay/stories/2001/06/25/focus3.html

[tfx]

nice site!