Tuesday, December 30, 2014

The Radical Case for Cities Buying Sports Teams, Not Sports Stadiums

Cross-posting excerpts from Neil deMause's insightful post on VICE SPORTS:
And then there were those who wondered: for $183 million, wouldn't it have been cheaper for D.C. to skip the stadium and just buy the team?
For what it's paying for a stadium, D.C. could have gotten the whole team and all its future revenues, plus had enough left over for either David Luiz or for keeping 5,000 city residents from becoming homeless, take your pick.

And this isn't an uncommon scenario. The city of Miami and Dade County spent more than $800 million in 2009 on a new stadium for the Marlins...Last year, Glendale, Arizona approved $225 million in operating subsidies for the Coyotes—this on top of the arena the city had already provided to the team—to grease the skids so that new owners could buy the team for $170 million. And mere blocks from the site of the new D.C. United stadium, the Washington Nationals received about $700 million in taxpayer money for their new stadium, even as the team itself was being sold for $450 million.

The numbers make your eyes glaze over after a bit, but add them up and you get all kinds of crazy. If the goal of fronting cash for new sports venues is to keep team owners from using their monopoly-given right to skip town and leave fans with no one to root for, then one workaround is obvious: cut out the middleman, and buy the team.
There's actually plenty of precedent for this, none of it bad. Several minor-league baseball teams are or have been municipally owned, and manage their operations the same way any billionaire who decides to buy a team as a plaything does: they hire professional managers to run the day-to-day show. A similar mechanism is in place for the three Canadian Football League franchises that are owned by fans via non-profit corporations (a la the Green Bay Packers), not to mention many of Europe's top soccer teams, including the last two European Champions League winners, Real Madrid and Bayern Munich.

Okay, so there is one small holdup with the public owning sports teams in the U.S., which is that the major pro sports leagues here have dedicated themselves to blocking it at every turn. McDonald's heiress Joan Kroc once tried to give the Padres to the city of San Diego as a charitable donation, but was overruled by MLB; a similar league edict later prevented the city of Pittsburgh from getting a share of the Pirates in exchange for a $20 million "loan" that was never repaid. The NFL was so freaked by the mere prospect of anyone trying to replicate the Packers that it wrote a ban on non-profit ownership into its league constitution. Congress considered a bill to pull leagues' antitrust exemption for TV rights if they barred community ownership, but like just about all Congressional attempts to reign in sports leagues, it's gone nowhere.

Okay, so no league is voluntarily going to allow its franchises to fall into public hands when it can keep on using its monopoly power over team ownership to extract subsidies. Is there any other way to force them to?

The answer is: maybe. And the trick lies in one of the same governmental powers that team owners use on their side in stadium deals: the power of eminent domain...In the eyes of the courts, though, there should be no legal difference between a few acres of dirt and other private property such as, say, a pro sports franchise.
Noll says—and David Morris of the Institute for Local Self-Reliance, which has advocated for public ownership of sports teams, agrees—that the bigger problem these days would likely be cost. Franchise values, floated by the cable TV bubble, have soared in recent years to where a United or Marlins situation is less likely—especially if courts require that taxpayers pay a premium in order to buy a team.

Still, eminent domain can be a worthwhile arrow in the municipal quiver...Instead of reaching for your municipal checkbook, you respond by drawing up eminent domain paperwork.

In the best case scenario, the mere threat is enough to force the team owners to lower their subsidy demands. In the worst, yes, you're stuck paying close to $600 million for an NBA franchise, but keep in mind two things: first off, that's how much the current Bucks owners just paid on the open market for the franchise, so presumably somebody thinks they'll bring in enough revenue to make that worthwhile. Plus, if you don't want to be stuck with the risk of the Bucks not earning back your investment, you can always re-sell the team to new private investors—even if you need to sell for $50 million or $100 million less in order to get new owners to agree to an ironclad lease, that's still cheaper than handing over $200 million for nothing.

Is that all too glib to be politically palatable? Maybe. But if there's one thing that we've seen time and again, it's that elected officials are—with a few notable exception—way too timid about exploring what cards they have to play in stadium and arena battles. As Chicago White Sox owner Jerry Reinsdorf famously said after threatening to move his team to Florida in order to extract stadium money from the Illinois legislature, "a savvy negotiator creates leverage." There's nothing stopping cities from trying to be a little savvy, too.
Like the Reinsdorf quote?  Here are more like it.

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