This article by David Morris and Daniel Kraker first appeared in The American Prospect magazine, September-October 1998
Onthe last Sunday in January, an elated John Elway stood on the gridiron where his Denver Broncos had just beaten the Green Bay Packers 31-24, and announced to millions of worldwide television viewers that the best part about finally winning the Super Bowl was how much it meant to his longtime fans, the people of Denver. Mere months later, the owners of the newly crowned Super Bowl champions announced they might move the team to another city if Denver fails to come up with $250 million for a new stadium — even though the team itself is valued at only $182 million.
Denver’s predicament is not uncommon. More than 50 million Americans in almost 30 urban areas stand to lose a professional sports team in the near future unless their local governments agree to subsidize new, amenity-laden stadiums. But why should a community pay millions more than a team is worth simply to keep it local for another 10 or 20 years — especially since tax revenue generated by a stadium is usually less than the cost of the subsidy? How can a city keep its home team without emptying the municipal coffers into the hands of a private owner?
Thebest answer to this last question may be provided by 1998’s Super Bowl losers, the Green Bay Packers, the only community-owned team in America. Rather than paying a continuous stream of subsidies to fickle owners, communities ought to be able to emulate Green Bay and buy their teams outright. Community ownership, combined with effective revenue sharing within professional sports leagues, would prevent teams from leaving home and would save taxpayers huge amounts of money by protecting fans and taxpayers from owners who bid their team out to the city offering the best stadium and the biggest subsidy.
FAITHFUL FANS
Professionalsports is modernity’s mass religion. The sight of Green Bay Packers fans baring their chests and wearing foam-rubber cheese on their heads leaves little doubt as to just how fanatic these modern zealots can be.
Yetsupport for a local professional team is more than frenzied enthusiasm. Stadiums bring together Americans from all walks of life — black and white, old and young, assembly-line worker and CEO — to share civic pride as they root for the home team. Detroit’s population doesn’t congregate in bars to watch Ford or Chrysler workers build cars; Seattle residents don’t cluster around their televisions to watch Microsoft programmers design software. But the cities do root communally for the Tigers and the Seahawks. This intimate connection between fan and team is what makes it so unbearable for some people to see their favorite team shipped around the country like a packaged good.
Butcivic pride is not equivalent to job creation or tax revenue. The same year that Cleveland unsuccessfully offered $175 million to refurbish Memorial Stadium to prevent the Browns from leaving for Baltimore, the city closed 11 schools for lack of funding. Although team owners claim that the economic benefits created by building new stadiums justify sweetheart deals, new stadiums have little impact on residents. Andrew Zimbalist, a professor of economics at Smith College who has written extensively about sports, argues that professional sports teams are actually a “slight net drag on the local economy.”
Inthe past six years, eight teams have changed addresses, uprooting themselves from Minneapolis, Quebec, Cleveland, Los Angeles (the Rams and the Raiders), Winnipeg, Houston, and Hartford. They moved either because their host cities wouldn’t build them a new stadium or because competing cities made a relocation offer that owners couldn’t resist. During the same period an additional 20 cities paid the extortion that team owners demanded, building a new facility or remodeling an existing one. And yet another 44 teams are planning a new stadium, or have expressed dissatisfaction with their current one, and are demanding new subsidies from their city governments. All told, $7 billion is expected to be spent on new sporting facilities by 2006, most of which will come from taxpayer pockets.
FAILED STRATEGIES
Communitieshave tried to use the law to stop wayward teams from leaving town. Oakland in 1982 and Baltimore in 1984 tried to invoke their legal authority to seize privately owned property to prevent their National Football League teams from moving, but the courts denied them that power. In the wake of the Cleveland Browns’ move, Ohio Representative Louis Stokes and Senator John Glenn introduced the Fans Rights Act of 1995, which would have provided for a narrow antitrust exemption, shielding a league from a lawsuit if it blocks a relocation.
Mostof the efforts at the national level have been focused on increasing the cost to cities that subsidize teams. New York Senator Daniel Patrick Moynihan introduced legislation two years ago to prohibit tax-exempt bonds from being used to build professional sports stadiums.
Yetno bill to curb the right of teams to move has ever made it out of a congressional committee, much less come up for a vote in either chamber. Cities are reluctant to support a limitation on tax-exempt borrowing for sports teams for fear that Congress would eventually limit their borrowing authority for other purposes. Also, for every two senators trying to keep a team in their home state, there are two more wrangling for a team for their state; for every city struggling to fund a stadium, there are two more cities claiming a willingness to pay whatever it takes.
When Baltimore built Camden Yards in 1992 and Cleveland opened Jacobs Field two years later, local residents were enthusiastic. Located downtown, these new baseball stadiums are smaller and more intimate than their predecessors and have great sight lines, modern amenities, and a traditional feel. Both were financed almost entirely by public money, and city leaders and urban experts alike touted them as sparks that would revive languishing city centers.
But the fiscal bottom line has been disappointing. Despite the Orioles’ success on the field and at the ticket office, taxpayers haven’t seen a return on their investment. Bruce Hamilton and Peter Kahn, economists at Johns Hopkins University, estimate that Camden Yards generates about $3 million annually in economic benefits but costs Maryland taxpayers $14 million a year. The new stadium for the Baltimore Ravens, built adjacent to Camden Yards, was much more difficult for politicians to approve, partly because its projected fiscal deficit is even higher than that of Camden Yards.
Withthe cost of sports arenas soaring, other cities are looking more closely at the promised economic benefits, and public opinion has taken a decidedly negative turn. Voters, when asked directly whether they would fund a sports facility, are increasingly refusing — as residents of Minneapolis, Pittsburgh, Columbus, and San Francisco have done. Last November the citizens of Minneapolis voted to amend the city charter to require any city contribution in excess of $10 million for a sports facility to be approved by voters in a special referendum. San Francisco Bay-area voters struck down six public financing initiatives for a new Giants ballpark in the last decade before the team owners finally agreed to finance a stadium themselves — the first 100 percent privately financed stadium in this country in 30 years.
Insome cities, residents voted down proposals to finance a stadium with public funds only to watch helplessly as their legislators bypassed their votes with financing plans of their own. In 1995, by a margin of 64 percent to 36 percent, Milwaukee voters defeated a proposal to pay for a stadium with a sports lottery. A few months later, by a single vote, the state legislature passed a plan for $160 million in direct public funds, when Senator George Petak “changed his mind” at the eleventh hour. While the stadium circumvented the public will, Petak could not; he was immediately recalled by angry citizens and lost re-election, causing Republicans to lose their majority in the state senate.
Even the referenda that have succeeded have been extraordinarily close, and all were tainted by gross spending disparities. In Seattle in 1996, Paul Allen, cofounder of Microsoft and the third wealthiest human being on earth (with a fortune of some $17 billion), agreed to buy the NFL’s Seahawks (who were close to moving to Los Angeles) on the condition that the state put up 75 percent of the$425 million cost of a new stadium. In an unprecedented step, Allen personally paid the $11 million for a referendum, then saturated the media with a $5 million pro-stadium advertising blitz and spent $1.7 million lobbying the Washington legislature. Stadium foes spent about$100,000 total. The result was a 51 to 49 percent victory for Allen.
Justa year earlier King County taxpayers had narrowly defeated a financing initiative for a Seattle Mariners ballpark despite facing the same spending disparities (the Seattle Times even donated free ad space to the pro-subsidy campaign). The next month, apparently stirred by the Mariners’ playoff victory over the Yankees, Washington legislators appropriated $270 million in public funds for a new stadium. The stadium, still under construction, is way over budget, putting taxpayers on the hook for yet greater subsidies.
SanFrancisco voters passed a referendum on June 4, 1997, calling for $100 million in public funds to help finance a new stadium complex for the NFL’s 49ers. It passed by the squeakiest of margins — 1,500 votes out of more than 173,000 cast — and only after closing a 20 percent gap in the polls in the final two weeks. Stadium proponents outspent their foes by $2.5 million to $100,000 and enlisted the aid and rhetorical agility of Mayor Willie Brown, whose office allegedly went so far as to set up special polling places at selective public housing projects where support for the stadium referendum was especially high but voter turnout was historically low.
COMMUNITY OWNERSHIP
Forsome years now, most communities with pro sports teams have been paying large subsidies to keep the teams around. But it is only recently that team owners have been demanding more public money than their teams are worth. Minnesota Twins owner Carl Pohlad tried to extract $250 million from the Minnesota state legislature for a state-of-the-art retractable roof stadium, but the team is only worth around $100 million [see “Team Values vs. Stadium Subsidies,” below].
Thebest way to reverse this trend and keep teams at home is to allow communities to own their teams. The Green Bay Packer organization is the poster child for community ownership of professional sports teams. Pre-NFL football champions in 1929, 1930, and 1931, and winners of Super Bowls I, II, and XXX, the Packers were incorporated in 1923 as a private, nonprofit, tax-exempt organization. Their bylaws state that the Packers are “a community project, intended to promote community welfare.” The team can move only through dissolution, in which case the shareholders receive only the original value of their shares. A board of directors, elected by the stockholders, manages the team.
Thisnonprofit status has been threatened only once, in 1949. The Packers needed to raise more than $100,000 to avoid insolvency, but instead of becoming a profit-making venture the board chose to authorize 10,000 shares of common stock at $25 a piece — 4,628 of which were issued –and dissolve the stock that had been sold in 1923. To ensure that no one individual or company had too much control, each shareholder was limited to a maximum of 200 shares.
Green Bay’s model works. While its surrounding metropolitan area is home to fewer than 200,000 people, the Packers rank in the top 20 percent of all professional teams in terms of franchise value. Extravagant player salaries have driven many cost-conscious franchises into competitive irrelevancy as they fail to bid for the best free agent players. Observing this trend, Packer team shareholders decided in late 1997 that more revenue needed to be raised for the team to remain competitive. The 10,000 shares issued in 1950 were split into 10 million shares — 400,000 of which were made available to the public at$200 a piece. A disclaimer on the opening page of the stock offering reads: “It is virtually impossible for anyone to realize a profit on a purchase of common stock or even to recoup the amount initially paid to acquire such common stock.” Even so, by March the team had raised $24 million dollars, far short of its $80 million goal but enough to double its available cash, and ample capital to invest for the future construction of a new stadium 20 or 30 years from now.
Wisconsinresidents support the team even through dismal seasons. Games at Lambeau Field have been sold out for more than 30 consecutive seasons, even through years of mediocrity in the 1970s and 1980s. Streets are deserted for three hours on autumn Sunday afternoons. The waiting list for season tickets is 36,000 names long for seats in a stadium that holds 60,000. It is common for season tickets to be willed from one generation to the next and to be hotly contested in divorce proceedings. For better or for worse, the Packers are like a community religion (even for the truly religious: nuns in northern Wisconsin proudly sport Packer T-shirts when doing social work in the community). Literal and figurative community investment in the team fuels such loyalty.
LEAGUE RULES
Ifcommunity ownership can make sports teams less transient, then why isn’t it more widespread (though it should be noted that the Canadian Football League, the NFL’s struggling junior sibling to the north, boasts four successful community-owned teams)? One simple reason, mainly: professional sports leagues have prohibited community ownership.
TheNFL formally banned community ownership in 1961 at the same time that it adopted a radical revenue-sharing plan that distributes all revenue from merchandise, television, and gate receipts equally among all teams. It took NFL Commissioner Pete Rozelle two years to convince Congress to enact this essentially socialist redistributive mechanism. Revenue sharing made small-market teams viable. In fact, had the league not chosen to ban community ownership at the same time, we might now be rooting for NFL teams from Akron, Ohio, and Gary, Indiana. Major-league baseball has also managed to prohibit fan ownership, though without enacting a formal policy against it. In the 1980s when Joan Kroc, widow of McDonald’s founder Ray Kroc, offered to donate the Padres to San Diego along with $100 million to cover operating expenses, the owners nixed the idea. Bud Selig, baseball’s current acting commissioner –who as owner of the Milwaukee Brewers coerced Wisconsinites into building him a new stadium — has vowed to kill any community ownership proposal because it would be an “awkward” arrangement for the league.
Thoughclearly successful where implemented, community ownership remains illegal in most professional leagues. A bill introduced in the House of Representatives by Earl Blumenauer, a Democratic congressman from Oregon, would change that. The Give Fans a Chance Act of 1997 would override all league rules against public ownership. Under the bill, if a league refused to allow a community to purchase its team, the league would lose its sports broadcast antitrust exemption. The bill also would require leagues to take into account fan loyalty and whether an investor is willing to keep the franchise in its home community when considering whether to allow teams to relocate. If enacted, Blumenauer’s bill would give fans the opportunity to give the home team genuine roots.
Community ownership is attracting increasing interest at the grassroots level. In 1995, Kansas City Royals owner Ewing Kauffman donated his team to charity with two conditions: the charitable foundation had to sell it to someone who would commit to keeping the team in Kansas City, and the proceeds from the sale had to go to local charities. The IRS approved the donation. While this arrangement does not call for community ownership, it does tie the team permanently to the city.
In Minnesota, Twins owner Carl Pohlad has offered to donate the club to a local foundation as part of a deal for a new publicly financed ballpark (as long as his accumulated losses of around $85 million are covered). Considering this an invitation to community ownership, several legislators have introduced a bill that would have the state buy the team and then sell a majority share to the fans within a year. If the fans failed to buy the shares, showing themselves unwilling to put their money where their cheers are, the team would go back on the market.
History indicates that fans are willing to pay top dollar for the home team. The Boston Celtics went public in 1986 as a rare “pure play” limited partnership, meaning someone buying shares got part ownership in a company made up entirely of the basketball team and all its parent corporation’s holdings. Shares in the Celtics were grossly overvalued at $18.50, did not grant voting rights, and lacked even the endorsement of star player Larry Bird, who deemed them “not a good investment.” Still, 2.6 million shares, a 40 percent interest in the team, were sold in one day, raising $48 million dollars — more than triple the $15 million the team’s owners had paid only three years earlier. Celtics shares are trading today for only around $20, but have paid out more than $16 per share in dividends since 1988. This comes to a healthy 10 percent annual return on investment.
REVENUE SHARING
Yetcommunity ownership, while necessary, is by itself an insufficient remedy for the disease currently afflicting professional sports. The Green Bay Packers, though the paragon of community ownership, would have died long ago if not for the NFL’s revenue-sharing policy — which ensures that, for example, its recent $17.6 billion television contract will be divvied up among all the teams.
Baseball and– increasingly — basketball and hockey, on the other hand, are tied to the fortunes of their owners and the skybox-revenue generating capacity of their stadiums. The four most victorious baseball teams in 1997 also had the largest payrolls; six of the eight top-spending teams have had stadiums built since 1989. As the same well-positioned teams continue to win while the small-market clubs flounder in division cellars, fan enthusiasm will erode, taking with it the leagues’financial vitality. If baseball, basketball, and hockey are going to retain an interesting level of competitiveness, small-market vitality, and national fan support, these leagues must emulate the NFL’s revenue-sharing system.
But revenue sharing alone will not make sports franchises less nomadic. In fact, the NFL’s revenue-sharing policy has effectively encouraged team migration — the NFL has experienced more relocations than any other league over the last decade — because sharing revenue permits small cities to compete for teams. But since revenue from corporate suites, club seats, and other stadium sources are excluded from the revenue-sharing arrangement, owners feel compelled to demand new stadiums with more and bigger skyboxes. Despite average game attendance of more than 75,000, the highest TV ratings in the NFL, and Cleveland’s 72 percent approval of a $175 million tax increase to redo Memorial Stadium, the Browns left for Baltimore in 1995 to enjoy a fancier, heavily subsidized stadium. Cleveland Mayor Michael White and Ohio federal legislators failed to keep the Browns from leaving, but they did reach a compromise that enabled Cleveland to retain the Browns name. The league also promised that Cleveland would receive an expansion team within three years. This kind of compromise should be the third element, with community ownership and revenue sharing, of a comprehensive solution to the professional sports problem.
Under such compromises, teams would remain free to move, but the league would be penalized when they do. If Los Angeles and Cleveland were granted expansion franchises when their teams left, each team’s share of the league’s total revenue would decrease because of the two additional teams that would join the league. In other words, by moving their teams to increase short-term revenue, the owners of the Rams and Browns would have decreased the average value of NFL teams in the long run. Owners would therefore have to weigh the short-term advantages of relocation against the long-term financial advantages of league stability.
Professionalteams have become an integral part of our community fabric and our emotional and civic lives. This may justify stadium subsidies in certain communities, but common sense dictates that when an owner demands a subsidy two to three times the value of the team itself, fans would be much better off purchasing the team themselves.
Professionalsports may be in decline. As taxpayers spend more on new stadiums, team values, player salaries, and ticket prices all increase. Many fans can no longer afford to attend games and will grow increasingly uninterested in sports. For fans and communities to reclaim their teams, they need to rewrite the rules of ownership to give priority to the civic value of teams; for leagues, new rules of ownership may be the smartest option even if it’s not yet in their playbook.
