The Electric Commentary

Wednesday, January 05, 2005

Update: Public Financing of Stadia

I have covered this subject before here. Apparently the Colts recently forged a new stadium deal with the city of Indianapolis. Radley Balko, writing in Tech Central Station, makes a good case that the city is being fleeced. Two points in particular stand out:

But the worst part of this deal is so ridiculous, it borders on parody: In order for the city of Indianapolis to build a new stadium for the Colts, it will need to tear down the RCA Dome. That will require the city to break the lease it signed with the Colts on the dome. According to the language in the lease, the city will be required to pay the Colts $48 million to break the lease, even though the city's breaking it solely to build the new stadium the Colts demanded! More galling yet, the Irsays typically include the $48 million in the amount they say they're ponying up to help pay for the stadium. In the end, Indiana taxpayers will underwrite 90% of the costs of the new stadium. (Emphasis Original)

and

Of course, it would also be nice if the Colts had the kind of owners who understood that if a new stadium is the revenue generator they claim it can be (hint: it isn't), then it would make just as much sense to fund it themselves, as the late Redskins owner Jack Kent Cooke and current Patriots owner Bob Kraft did. The Irsays are apparently not that kind of owner.

He also makes note of the fact that the tax used to build the Colts current stadium, the RCA Dome, still exists and will continue to exist even after the RCA Dome is reduced to rubble. This deal is troubling. In yeterday's TMQ, Gregg Easterbrook praised this deal for the following reason:

Hats Off to Jim Irsay

The sports commentary world has not given sufficient due to the fact that just before Christmas, the Colts signed a 30-year agreement to remain in Indianapolis. A new stadium will be built with a mix of public and private financing; the stadium will feature lots of club and box seats, these being essential to modern NFL team financing because premium seat revenue is the one major form of income that NFL teams do not share amongst themselves. TMQ, who is anti-gambling, is not thrilled that some of the public money for the project will come from allowing slot machines in Indianapolis and taxing the proceeds; but yours truly is impressed that the deal includes a provision that 6,000 seats at the new stadium be reserved for $25 tickets, so average people can afford to attend a game. The Colts could have high-tailed it to the glamour, sun and beach babes of Los Angeles: Instead they showed loyalty to the small-state local fans of Indiana. Loyalty -- I thought that went out of style!

Congratulations to the Colts for doing the right thing.

Gregg, who is a visiting fellow at the Brookings Institution, should know better. Artificially lowering the prices of seats doesn't help the average fan, it helps the average scalper. This measure is all about PR, and in fact probably increased the amount of public money needed for the new stadium by transferring (not insignificant) profits from the club to scalpers and Stubhub. In other words, it hurts the whole community for the benefit of scalpers and those willing to pay scalper prices.

2 Comments:

  • If I were a public leader in D.C. or Indianapolis or any other city providing public funding for a local professional sports team, I'd propose a requirement that the franchise put a competitive team on the field. If the team fails to be competitive, the franchise must provide a refund to the public treasury.

    You may remember the lawsuit against the Bengals alleging that failure to provide a competitive team constituted a breach of the lease agreement, but my idea is different. The requirement would be an express part of the agreement to provide public funds. Competitiveness would be defined by very specific criteria, perhaps with variable penalties depending on degree of noncompetitiveness, because a subjective definition would likely never be enforced. And the criteria would have to be reasonable (you wouldn't have to be like the Yankees, but you couldn't be like the Arizona Cardinals). I think it creates a great predicament for ownership. In order to reject the conditions placed upon public money, the ownership must admit that it is not committed to winning.

    By Anonymous Anonymous, at 1:33 PM  

  • In theory a very good idea. As a Brewer fan I am very smpathetic to this notion. The problem with actually doing this is that the ownership is usually in a much better bargaining position because they can move the team. It would also be tough to come up with a good definition for competitive. I think a "salary floor" would go a long way towards solving this problem. As of now many owners get new stadium deals and use the revenue to pay down their own debt rather than aiding the team Requiring some percentage to flow into the product just makes sense.

    By Blogger PaulNoonan, at 2:01 PM  

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