Never Give a Sucker an Even Break
There's been a blizzard of stadium proposals, a ton of talk, and more than a fair share of posturing. Yet, after many months and multimillion-dollar scenarios, Twin Cities residents have precious little context or useful information on what, if any, return can be expected from investing in ballparks or hockey arenas.
One of the few independent sources of such information is Mark Rosentraub, the author of Major League Losers: The Real Cost of Sports and Who's Paying For It (Basic Books). Rosentraub is associate dean of the School of Public and Environmental Affairs at Indiana University in Indianapolis. He is also a lifelong sports fan and season-ticket holder to Indiana Pacers basketball games. His 513-page tome reveals, among other things, that while pro sports account for less than 0.5 percent of the total jobs and payroll revenues in a community, governments have shelled out hundreds of millions of dollars to secure those jobs. Even when "indirect" job gains are included, Rosentraub's data show that massive public stadium investments are bad business.
On that score, his research simply confirms what voters all across the country already suspect, if last week's election defeats for stadium proposals from Pittsburgh to San Diego and Minneapolis are any guide. The time, Rosentraub argues, may have finally come for a solution that "protects the fans and the taxpayers." And it's not what you might think.
CITY PAGES: Have there been any sports deals you've favored?
ROSENTRAUB: Oh, absolutely. The city of Los Angeles came to an agreement with the Lakers and the Kings, and believe it or not, Los Angeles is going to make money on the deal. The city of Philadelphia has an excellent deal on a new facility, which is home to the Flyers and the Sixers. There are a number out there that are good. There are a number that are horrific. The issue is this welfare system that has been developed, where cities are providing incentives for the different teams because the teams are bidding one city against the other.
CP: How did we get to this point?
ROSENTRAUB: Sports has been a protected cartel in this country for as long as the professional sports leagues have existed. We've allowed it to specify, for example, how many teams will exist, what cities will get teams, and how many teams will exist in the very large markets.
To sum this up pretty quickly, I'd point out that the Indiana Pacers play in one of the smallest markets in the NBA, a market of about 1.5 million. If that is what it takes to build a successful NBA team, then the city of New York should have about two teams per borough, given the population size. But the NBA says there can only be two teams in New York, so you have the Knicks and the Nets splitting a market of 19.8 million people. This is not rocket science. The Yankees and the Mets split a market of 19.8 million, and the Minnesota Twins play in a market of about 3.5 to 4 million people. The Yankees are going to have a decided advantage.
CP: Is this media-driven? Is it that the people who operate the sports figure that if there are six New York/New Jersey teams, the television watcher in, say, Wisconsin won't be able to tell them apart?
ROSENTRAUB: No. Look at sports in other countries. The major cities in Europe all have multiple teams at the first level. We're the only country where we actually regulate it so tightly and allow the sports leagues to set the rules.
CP: What about scheduling problems?
ROSENTRAUB: We can schedule 1,000 airline flights a day, but we can't schedule teams? The NCAA pulls off a tournament with 64 teams in a span of three weeks, but the NFL couldn't expand their schedule? That's just a totally ludicrous argument.
CP: So under your scenario, more teams lessen the demand, which means that the owners can't blackmail communities.
ROSENTRAUB: Yes. And the second issue is revenue-sharing. If we are to allow sports leagues to have this cartel structure, then it is incumbent upon them to talk about revenue-sharing, so the small markets can survive. Major League Baseball, for example, has come up with a woefully inadequate program. The total amount of money into it now is $10 million, that's all the money shared between the haves and have-nots. Well, $10 million divided among all the have-nots is...
CP: ...a fraction of one team's payroll.
ROSENTRAUB: This is the issue we have to confront. It has nothing to do with being anti-sports, it has to do with protecting the sports fan. If we're not careful, the championship will essentially be divided between Chicago, New York, Los Angeles, Houston, and a handful of other cities that periodically have a good team until those players go on to free agency. The major metropolitan markets are the teams that have the revenue, and over time that's where the players drift.
CP: In terms of bidding cities against each other, where have the biggest boondoggles occurred?
ROSENTRAUB: Certainly the deal between the city and county of St. Louis, with the participation of the state of Missouri and the Los Angeles Rams, now the St. Louis Rams, would rank up there. You have a $300-million facility totally run by the public sector, with all the revenue from the facility turned over to the team. Cuyahoga County is investing almost $700 million in professional sports in an area where more than half the people live at or below the poverty line. King County--Seattle--is now closing in rapidly on about $700 million in public investment in sports, despite the fact that the owner of the Seattle Seahawks is one of the 15 richest people on the planet. When they were voting there, he was asking the state of Washington for $300 million in welfare during the same time his wealth increased by $975 million. What he made in one year was three times what he was asking the state of Washington for. Does anybody seriously want to argue that Paul Allen needs that money to operate the Seattle Seahawks?
CP: Why does this game still seem to work?
ROSENTRAUB: Because there are more cities that want teams than there are teams to be had. And the NFL, Major League Baseball, the NHL, and the NBA control the supply. This is not like getting an appliance store in your town. This is a group of people who get together and decide where business is going to go. We've deregulated airlines, we've deregulated telephone service and electrical service. We're considering deregulating gas service. But we haven't deregulated sports.
CP: You hear a lot of figures thrown out as to what an investment in a facility will do for a community. Is there any acceptable method to measure something like this?
ROSENTRAUB: There really is no statistical evidence or anecdotal evidence that will show you that sports generates a substantial economic development or change. Even in the case of Cleveland, which hands-down is probably the largest success story around with more than 5 million people coming to downtown, the number of jobs created relative to the public subsidy is ridiculous. They've created less than 2,000 jobs at something on the order of $350 million to $400 million of public investment.
Most sports consumption is a redistribution of existing recreational dollars. If people don't go to the game, they'll spend it on something else--they'll go to the movies, they'll go out to eat. Moving the activity to downtown Cleveland from the suburban areas of Cleveland is great for downtown, and I've worked with a lot of communities to get downtown facilities built because those jobs are usually more accessible to the people who need them. But we can do it without massive public subsidies.
CP: Who gets most of the economic benefit, to the extent that there is one?
ROSENTRAUB: More or less, all the money spent on the stadium is split 50-50 between the owners and the players. And the problem is that players are not like you and I. Most of what we earn gets spent on the community in which we live. But players have a much higher savings ratio, because their careers are shorter. And that savings may not go into local banks--it could be invested in Cleveland or Berlin or Oshkosh. Players know that they may move, so they don't make large investments, typically, in real estate. They may also have their main residence in another city. They do buy a high amount of luxury goods. But those luxury goods may not be produced in your local economy. So as a rule of thumb, if half the money goes to the players, at a minimum half of what the players get does not surface in your local economy. And the owner may be in the same situation--what he does with his investments may not trickle down to the local economy.
What we've found--and when you start thinking about it, it becomes a little more logical--is that cities with teams don't grow any faster than cities without teams. In fact there appears to be a slight negative: Cities that have teams may have slightly less growth than those that don't. [Stadium investment] is creating too much debt, and the debt has a negative effect on taxes. And taxes have a small effect on corporate locations.
The other part is that sports, when it does generate jobs, by and large generates service-sector jobs, which typically have low payrolls. So what happens is that average salaries actually decline. I tracked my home city of Indianapolis very carefully for our mayor. Before our legendary sports strategy began, which has been extraordinarily successful, we ranked second to third in terms of average salaries among the Midwest cities we compete with. We dropped to fifth or sixth over the same period, and we got a lot of service-sector jobs.
What you have is money being transferred out of low- and moderate-income people's pockets into the players' and owners'. That's why I argue it is a regressive welfare system.
CP: You've looked at the Twins situation. What are you going to tell the state legislators when you come up here?
ROSENTRAUB: I'm going to focus on whether the state should buy the team, and the issues associated with that. The upside is that [public ownership] puts a stake through the heart of franchise free-agency. The state of Minnesota will decide if it wants the team or not.
The second benefit is that it gives the state clear standing to deal with the revenue-sharing issues. I'm going to show how far from the average of all Major League Baseball teams the Twins' financial fortunes have declined. They're just not economically competitive, and Minnesota is going to have to argue that point.
CP: So the stadium is a very temporary fix, if a fix at all--even if it's funded with casino money or lottery money?
ROSENTRAUB: Exactly. That's what I'm going to warn the Legislature about.
One of the problems Minnesota has is that you are clearly going to be the smallest market with four teams, if you keep them all. That will create an amazing cost structure for both fans and for corporations, and that's going to be a major problem.
But there's enough money in here for everybody. We just have to get a distribution so that the sports fans and the taxpayers benefit as much as the players and the owners.
CP: How does that happen?
ROSENTRAUB: Every time Major League Baseball has been threatened, or any of the sports leagues have been threatened with congressional action, they have expanded. It goes back to the early 1950s. Expansion of the Mets into New York came when there was a threat of a new continental baseball league. Expansion into California came when there was a threat of a California league. This is a political, as well as legal, set of issues. The cities and the state of Minnesota are going to have to conduct that battle.
CP: What happens if all the teams leave here?
ROSENTRAUB: All the teams are not going to leave here, because the leagues could not take that kind of political battling from the state. I said before, and I'll stick with it, no team is going to leave Minnesota without Minnesota's permission.
CP: That's simply because it's too large a market?
ROSENTRAUB: No, it's because Minnesota could make enough political problems in Washington. None of the leagues would want that kind of investigation or hearings.
CP: So that's the hammer. It doesn't get used very often.
ROSENTRAUB: But when Cleveland decided to use it, they got a franchise. When Baltimore decided to use it, they got two franchises. We have a clear history on how to make it happen. And people in several states are now so annoyed that the probabilities are greater than they have ever been that we could get something done at the national level.
News Intern James Bryant MacTavish contributed to this article.
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