Posts tagged ‘publicly funded stadiums’

A Large Part of Sports Team Profits (And Valuations) Come From Public Subsidies

I have argued many times that publicly-funded stadiums are a huge part of sports profits and team valuations.  For example, here in Glendale AZ, the town's stadium subsidies represent over a third of the value of the Cardinals and almost 200% of the value of the Coyotes.

As some of you may know, the NBA is heading into a protracted labor negotiation, with both parties acknowledging that the economics of the game have turned against owners.  Henry Abbot at ESPN argues that a large part of that economic change has been increasing taxpayer reluctance to subsidize sweetheart stadium deals for teams

Public money for stadiums has become scarce, and I have to believe that's part of the owners' pleas for financial relief from players. Huge moneymaking buildings for free or cheap have been no small part of what makes owning a team a no-brainer. Now teams in need of stadiums -- like the Kings and whatever team may one day relocate to Seattle -- face tough economics. Getting either deal done requires some kind of miracle. And in that context, if you ever fantasized about a world where taxpayers didn't contribute so much to buildings -- even if it meant players earned a little less -- well, your time is now.

To his latter point, I hope he is right.

This Is Not A Kickback, How?

Readers will know that I am not a fan of publicly-funded stadiums.  Had the mayors of the 40 largest cities in the US signed a no-public-funding pledge 30 years ago, and stuck to it, we would still have the same number of sports teams in roughly the same places, but without all the taxpayer subsidies.  It is rivalry among cities the creates a sort of prisoners dilemma problem and we end up with rampant public subsidies.

What I hadn't realized was the role of outright bribery and kickbacks in this process.  Apparently, it is routine that city and county officials take compensation, in terms of free personal access to luxury boxes, in return for approving these public stadiums

In late August, when the Mobile City Council and Mayor Sam Jones first toured the $2.5-million addition to Ladd-Peebles Stadium, including 11 new skyboxes, District 6 Councilwoman Connie Hudson said she was surprised to hear the city council would have a suite separate from the mayor's, which is located just between the 40- and 50-yard lines.

"It was announced to me on the day we toured," Hudson said. "We've always shared, like we do with the Baybears."

The 11 new skyboxes bring the total at city-owned Ladd-Peebles Stadium up to 14, as three were built in 1997 in part of the press box addition. In addition to the two skyboxes available to the city, the Mobile County Commission also has a suite, which brings the total of skyboxes for local government use to three, or 21 percent of the skyboxes in the 61-year-old stadium.

Speaking generally, and taking into consideration the differences between facilities in other cities, Bud Ratliff of the Mobile Bay Sports Authority says most stadiums have only two skyboxes reserved for city and county use, but doesn't see a problem with the current arrangement at Ladd-Peebles.

The Wages of Sports Stadium Subsidies

Well, you can't say I didn't predict this.  The Phoenix NHL hockey franchise (the Coyotes, a case of obvious before-the-fact trademark infringement on this blog) has declared bankruptcy.  The only current buyer is RIM's Jim Balsillie (a section-mate of mine at HBS) who will only buy the team if he can move it to Canada.  Gee, who would have thought that ice hockey would struggle to be successful in Phoenix?

Several years ago, Phoenix suburb Glendale paid about $180 million to build a hockey stadium for the Coyotes.  The Coyotes had already been in the Valley for several years, losing money all the while, and had shed one ownership team for another fronted by Wayne Gretzky.  It was shear madness to build them a stadium, as their chances of financial success were almost non-existant.  It was already clear at this point that hockey was not going to be a big draw in Arizona.  For this reason, Scottsdale and Phoenix both ended up passing on subsidizing the team before Glendale, out to prove it was a "real" city, stepped up to the plate with a wad of taxpayer money.   The stadium ended up being about as close to the center of mass of the metropolitan area as the Denver airport is in that city.

Libertarianism, the Environment, and Kyoto: Part 1

As a libertarian and strong believer of individual rights and free markets, I often get "accosted" by folks saying that I must want the environment just to go to hell. Actually, no. Beyond my personal enjoyment of the outdoors, having "the environment go to hell" would be a disaster for my business, which depends on outdoor recreation.

This confusion about libertarianism and the environment falls in the category of what I call being pro-property-rights-and-markets and being pro-business. Many politicians, particularly traditional conservatives, who say they are the former and are in fact the latter. "Pro-business" politicians often support many things (subsidies, using eminent domain to help developers, building publicly funded stadiums) that bear little resemblance to libertarianism or truly free markets. This confusion also stems from differences in how much people trust individual action and incentives rather than command and control government programs. The Commons is a good site dedicated to market solutions to environmental issues, as is the environment section at Cato Institute. Virginia Postrel frequantly writes on the more general topic, beyond just the environment, of bottom up systems driven by individual choices vs. top down command and control.

In fact, environmental laws are as critical to a nation with strong property rights as is contract law. Why? Imagine a world without any environmental legislation but with strong property rights. What happens when the first molecule of smoke from my iron furnace or from my farm tractor crosses over on to your land. I have violated your property rights, have I not, by sending unwanted substances onto your land, into your water, or into your airspace. To stop me, you might sue me. And so might the next guy downwind, etc. We would end up in an economic gridlock with everyone slapping injunctions on each other. Since economic activity is almost impossible without impacting surrounding property owners, at least in small ways, we need a framework for setting out maximums for this impact - e.g., environmental legislation.

But I do disagree with a lot of environmentalists today. The conflict between free market supporters and environmentalists usually come in four flavors:

1. Disagreement over standards. The discussion above implies that environmental laws create a framework for setting out the maximum impact one property owner can have on others. But what is that maximum? Rational people can disagree, and do. This is a normal part of the political process and won't go away, as different people value different things. I generally don't have any problem with people who disagree with me on these standards, except perhaps for folks that want to argue for "zero" -- these people usually have anti-technology and anti-capitalism goals that go way beyond concern for the environment.

2. Disagreement over methods. Consistent with the framework I presented above, I believe that the government should as much as possible set overall emission standards, and allow individuals to make choices as to how those standards are reached. A good example of this are emissions trading schemes. Statists are uncomfortable with these approaches, and prefer to micro-manage compliance, down to the government making detailed choices about technologies used.

3. Use of One's Own Property. By the reasoning for environmental regulation above, the regulation is to limit the impact of one property owner on others. But the flip side is that property owners should be able to do whatever they damn well please with their own property if it does not affect others. Environmentalists will disagree with this vociferously. I have had literally twenty different people give me the exact same response to this: "If you let people do whatever they want, they would all trash their own land and dump toxic waste all over it". Huh? I swear I get this response constantly and it makes no sense. Why would they do this? We have no regulations that people should keep their house looking nice and shouldn't trash it, but most people keep their house up anyway. Why? Because it is in their own obvious self-interest to do so. If other people don't want you building on a piece of property or want it saved for some specific use (or non-use), then they should buy it. That's why I support the Nature Conservancy -- I personally value having some wide open pristine lands and preserving some habitats, but unlike others, I don't expect other people to pay for my wishes, usually in the form of some luckless landholder who suddenly can't use his property the way he wants. Through the Nature Conservancy, private donors who value having certain lands set aside from development pay to achieve that goal privately. This is similar to environmental groups buying up emisions credits. If all the money spent on whining about and lobbying over the Brazilian rainforest had instead been spent buying tracts of it, it would probably be a big park by now.

4. Priority of Man. This is the up and comer in the world of environmentalism. In its extreme form, proponents argue that animals have the same rights as man (though in practice it seems it is just the cute animals like dolphins and harp seals that get the attention). I don't buy it. While there is no defensible reason to allow cruelty when it can easily be avoided, taking the step to put animals on the same level as man, if followed to its logical extreme, will not bring animals up to our level (how could they?) but will knock man back down to the level of animals (see Rush song here).

In my second post on this topic, I will move on to a more specific topic, with a brief roundup on Global Warming and the Kyoto treaty.