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Sports owners are entitled to lion’s share of stadium revenues – and here’s why

cowboysstadium_optBY EVAN WEINER
NEWJERSEYNEWSROOM.COM

Washington Post sports columnist Sally Jenkins asked a question in a column written after the NFL lockout started on March 11. It was a simple query that the writer could not answer. "Where is it written that (NFL) owners are entitled to the lion’s share of revenues from structures we help build and support?"

There was no answer in the piece – although if Jenkins did some research (all she would have to do is go back almost 25 years) and read her own newspaper, which covers the politics of Washington, D. C., she would have found it.

It actually is written and the document with Ronald Reagan's signature sits somewhere in Washington.

The answer is the 1986 Tax Reform Act, signed into law by President Reagan, which says only eight cents of every dollar generated in a facility goes off to pay down the debt. That is the starting point for leases. Before the change in the federal tax code in 1986, municipalities got more money from stadium- or arena-generated revenue and used that money to pay down the debt.

The Tax Reform Act of 1986 opened a loophole in the tax laws and gave owners ammunition in their battles with cities and states to get new or renovated stadiums with the opportunity to cash in on newly found revenue streams like luxury boxes and club seats.

The owners pitted city versus city. In the NFL, Art Modell took his Cleveland Browns to Baltimore (and got a loan from the state to help him out financially as part of the deal), Bud Adams moved his Houston Oilers to Nashville, Al Davis returned his Raiders to Oakland after failing to get a new stadium in Inglewood and left the Los Angeles Coliseum. Georgia Frontiere went home to St. Louis with her Rams leaving Anaheim behind. Robert Kraft played ball with Connecticut Gov. John Rowland and thought about going to Hartford but stayed in Foxboro with his New England Patriots working out a deal, although he put up money for his stadium.

Houston outbid Los Angeles for the NFL’s 32nd team, an expansion franchise in 1999 thanks to a new stadium. The Glazier family stayed in Tampa after considering a Baltimore bid. Cleveland built a new stadium after Modell left. Pittsburgh voters said no to a new stadium but elected officials decided to construct one anyway. Cincinnati paid for a new stadium. Indianapolis found money for Jim Irsay who might have moved his Colts elsewhere. Jacksonville built a new stadium for an NFL expansion team. Oakland renovated the Coliseum for Davis. Kansas City-area voters put up funding to renovate the Chiefs’ home field. Denver OK’d a new stadium while San Diego upgraded the city’s stadium for the Chargers and the Super Bowl.

Arlington, Texas raised the city’s sales tax again for a stadium, this time for Jerry Jones’ Dallas Cowboys; Philadelphia built Jeffrey Lurie a new Eagles park. Dan Snyder may want a new Redskins facility in Washington replacing his Landover, Maryland structure. Chicago rebuilt Soldier Field, Detroit put up money for William Clay Ford’s Lions. Green Bay got a renovation job at Lambeau Field which included funding from a 0.5 percent sales tax hike in 2000. Seattle replaced the Kingdome with a baseball stadium (which was approved by the state legislature after voters said no) and a football facility.

More than $310 million went into the construction of a Glendale, Arizona stadium for Bill Bidwill’s Cardinals. Louisiana rebuilt the Superdome after Hurricane Katrina in 2005 and the state is spending millions on yet another renovation at the building. Arthur Blank wants to replace the soon-to-be 19-year-old municipally funded Georgia Dome with a new stadium for his Atlanta Falcons.

In some cases, NFL owners like Jones, Bidwill, Ford and others threw some money into the projects. In some cases, NFL owners double dipped selling personal seat licenses and then asking those who bought the licenses to pay for tickets for a game to pay off owners’ debt.

The 1986 law gave municipalities a federal tax exemption on bonds to build new stadiums. The results are stunning. In 2011, 29 of the NFL's 32 teams have new stadiums or renovated facilities with enhanced revenue streams stemming from the 1986 legislative action. Only San Francisco and Minneapolis have not upgraded facilities for NFL owners.

Sports-team owners started putting pressure on municipalities shortly after Congress sent the completed bill to Reagan for his approval. The frenzy then started as the Chicago White Sox ownership threatened to move to a publicly funded stadium in St. Petersburg, had the Illinois General Assembly not given approval for building a new ballpark on Chicago's South Side.

Baseball expanded to taxpayer-funded stadiums in Denver, St. Petersburg and Phoenix. Most cities built new ballparks for their Major League teams. The Cubs, Red Sox, Dodgers, and A’s still play in old facilities but Chicago, Boston and Los Angeles have renovated their ballparks. Spring training is different, too, with little cities being forced to build state-of-the-art complexes in a bid to keep teams from leaving for better offers in other areas of Florida or Arizona.

In 1990, Major League Baseball and Minor League Baseball signed a new agreement that mandated cities and states across the country to either build new facilities or renovate existing parks by 1994, or Major League owners could pull out of those cities. It's no coincidence that independent minor league teams sprung up, using cities that Major League Baseball deserted as the basis for their business ventures.



 

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