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

The National Hockey League decided to expand the league's United States "footprint" in 1990 claiming that the league needed to expand for television purposes. With the help of municipal governments leagues did expand and owners got a slice of expansion money. The new venues also raised the value of franchises.

mtbankstadium_optThe United States government, along with state and city governments, is partners with sports, whether it is on the professional or college level. National Basketball Association Commissioner David Stern freely admits that government is a sports partner.

According to Stern, there are three elements needed for sports teams to succeed: Government, cable TV and corporate support. Government has funded stadiums and arenas, provided tax breaks and incentives to build facilities and through the Cable TV Act of 1984 and the Tax Act of 1986 provided more revenues for sports owners. Without the Cable TV Act of 1984, ESPN might have folded; the tax act capped revenues that were generated inside a facility to pay off the debt of a publicly funded stadium or an arena at eight cents on a dollar. Neither New York Senator Daniel Patrick Moynihan nor Pennsylvania Senator Arlen Specter could close the loophole that exists to this day.

Arizona Senator and one-time Republican Presidential candidate John McCain wanted to end the stadium and arena building process that has taken place since the 1986 tax reforms that were passed by Congress, called for the elimination of the tax exemption for bonds for stadiums and arenas. McCain has said little about the legislation since his Presidential run.

The 1986 law that capped revenues at a municipally built facility for sports franchise had a significant consequence. There was no way to pay off the debt with just eight cents being collected from every dollar spent in a stadium or an arena so other taxes were used to make up the difference.

There was a "sin tax" in Cleveland with an extra levy put on cigarettes, cigars and alcohol. Many areas raised sales tax while others hit local residents with "tourist" taxes from tax hikes on motel, hotel, restaurant and car rentals bills. There was also a water tax, some owners were able to negotiate deals for rent and agreed to a formula called payment in lieu of taxes (PILOT) and didn't have to pay full property taxes on stadiums they controlled that were municipally financed. The sports facilities, proponents argue from both sides of the political aisle. If that wasn't enough, team owners received cash from states to help out with some bills.

The worst deal that was signed was between Louisiana Governor Mike Foster and New Orleans Saints owner Tom Benson. Louisiana gave Benson $186.5 million in checks as a thank you for keeping the team in New Orleans between 2002 and 2010. The city of San Diego was buying unsold San Diego Chargers tickets as part of a lease arrangement in the late 1990s.

New York State is heavily invested in Ralph Wilson's Buffalo Bills by virtue of a 1998 lease agreement between Wilson and Erie County that called for $63.25 million worth of improvements at the Orchard Park facility. The Empire State Development Corporation gives $3 million a year to Orchard Park for stadium maintenance.

In the summer of 2010, the giveaways kept coming despite belt tightening around the country. Jacksonville politicians gave up the city's right to collect 25 percent of the revenue for naming rights of the city owned football stadium to the National Football League's Jaguars or about $4 million through 2014.

NFL owners fear the municipal gravy train may be heading to the station and one of the disputes in the 2011 lockout centers around stadium costs and that the players should be kicking in money to help build stadiums. The reason why there has been no work on the new Santa Clara, Calif., stadium that will eventually house the San Francisco 49ers franchise is that the NFL doesn't want any funding to go into the construction until there is a new agreement between the owners and players. Minnesota and San Diego are seeking new stadiums. Two Los Angeles groups are planning to build new stadiums with the operative word being "planning."

As the new stadiums that came into existence in the 1990s, Rupert Murdoch’s struggling FOX television syndication company which is misidentified as a network threw an enormous amount of money at NFL owners and wrested the rights to NFC games from CBS. That deal helped establish FOX as a TV power and caused NBC and Disney to ante up billions for the right to televise NFL games.

The NFL was swimming in money and a lot of it, more than 57 percent, ended up in the players’ pocket.

"Where is it written that (NFL) owners are entitled to the lion’s share of revenues from structures we help build and support?"

It was written in Congress and signed into law in the Oval Office in 1986. Ronald Reagan's signature opened the floodgates for the owners to get their hands on revenue streams in new facilities at bargain basement prices as taxpayers’ dollars were used to build stadiums and arenas. The Gipper's greatest football role wasn't in the movies but at 1600 Pennsylvania Ave. in 1986.

Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at bickley.com, Barnes and Noble or amazonkindle.

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