THE BUSINESS AND POLITICS OF SPORTS
When Mikhail Prokhorov arrives in Brooklyn with his New Jersey Nets franchise, can he bring with him a National Hockey League team — specifically the New York Islanders? The answer according to someone who has been around hockey for a long time is no because the Madison Square Garden's owners, the Dolan family, and the league won't allow Charles Wang's Islanders to invade New York Rangers territory.
The Gulf and Western owned-Garden in 1971 collected millions of dollars from the expansion New York Islanders owner Roy Boe and in 1982 from New Jersey Devils owner John McMullen when both teams opened shop in the metropolitan area as Boe and McMullen "invaded" Rangers territory. The Garden also got millions from Boe when his American Basketball Association New York Nets joined the National Basketball Association in 1976.
Perhaps Dolan would change his mind if Wang renegotiated his Madison Square Garden cable TV deal and gave Dolan more favorable terms than he presently enjoys which would allow Wang to move to Brooklyn.
(Dolan's cable TV Cablevision franchises partly depend on two planks, he has the rights to Islanders games which takes care of his Long Island systems and New Jersey Devils games which gives New Jersey systems local programming. The other is News12, which provides local news in Nassau and Suffolk counties in New York and New Jersey's News 12 does the same thing in the Garden State. It is actually clever programming and use of money as no other multiple cable systems operator can offer local cable boards when contracts are renewed that sort of option.)
NHL Commissioner Gary Bettman has thrown water on the idea that Wang's Islanders could move about 20 miles west of the franchise's present location in Uniondale. The NHL does have the right to control franchises shifts as does the National Basketball Association according to the latest court case (the 2009 Phoenix Coyotes bankruptcy proceedings in Judge Redfield Baum's courtroom in Phoenix) involving a league and that league's ability to control franchise shifts. In 1994, NBA Commissioner David Stern and the majority of the league's 27 owners blocked the sale of the Minnesota Timberwolves to New Orleans interests led by boxing promoter Bob Arum. The Arum group planned to move the Minneapolis franchise to New Orleans.
New Jersey Governor Chris Christie has already met with Stern to discuss the possibility of replacing Prokhorov's Newark-based franchise with another NBA team. It is hard to imagine Stern warming up to the idea of putting a third team in the New York metropolitan area although ultimately it is the NBA owners, not Stern, that decides where a franchise can operate.
Stern was so angry with New Jersey officials in 2005 after another set of New Jersey Nets owners could not get an arena built in Newark that he lost his cool and showed the not so polished side of his media-made "Easy Dave" persona when he admonished them by proclaiming "you blew it."
Madison Square Garden's James Dolan and Prokhorov probably would lead the charge to block another NBA owner from moving to Newark even though Prokhorov is giving up the New Jersey territorial claims. By the time Prokhorov leaves for Brooklyn, there could be a large number of small market franchise owners that might be looking for greener pastures. Presently, the league owns the New Orleans franchise, Indiana is losing copious amounts of money, and the Maloof brothers are not any closer to getting a new building in Sacramento than they were five years ago. In retrospect, the move of the Vancouver Grizzlies to Memphis by owner Michael Heisley has not produced the financial results and might be considered a failure. The league's return to Charlotte has not produced a good result. Milwaukee needs a new building but it is unlikely the team's owner — United States Senator Herbert Kohl — will move the team because that would signal that Wisconsin is not a good place to do business (although new Governor Scott Walker seems to be doing a good job shooing business away from the state in his initial six weeks on the job.)
Stern and his owners seem to be playing out the clock with the players in regard to the present collective bargaining agreement, which expires on June 30. Stern wants to change the way players are paid and shift revenues back into his owners' pockets. That could help the small market owners. Should Stern fail to produce that type of result, the NBA will lock out the players. If Stern does not prevail, the NBA might see franchises move with Seattle, Louisville, Vancouver, San Jose, Anaheim and yes even Newark in play.
Because of the 1922 United States Supreme Court ruling that baseball was a game not an interstate business and therefore was entitled to an antitrust exemption, New Jersey will never get a Major League Baseball team. In northern New Jersey, the Steinbrenner Yankees and the Wilpon-Katz Mets have veto power and can nix a third team in the New York City area and Philadelphia Phillies ownership can do the same thing in southern New Jersey. New York City once had three Major League Baseball teams and the area could support a third team. People in Major League Baseball know this but there is that antitrust exemption which would preclude franchises seeking new facilities like Oakland and Tampa Bay from checking into New Jersey.
Getting back to the Islanders situation and Brooklyn. It may be a good time for Eric Holder and the Department of Justice or oversight committees in either the United States Senate or the House of Representatives to take a look at franchise movement because of the vast amount of public dollars that have been poured into sports.
American sports is not a private entity.
It is a government-subsidized business. Cities are building stadiums and arenas for teams and in some cases paying owners outright to make sure the owner keeps a franchise in town like Louisiana does with New Orleans Saints owner Tom Benson. The "major league" sports industry has grown financially thanks to antitrust exemptions and all sorts of tax breaks for owners.
Municipalities have been moving money around to pay off sports facilities debt. New Jersey is still paying off the debt on the departed Giants Stadium in the Meadowlands. Houston, Pittsburgh, Seattle, Indianapolis, and Vero Beach, Florida residents to name a few cities are paying bills on departed stadiums or in Vero Beach's case improvements at a spring training facility that was abandoned by the Los Angeles Dodgers, a franchise that has a history of leaving town.
The owners of new Meadowlands Stadium (the Giants Mara and Tisch families and the Jets Woody Johnson) are paying significantly less in property taxes than had other owners developed the property for different businesses. In 2006, East Rutherford mayor James Cassella noted that the Meadowlands should be generating more than $10 million a year in property taxes and that East Rutherford was getting a small percentage of that. In 2009, Mayor Cassella again wanted more money from the property. East Rutherford is getting $5 million in rent from the teams and through payment in lieu of taxes (PILOT), $1.3 million or so annually instead of a full share of property taxes.
Prokhorov's new Brooklyn building will be costing New York taxpayers hundreds of millions of dollars. If there is a National Hockey League owner who is willing to work out a deal with Prokhorov and put a team in the Brooklyn building then the deal should not be squashed by a bunch of owners led by someone who does not pay New York City property taxes.
Madison Square Garden is not on the New York City property tax roll and has not be paying property taxes for nearly three decades (1982) thanks to politicians led by then Mayor Ed Koch who fell for the line that the New York Knicks and the New York Rangers could not compete for players with other teams because of the property tax burden. New York City and state elected officials gave the Garden a property tax exemption.
Mayor Michael Bloomberg has declared war on public employees and wants concessions because he claims the city cannot afford pensions, school costs and other public services. The Garden's estimated $14 million a year property tax bill contribution, if the Garden was forced to pay the tax, won't solve the city's fiscal problems but it might save a few jobs. That money does not need to go to LeBron James or Carmelo Anthony or Chris Paul.
New York sportswriters, assuming their usual on their knees cheerleading positions for a team---this time the Knicks, are pushing, hoping and wishing the Knicks land Carmelo Anthony in a trade. Anthony's next contract could net him more than $20 million a year. If Dolan can pay an employee $20 million annually, he could and should be forced to pay his tax bill.
It isn't Dolan's fault that New York capitulated to the Garden's demands. He inherited the largess when his family bought the team in 1994 from Viacom.
The property tax issue has been around for four decades. Garden chairman Irving Mitchell Felt was so disgusted with the costs of the Garden that he considered moving the Knicks and Rangers to the New Jersey Meadowlands. It seemed that the Meadowlands in the early 1970s was the panacea for all that ailed New York City-based franchises. Had history followed a different course in 1972, George Steinbrenner would have missed out on buying into the New York Yankees as a local New Jersey businessman was in the hunt to get the Yankees and move the franchise to the Meadowlands. It is possible that the Meadowlands would have housed baseball and the Knicks and Rangers in 1976 instead of the Mara family's New York Giants.
Sports owners in the metropolitan New York area should be paying full property taxes. The New York Yankees, the New York Mets, the Jets-Giants ownerships are getting subsidized through PILOTs, the Garden is not paying any property taxes and the truth is, the sports teams are not really creating many jobs. The NHL and NBA are within their legal rights to control their franchise movements however with so much of the league's businesses being propped up by public dollars (including cable TV monies which have been produced thanks to the 1984 Cable TV Act which was signed into law by President Ronald Reagan and the revamping of the 1986 Federal Tax Code which shifted the parameters for rent at new municipally built facilities that gave a sports owner up to 92 percent of all revenues generated in the building with just eight percent going off to pay down the buildings debt), it is time to review territorial rights issues.
The American public should really know the score and how much money taxpayers are putting into the system. The news might be staggering.
Since Milwaukee officials in 1950 decided that the public should pay for a baseball stadium in order to attract a Major League Baseball team for the city, politicians have been spending vast amounts of public dollars on owners for big time sports. Leagues are private businesses yet so much of the public is picking up the bills for sports on the professional level and now the college level. The public should begin to have a say. When the Dolan family starts paying their property tax on their Manhattan holding, then they should have a say on whether Brooklyn can go after Charles Wang's Islanders franchise. Newark put up a lot of money for the downtown arena. It seems rather unfair that a bunch of suits in a Manhattan office can summarily dismiss a bid for an NBA team in a publicly built facility just because a commissioner has a fit in 2005 because things didn't go his way or because an NHL owner who is highly subsidized by a city and a state just doesn't want competition a bunch of stops away by subway.