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The Lakewood Times

Paying For Sports Teams Is a Losing Proposition

8/21/2013

12 Comments

 
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Do cities gain from subsidizing sports teams?

The National Hockey League season doesn't start for another three weeks, but already hockey fans in Glendale, Ariz., are counting an unexpected victory. Four years after the Phoenix Coyotes went bankrupt and were taken over by the league, prompting endless rumors that the struggling franchise would relocate to Quebec, Seattle or parts unknown, new owners were approved this month who have promised to keep the team in Arizona.

It's a victory, though, that will come at a high price. To secure the sale, the Glendale city council agreed to a new lease that requires the city to pay the Coyotes' owners $15 million a year as an "arena management fee." If the deal runs its full 15-year course — not a given, because the new lease allows the team to leave town if it’s losing money after five years — the Coyotes' new owners, a pair of Canadian investment bankers, will end up collecting more from the city of Glendale to run the team than the $170 million they're spending to buy it in the first place.

City officials say they had little choice. Glendale mayor Jerry Weiers, who in his acceptance speech last fall warned the Coyotes, "Glendale is not your cash register," has now resigned himself to paying for pro sports, saying, "The council made its decision, and my job at this point is to do everything in my power to make this thing a success." His predecessor, Elaine Scruggs, insisted that paying the Coyotes was cheaper than letting the team leave: "What shall we do — lock it up, turn off the lights and then pay the debt on the arena?"

The answer, say many economists and sports business experts, is very likely yes. There's no way a city like Glendale will see enough of a boost to its local economy to make lease subsidies pay off. And, they warn, the Coyotes deal is a sign of a new trend in the sports industry: After a 20-year period during which, according to Harvard researcher Judith Grant Long, about $18 billion in public money was spent on a wave of new stadiums and arenas, team owners looking for a leg up on their competition are now demanding additional cash to run the buildings they got for free.

"They always do come up with clever little tricks," says Rick Eckstein, sociology professor at Villanova University and co-author of the book Public Dollars, Private Stadiums. "Just when we think we’ve seen it all, they come up with something else."

This summer's new lease isn't the first time that Glendale has anted up public cash for its hockey team. The suburb of 230,000 people was already on the hook for $9 million a year in debt payments on its new arena, a building for which the team's owners paid only $1 a year in rent. (Glendale also spent $200 million on Camelback Ranch, a spring-training baseball facility for the Los Angeles Dodgers and Chicago White Sox.) In 2010, after the Coyotes' bankruptcy, Scruggs poured in an additional $50 million in management fees over two years, raiding its landfill, sanitation, water and sewer funds to raise the cash.

The result of all this sports spending has been a massive hit to the city's budget at a time when Glendale was already furloughing firefighters, closing public pools and shortening public libraries' hours. Last month's Coyotes lease subsidy came shortly after the Glendale council discussed a proposal to sell off its city hall to help pay for the previous round of Coyotes payments. 

"Our police and fire departments were the first ones that started seeing their budget cut back," says Ken Jones, a Glendale resident who led several unsuccessful attempts to force a public vote that could have overturned the Coyotes lease deal. "Libraries were hit pretty hard. They raised our water bills 80 percent, our sales tax was raised, and our property tax was raised. They have robbed the things that people really expect to get from their taxes in order to keep supporting sports."

The first sports team owner to cash in on this pay-to-play tactic was the New Orleans Saints' Tom Benson, who in 2001 capitalized on rumors that he was considering moving his NFL team to convince the state of Louisiana to pay him $186.5 million over the next 10 years to keep playing at the Superdome. In 2010, the owners of the Indiana Pacers basketball team followed suit by demanding — and receiving — $30 million in "operating subsidies" over three years to remain at Conseco Fieldhouse, the arena that the city of Indianapolis had spent $183 million to build nine years earlier. (As in Glendale, Pacers owner Herb Simon, a billionaire real estate developer, paid just $1 a year rent.)

To pay off the initial Pacers arena cost — plus the $650 million that it sank into a new stadium for the Colts football team — Indianapolis' Capital Improvement Board had already cut off all of its arts and tourism grants the year before. To help fill the new gap, Mayor Greg Ballard funneled city property-tax revenues to the board, even as he asked city agencies to reduce library hours and close public pools because of budget shortfalls.

"Indianapolis might be a great place to visit, but it should be a better place to live," says Pat Andrews, a longtime Indianapolis community activist and blogger who has closely followed the Pacers deal. In addition to cuts to parks, transit and other services, she notes, the city police force has stopped recruiting new officers because of budget cuts, and murders have risen dramatically this year. "The basic services of the city are suffering at the same time the Simons and [Colts owner Jim] Irsay are making out like bandits."

Simon, meanwhile, agreed only to keep the Pacers in town through 2013 in exchange for his $30 million in cash. The city's Capital Improvement Board has since negotiated a one-year lease extension — along with yet another $10 million in payments to the Pacers — while it works out a long-term deal, one that Andrews worries will cement annual operating subsidies in place for good. (CIB officials declined to comment for this story.)

Even team owners building new stadiums have begun seeking annual operating subsidies.Earlier this year, when Atlanta agreed to provide billionaire Atlanta Falcons owner (and Home Depot founder) Arthur Blank with $200 million in hotel tax money to help pay for a new stadium to replace the 20-year-old Georgia Dome, it tacked on an additional bonus: Any leftover hotel tax money after the first $200 million would spill over into a so-called waterfall fund that Blank could then tap for any future maintenance or operating expenses. Estimated cost: an extra $300 million. 

12 Comments
Chai
8/21/2013 12:39:03 pm

Such a shame. i passed by this Tuesday when there was a game. som many cars from out of Lakewood that could be utilized to spend a boost Lakewoods economy.. but nothing they come and go and nothing gets done. Thge Blue laws have been around ~10 years and not one strip mall next to it with a burger king or sport authority in it.......Embarrasing that the politicos are tied down and can't get anything done.......

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lakewood resident
8/22/2013 12:19:46 am

Chai , that was the point of having a team in Lakewood to get people to come, when you say nothing gets done ,what are you referring to. what do you want to get done ,they are there to see the game that's why they are there!!!! there are enough strip malls already don't need anymore trees cut down for another strip mall
why does it always have to be about money! (yes I think that's what your point is!)

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Chris
8/22/2013 09:03:41 am

I could be wrong but it was my understanding from years ago that the area around the stadium on the the Ave of the States and Blvd of the America's was supposed to be shopping outlets, restaurants, large anchor stores like Costco and a hotel. The team itself was never to make the town money but the taxes from the new business's was with the team being the attraction to draw people in like Six Flags is for the Jackson outlets. So the real question is who didn't follow/prevented the plan from coming to fruition?

Honestly I wrote the team off when they came up with the stupid name that didn't reflect Lakewood. They should have put them in Toms River by the water with a name like that.

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Chai
8/22/2013 11:45:41 pm

Sorry but get real, it is about money.

Lakewood ahs a responsibility to bring in jobs and revenue from other asources than just the residential tax base. The industrial park is being converted to schools( not taxable). Many lower income residents reuire jobs that would be offered at these stores and its just simple business sense. Look around no other town has a staium in middle of nowhere. You anvhor the stadium around a commercial strip area....

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lakewood resident
8/23/2013 09:14:02 am

well you just confirmed my suspicion , it always has to be about the money .I feel sorry for people who go through life with only that objective .Don't get me wrong there is absolutely nothing wrong with making a profit if you run a business ,in fact if you don't guess what you are out of business . My point is this when your intentions are right and you provide a service or product that people want and you market those correctly the money will follow ,however if everything you do is solely to increase your wealth at everyone else's expense and don't give a hoot how you line your pockets (lots of that in Lakewood) and don't care who you step on to get there in my eyes you are Evil ,the stadium was built to provide entertainment at a much more reasonable cost as opposed to major league games for families to attend .I'm confused as to what you expected as far as what it would do for Lakewood .Did you really believe it would Make a few people rich or perhaps bring in so much money your taxes would be cut .Sorry but I stand by my principals that money is just a side result of doing what is right to help others and not the motivating force itself like so many in this town seem live by .As far as the statement abut schools in the industrial park that's a whole other problem that this town created ,you are right about bring in jobs and that what an industrial park is supposed to do for a town so we do agree about that !

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Chai
8/24/2013 02:37:49 pm

You want to do things for the 'good' then go to a charity but business and government is about bringing in revenue. Lakewood has gained nothing from the stadium. A majority of the cars coming were from neighboring towns so whats the point for Lakewood to have it so that others can come and enjoy it. Wow you really must think very highly of our local governemtn as they built the stadium for other towns to enjoy and get NOTHING from it?? Come on you build it tpo anchor a stram of peole to spend $$$$ i yoiur toen like a strip mall next to it.....to offset some of the high re taxes...etc...

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lakewood Resident
8/25/2013 01:06:14 am

Once again you confirmed what I have already stated ,no need to debate my a matter of principles with someone who obviously is not on the same wavelength as I am ,GREED IS NOT GOOD and when you are strickly motivated by money that's what that is. I do believe in capitalism ,however I don't believe in GREED .What you are saying about the stadium is not that Lakewood got nothing in return ,(yes it did!) did you really think only Lakewood families would attend???? NONSENSE .Sorry but I stand by my convictions and principals IT DOES NOT ALWAYS HAVE TO BE ABOUT MONEY PERIOD ............................

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Chai
8/25/2013 02:06:31 am

I think you are living in a bubbble. Are you aware that Detroit in bankrupt? Many other cities are not far behind like Cleveland, Baltimore, Trenton....
It is a beuatiful thing to say your not in it for the money but that is for charity organzations. A city or business cvan't exist with just 100% lets do it for the people. Someone has to pay for it.....I give plenty of charity but government is this case Lakewood has NOT beenm responsible with taxpayers money as the stadium was built ~15 years ago and abosultely nothing has been built nearby all this time because of the sehnangans that exist... If a strip mall with steors and restaurants for the fane to go to after and before the ganme it would naturally compliment each other.
Do you travel? Do you remember the old decrepit reststop bathrooms? Now you stop and there are beautful restrooms with.....commerically rented space to offset and actually help the taxpayers enjoy a cleaner and safer environment.
There is NO reason why this has not taken place all these years and as a taxpayer in Lakewood I am upset about the committee members doing nothing about it.
Yes you can build a stadium for people to enjoy but who pays for it? The local government needs to build on it with natural growrth to create jobs ( yes thats what government is for) expanding the area with strip malls and restaurant for jobs and revenue.

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lakewood resident
8/25/2013 07:30:25 am

Are you saying its Lakewoods responsibility to build businesses that are private enterprises ?QUOTE > "abosultely nothing has been built nearby all this time because of the sehnangans that exist"
maybe you have some inside information that I am not privy to as far as land deals go .but building businesses is not the governments function despite the fact we have leadership in Washington that thinks otherwise remember the statement "You didn't build that " it takes investments of individuals who are willing to put their own cash into a business .Our government is broke for many reasons one of them entitlements ,DETROIT is a good example it has nothing to do with government running businesses. They don't do that very well just look at the Post Office ,if in fact this was privately run they would be out of business Let the government govern and individuals who are entrepreneurs take care of running business ..

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lakewood resident
8/25/2013 07:33:41 am

just one more thing to mention here if in case you did not get my point already I quote you " to create jobs ( yes thats what government is for)"
NO ITS NOT government DOES NOT CREATE JOBS IN THE PRIVATE SECTOR !!! Only Obama believes that and look at the mess he has us in !!!

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Chai
8/25/2013 11:52:21 pm

True government does not creat jobs but they facilatiate jobs with creating opputtunities. The fed lowers interest rates to spur growth. Lakewood creates a staium drawing a revenu stream to feed off of and faciliatating growth of jobs in the community and taxes revenue from stores that would be near the stadium. If you look at the stadium there is a sign nearby about development oppurtunites that have been up. If it would be legit and there would be $$$$ paid every months on taxes etc...on the land then it would move further much faster. It is Lakewood township land and whoever is supposed to develop it is sleeping at the wheel and we are all suffering.

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lakewood resident
8/27/2013 11:33:40 pm

" It is Lakewood township land and whoever is supposed to develop it is sleeping at the wheel and we are all suffering"
not sure what you mean "suffering" are we back to the money issue again? If so this issue is a needle in the haystack compared to so many other things that this town throws money away on ,how about land deals where the town gave away property that was latter sold for millions????

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