Last year was a busy one for public giveaways to the National Football League. In Virginia, Republican Governor Bob McDonnell, who styles himself as a budget-slashing conservative crusader, took $4 million from taxpayersâ€™ pockets and handed the money to the Washington Redskins, for the team to upgrade a workout facility. Hoping to avoid scrutiny, McDonnell approved the gift while the state legislature was out of session. The Redskinsâ€™ owner, Dan Snyder, has a net worth estimated by Forbes at $1 billion. But even billionaires like to receive expensive gifts.
Taxpayers in Hamilton County, Ohio, which includes Cincinnati, were hit with a bill for $26 million in debt service for the stadiums where the NFLâ€™s Bengals and Major League Baseballâ€™s Reds play, plus another $7 million to cover the direct operating costs for the Bengalsâ€™ field. Pro-sports subsidies exceeded the $23.6 million that the county cut from health-and-human-services spending in the current two-year budget (and represent a sizable chunk of the $119 million cut from Hamilton County schools). Press materials distributed by the Bengals declare that the team gives back about $1 million annually to Ohio community groups. Sound generous? Thatâ€™s about 4 percent of the public subsidy the Bengals receive annually from Ohio taxpayers.
In Minnesota, the Vikings wanted a new stadium, and were vaguely threatening to decamp to another state if they didnâ€™t get it. The Minnesota legislature, facing a $1.1 billion budget deficit, extracted $506 million from taxpayers as a gift to the team, covering roughly half the cost of the new facility. Some legislators argued that the Vikings should reveal their finances: privately held, the team is not required to disclose operating data, despite the public subsidies it receives. In the end, the Minnesota legislature folded, giving away public money without the Vikingsâ€™ disclosing information in return. The teamâ€™s principal owner, Zygmunt Wilf, had a 2011 net worth estimated at $322 million; with the new stadium deal, the Vikingsâ€™ value rose about $200 million, by Forbesâ€™s estimate, further enriching Wilf and his family. They will make a token annual payment of $13 million to use the stadium, keeping the lionâ€™s share of all NFL ticket, concession, parking, and, most important, television revenues.
After approving the $506 million handout, Minnesota Governor Mark Dayton said, â€œIâ€™m not one to defend the economics of professional sports â€¦ Any deal you make in that world doesnâ€™t make sense from the way the rest of us look at it.â€ Even by the standards of political pandering, Daytonâ€™s irresponsibility was breathtaking.
In California, the City of Santa Clara broke ground on a $1.3 billion stadium for the 49ers. Officially, the deal includes $116 million in public funding, with private capital making up the rest. At least, thatâ€™s the way the deal was announced. A new government entity, the Santa Clara Stadium Authority, is borrowing $950 million, largely from a consortium led by Goldman Sachs, to provide the majority of the â€œprivateâ€ financing. Who are the board members of the Santa Clara Stadium Authority? The members of the Santa Clara City Council. In effect, the city of Santa Clara is providing most of the â€œprivateâ€ funding. Should something go wrong, taxpayers will likely take the hit.
The 49ers will pay Santa Clara $24.5 million annually in rent for four decades, which makes the deal, from the teamâ€™s standpoint, a 40-year loan amortized at less than 1 percent interest. At the time of the agreement, 30-year Treasury bonds were selling for 3 percent, meaning the Santa Clara contract values the NFL as a better risk than the United States government.
Although most of the capital for the new stadium is being underwritten by the public, most football revenue generated within the facility will be pocketed by Denise DeBartolo York, whose net worth is estimated at $1.1 billion, and members of her family. York took control of the team in 2000 from her brother, Edward DeBartolo Jr., after he pleaded guilty to concealing an extortion plot by a former governor of Louisiana. Brother and sister inherited their money from their father, Edward DeBartolo Sr., a shopping-mall developer who became one of the nationâ€™s richest men before his death in 1994. A generation ago, the DeBartolos made their money the old-fashioned way, by hard work in the free market. Today, the familyâ€™s wealth rests on political influence and California tax subsidies. Nearly all NFL franchises are family-owned, converting public subsidies and tax favors into high living for a modern-day feudal elite.
Pro-football coaches talk about accountability and self-reliance, yet pro-football owners routinely binge on giveaways and handouts. A year after Hurricane Katrina hit New Orleans, the Saints resumed hosting NFL games: justifiably, a national feel-good story. The finances were another matter. Taxpayers have, in stages, provided about $1 billion to build and later renovate what is now known as the Mercedes-Benz Superdome. (All monetary figures in this article have been converted to 2013 dollars.) The Saintsâ€™ owner, Tom Benson, whose net worth Forbes estimates at $1.2 billion, keeps nearly all revenue from ticket sales, concessions, parking, and broadcast rights. Taxpayers even footed the bill for the addition of leather stadium seats with cup holders to cradle the drinks they are charged for at concession stands. And corporate welfare for the Saints doesnâ€™t stop at stadium construction and renovation costs. Though Louisiana Governor Bobby Jindal claims to be an anti-spending conservative, each year the state of Louisiana forcibly extracts up to $6 million from its residentsâ€™ pockets and gives the cash to Benson as an â€œinducement paymentâ€â€”the actual term usedâ€”to keep Benson from developing a wandering eye.
In NFL city after NFL city, this pattern is repeated. CenturyLink Field, where the Seattle Seahawks play, opened in 2002, with Washington State taxpayers providing $390 million of the $560 million construction cost. The Seahawks, owned by Paul Allen, one of the richest people in the world, pay the state about $1 million annually in rent in return for most of the revenue from ticket sales, concessions, parking, and broadcasting (all told, perhaps $200 million a year). Average people are taxed to fund Allenâ€™s private-jet lifestyle.
The Pittsburgh Steelers, winners of six Super Bowls, the most of any franchise, play at Heinz Field, a glorious stadium that opens to a view of the serenely flowing Ohio and Allegheny Rivers. Pennsylvania taxpayers contributed about $260 million to help build Heinz Fieldâ€”and to retire debt from the Steelersâ€™ previous stadium. Most game-day revenues (including television fees) go to the Rooney family, the majority owner of the team. The teamâ€™s owners also kept the $75 million that Heinz paid to name the facility.
Judith Grant Long, a Harvard University professor of urban planning, calculates that league-wide, 70 percent of the capital cost of NFL stadiums has been provided by taxpayers, not NFL owners. Many cities, counties, and states also pay the stadiumsâ€™ ongoing costs, by providing power, sewer services, other infrastructure, and stadium improvements. When ongoing costs are added, Longâ€™s research finds, the Buffalo Bills, Cincinnati Bengals, Cleveland Browns, Houston Texans, Indianapolis Colts, Jacksonville Jaguars, Kansas City Chiefs, New Orleans Saints, San Diego Chargers, St. Louis Rams, Tampa Bay Buccaneers, and Tennessee Titans have turned a profit on stadium subsidies aloneâ€”receiving more money from the public than they needed to build their facilities. Longâ€™s estimates show that just three NFL franchisesâ€”the New England Patriots, New York Giants, and New York Jetsâ€”have paid three-quarters or more of their stadium capital costs.
Many NFL teams have also cut sweetheart deals to avoid taxes. The futuristic new field where the Dallas Cowboys play, with its 80,000 seats, go-go dancers on upper decks, and built-in nightclubs, has been appraised at nearly $1 billion. At the basic property-tax rate of Arlington, Texas, where the stadium is located, Cowboys owner Jerry Jones would owe at least $6 million a year in property taxes. Instead he receives no property-tax bill, so Tarrant County taxes the property of average people more than it otherwise would.
In his office at 345 Park Avenue in Manhattan, NFL Commissioner Roger Goodell must smile when Texas exempts the Cowboysâ€™ stadium from taxes, or the governor of Minnesota bows low to kiss the feet of the NFL. The National Football League is about two things: producing high-quality sports entertainment, which it does very well, and exploiting taxpayers, which it also does very well. Goodell should knowâ€”his pay, about $30 million in 2011, flows from an organization that does not pay corporate taxes.
Thatâ€™s rightâ€”extremely profitable and one of the most subsidized organizations in American history, the NFL also enjoys tax-exempt status. On paper, it is the Nonprofit Football League.
This situation came into being in the 1960s, when Congress granted antitrust waivers to what were then the National Football League and the American Football League, allowing them to merge, conduct a common draft, and jointly auction television rights. The merger was good for the sport, stabilizing pro football while ensuring quality of competition. But Congress gave away the store to the NFL while getting almost nothing for the public in return.
The 1961 Sports Broadcasting Act was the first piece of gift-wrapped legislation, granting the leagues legal permission to conduct television-broadcast negotiations in a way that otherwise would have been price collusion. Then, in 1966, Congress enacted Public Law 89â€‘800, which broadened the limited antitrust exemptions of the 1961 law. Essentially, the 1966 statute said that if the two pro-football leagues of that era mergedâ€”they would complete such a merger four years later, forming the current NFLâ€”the new entity could act as a monopoly regarding television rights. Apple or ExxonMobil can only dream of legal permission to function as a monopoly: the 1966 law was effectively a license for NFL owners to print money. Yet this sweetheart deal was offered to the NFL in exchange only for its promise not to schedule games on Friday nights or Saturdays in autumn, when many high schools and colleges play football.
Public Law 89-800 had no nameâ€”unlike, say, the catchy USA Patriot Act or the Patient Protection and Affordable Care Act. Congress presumably wanted the bill to be low-profile, given that its effect was to increase NFL ownersâ€™ wealth at the expense of average people.
While Public Law 89-800 was being negotiated with congressional leaders, NFL lobbyists tossed in the sort of obscure provision that is the essence of the lobbyistâ€™s art. The phrase or professional football leagues was added to Section 501(c)6 of 26 U.S.C., the Internal Revenue Code. Previously, a sentence in Section 501(c)6 had granted not-for-profit status to â€œbusiness leagues, chambers of commerce, real-estate boards, or boards of trade.â€ Since 1966, the code has read: â€œbusiness leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues.â€
The insertion of professional football leagues into the definition of not-for-profit organizations was a transparent sellout of public interest. This decision has saved the NFL uncounted millions in tax obligations, which means that ordinary people must pay higher taxes, public spending must decline, or the national debt must increase to make up for the shortfall. Nonprofit status applies to the NFLâ€™s headquarters, which administers the league and its all-important television contracts. Individual teams are for-profit and presumably pay income taxesâ€”though because all except the Green Bay Packers are privately held and do not disclose their finances, itâ€™s impossible to be sure.