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San Francisco 49ers

How the profitable sports league in the world fleeces taxpayers

Here is how the NFL takes advantages of taxpayers across the United States and doesn’t pay any taxes.

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 taxpayers’ 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 Redskins’ 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 NFL’s Bengals and Major League Baseball’s Reds play, plus another $7 million to cover the direct operating costs for the Bengals’ 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? That’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 didn’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 Vikings’ disclosing information in return. The team’s principal owner, Zygmunt Wilf, had a 2011 net worth estimated at $322 million; with the new stadium deal, the Vikings’ value rose about $200 million, by Forbes’s estimate, further enriching Wilf and his family. They will make a token annual payment of $13 million to use the stadium, keeping the lion’s share of all NFL ticket, concession, parking, and, most important, television revenues.

After approving the $506 million handout, Minnesota Governor Mark Dayton said, “I’m not one to defend the economics of professional sports … Any deal you make in that world doesn’t make sense from the way the rest of us look at it.” Even by the standards of political pandering, Dayton’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, that’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 “private” 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 “private” 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 team’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 nation’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 family’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 Saints’ 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 doesn’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 residents’ pockets and gives the cash to Benson as an “inducement payment”—the actual term used—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 Allen’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 Field—and to retire debt from the Steelers’ previous stadium. Most game-day revenues (including television fees) go to the Rooney family, the majority owner of the team. The team’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 stadiums’ ongoing costs, by providing power, sewer services, other infrastructure, and stadium improvements. When ongoing costs are added, Long’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 alone—receiving more money from the public than they needed to build their facilities. Long’s estimates show that just three NFL franchises—the New England Patriots, New York Giants, and New York Jets—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 Cowboys’ 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 know—his pay, about $30 million in 2011, flows from an organization that does not pay corporate taxes.

That’s right—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 89‑800, 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 merged—they would complete such a merger four years later, forming the current NFL—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 name—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 owners’ 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 lobbyist’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 “business leagues, chambers of commerce, real-estate boards, or boards of trade.” Since 1966, the code has read: “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues.”

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 NFL’s headquarters, which administers the league and its all-important television contracts. Individual teams are for-profit and presumably pay income taxes—though because all except the Green Bay Packers are privately held and do not disclose their finances, it’s impossible to be sure.

Best Conversation of Super Bowl Week

This conversation between Caterina Fake and her taxi driver is priceless and a much read about how she probably isn’t going to be watching the Super Bowl

Oddly enough despite being a passionate NFL fan, I probably won’t watch the game either.  My problem is that I start to care about the NFL draft on Monday and I go strong all through the off-season and keep it up until about week 15 of the NFL season before I burn out.  By the time the Super Bowl week hits, I can’t handle anymore football which means I only pay a passing interest in the game itself unless Denver is in it.  In other words, I’ll be back caring about football on Monday.

Meadowlands West

49ers Stadium 

According to Yahoo! Sports

A stadium proposal for the San Francisco 49ers in Santa Clara, California, is apparently planning a facility that could fit two home teams, according to ABC7, leading to speculation that the Niners and Oakland Raiders could move to Santa Clara together.

This could make the proposal more attractive to Santa Clara voters who would have to put less of their tax dollars into the stadium if another team were there to offset some of the supposed $937 million in costs it will take to erect the thing.

I am not sure what to think about this.

  • The New York Jets and the New York Giants have successfully shared Giants Stadium for years and will continue to share their new stadium.  Two different fan bases means that home games have a much different feel.  Let’s be honest, a Oakland Raiders home game is never going to be confused with a San Francisco 49ers home game (49ers fans can read and walk upright).  Two NFL franchises in one stadium makes a lot of financial sense.
  • Are there two worse stadiums in the NFL than Oakland Coliseum and Candlestick Park?  Just read the Wikipedia entries on both of them (although according to Sports Illustrated, they are not the two worse fan experiences in the game, that honor goes to the St. Louis Rams), they are two really poorly designed stadiums from a previous era.  Now common sense will dictate that the new stadium will be much improved but I think there is a reasonable chance that the new stadium could be so bad, it brings about the apocalypse.  Apparently building world class stadiums is not something Californians are comfortable with.
  • More realistically with the current economic climate in California, the stadium won’t see any public money.  No offense to the 49ers or the Raiders but right now is a hard time to ask the state for funding for a sports franchise, especially two incompetently run franchises.  I am not saying it won’t happen but its been a hard sell so far for voters to buy in.  One stadium/two teams is a lot easier sell for many than a billion dollar stadium now and a billion dollar stadium a decade from now when Al Davis’ corpse threatens to move his team again.

It’s My Fault

joe-montana.xxiv

I was watching America’s Game today, the episode on the 1980-81 Superbowl Champion San Francisco 49ers.  Randy Cross, Dwight Clark, and Ronnie Lott were all talking about how everything was Joe Montana’s fault.  A bad snap, Joe Montana would say, “I pulled out too early”.  An interception where the receiver was in the wrong place and Joe would say, “I made a bad pass”.  Everything was Joe Montana’s fault.  Now the coaches knew the truth but the players would do anything for a guy who would take the blame for their mistakes.

Now this isn’t revolutionary, a lot of great players have lived this out and the response is always the same.  Their teammates deeply appreciate it and the effect is the same, when Joe Montana would make a throw that was too high or in the right place, the receivers would fight and scratch to go get it, knock it away from a defender or do whatever they had to do during a game.

18 November 2007:  Oakland Raiders quarterback JaMarcus Russell #2 takes pre-game warmups.  The Vikings defeated the Raiders by a score of 29 to 22 at the H.H.H. Metrodome, Minneapolis, Minnesota. My question is why along the way have the JaMarcus Russell, Jay Cutler, and Jeff George’s of the world never learned this.  Over their career, they have constantly tossed offensive linemen, receivers, and running backs under the bus with confrontations on the sidelines or as JaMarcus Russell did this year, blame them for his lack of success.

They have agents, advisors, coaches, and teammates and you have to think that one of them said, “Hey, stop glaring at your receivers when they drop a pass.  It makes them look bad and embarrasses them.”  Despite that, many have no idea that team sports are won and lost as a team and their lack of emotional intelligence hurts their team and their careers.

How many QB’s won Super Bowls who had teammates who hated them?  Even the wild and out of control Raiders of the 70s and 80s liked each other.

One of the things that the New England Patriots reportedly place a high priority on when drafting players in character.  Character makes players coachable, makes them get along with their teammates, helps them handle adversity, and also keeps them out of trouble with the law or NFL rules.  In other words it allows the team to concentrate on football, not the drama that surrounds the players I mentioned.

What I also can’t believe is that there are still franchises who place so little emphasis on these qualities and really think that talent is everything.  It isn’t.  At the same time I can’t believe that agents aren’t getting these guys coached by the greats that have gone before them.  For years some of these stars have gotten along with having more talent then everyone else but now everyone has talent.  It’s now an age of hard work, intelligence, and desire will win you games.  If I was an agent, I would have my client sit down less with rappers and new media consultants and more with guys like Archie Manning, John Elway, Joe Montana, Roger Staubach, and Dan Marino and see what the learned about leading a team, being loyal, and the work it took to play the game.  It was Roger Staubach who called up John Elway and said, “hit the weight room kid if you want to survive playing the way you do.”  With Russell it may as well be, “stay away from the Eggo’s in the morning” but I am sure they would have things to say before he ate away his career.

Contextless Football Thoughts

Denver Broncos logo Well the Denver Broncos are 5-0 after beating the New England Patriots in OT on Sunday.  You have no idea how much this messes with me.  Emotionally I was prepared for a 5-11 record and now they are 5-0.  I am not sure how to handle this.  Do I start to believe that Denver could contend for a for a playoff spot or do I stand firm with my 7-9 best case scenario.  Say whatever you want about Josh McDaniels but he ability to bring disgruntled receiver, Brandon Marshall back into the fold has had a big impact on this season.  Could you see Eric Mangini patching up a relationship like this? 

While we have seen the Patriots replace coordinator after coordinator and not miss a beat, has the loss of Josh McDaniels hurt Tom Brady?

Cleveland Browns logoHow much fun can it be to be a Cleveland Browns fan.  First they hired the most socially dysfunctional coach this side of Mike Keenan because he was an offensive genius and then they start 0-4, change their QB’s and then still stink.  Finally they win a game but they win the game 6-3.  Their QB, Derek Anderson was 2-17 or 23 yards which is slightly worse than what Napoleon Dynamite’s, Uncle Rico could do if given the chance.  For the record, this is far worse than what Brady Quinn ever did.

San_Francisco_49ers_helmet_rightfaceThis is painful for me to stay as I really like Mike Singletary as a player and as a coach but until he gets his temper and intensity under control he will continue to hurt his team.  Of course Dre’ Bly hurt the team in his own way when celebrating while making an interception.  Of course his team was down 25 points at the time.  In his defence, Bry decide to speak in third person.  “Dre’s going to be Dre’,” Bly said. “When I make plays, and I’ve made a lot, I express myself.”  He made so many places in Denver they cut him.  What an idiot.

University of Saskatchewan Huskies A little closer to home, the University of Saskatchewan Huskies walked all over the University of British Columbia Thunderbirds.  If I am UBC, I may put off my move to the NCAA until I can be competitive consistently in the CIS.  The University of Saskatchewan Huskies’ offence woke up scoring five touchdowns en route to a 44-7 victory over the UBC Thunderbirds.  Questioned for their lack of offence in first few weeks of the season, the Huskies entered the game with just three touchdowns and 55 points in their first four games of the season.

Other quick hits… I can’t believe that the Tennessee Titans are 0-5…I am glad to see that the Cinncinnati Bengals are doing well.  Part of me wonders if they are more stable because of Chad Ochocinco finding a community on Twitter…

Michael Vick’s Comeback

Michael Vick I really like the San Francisco 49ers coach Mike Singletary but he is signing his own pink slip if he thinks that Michael Vick is his best bet at QB.  A quarterback needs to be a leader and Singletary is deluding himself if he thinks that Vick will ever be a leader after he was convicted of dog fighting.  Will team mates follow an inconsistent QB who hasn’t been a great teammate, a great passer, and whose team improved after he left (now part of that was the disastrous regime of Bobby Petrino).  Michael Vick is a coach killer and Mike Singletary would be far better off with Shaun Hill or even better, a Matt Cassel.