We’ve all become desensitized to the spectacle of obscenely rich corporations depending on handouts from taxpayers for the privilege of doing business and making money, but no one is as brazen at this form of corporate welfare as the National Football League.
The NFL is at it again, trying to mulct the public for hundreds of millions of dollars in funding to build new stadiums in Las Vegas, which is trying to snag the Oakland Raiders; and San Diego, where the Chargers have played, generally dismally, since 1961.
This is an old habit. Even NFL stadiums that appear to be privately financed involve heavy public investments. That’s the case with the new Rams stadium in Inglewood, the development plan for which says taxpayers will be on the hook for unspecified “public services and infrastructure.” As we’ve reported, any economic gains the city expects to reap from the stadium will be eroded by the cost of traffic control and police and fire protection, which the city will have to cover from its share of revenues.
Turning to the new proposals, let’s begin with Las Vegas, since it’s the more peculiar situation. The billionaire trying to squeeze the city for big bucks is Sheldon Adelson, whose net worth is estimated by Forbes at $28.7 billion. Adelson’s Las Vegas Sands Corp. has partnered with Oakland Raiders owner Mark Davis to propose a $1.9-billion stadium near the Vegas airport. Of that sum, they’re demanding that $750 million come from a raise in the city hotel tax.
“Not to be difficult, but we’re not negotiable,” Sands President Rob Goldstein told a regional tourism committee last week. “If we can’t get 750, we respectfully thank you but we’re going to move on.” He said, “Sheldon would walk away from it.” In return for this handout, Adelson is willing to put up $650 million as his personal contribution.
In the Las Vegas Review-Journal, which his family owns, Adelson called the stadium a “must-have” for Las Vegas — contradicting the view of MGM Resorts International Chairman and CEO Jim Murren, who had called it merely a “nice-to-have.” Leaving aside the question of whether the NFL would even countenance the relocation of a team to Las Vegas, the newspaper’s editorials have been obligingly positive about its patron’s project, calling it “a momentous economic stimulus for the city and entire region,” and a project the city “desperately needs.”
In San Diego, the family of Alex Spanos (net worth, as calculated by Forbes: $1.69 billion), which owns the Chargers, has arranged to place a measure on the November ballot authorizing a hotel tax increase to 16.5% from 12.5% to support public bonds for a new stadium.
Financial analyses have raised numerous questions about this arrangement. They include doubts that the $1.8-billion price estimate for the stadium is realistic; if it’s too low, the city could be on the hook for more than the tax increase produces. Chargers spokesman Fred Maas has dismissed the studies. “I would call this vote and report rubbish, but it would be an insult to the hard working refuse collectors in San Diego,” he said of one study, thereby displaying the team’s commitment to sober debate about the costs and benefits. He said the financial analysis “couldn't pass for a third-grade arithmetic homework assignment.”
The Chargers have claimed that the project would increase hotel industry revenue by $750 million over 10 years, but some tourism experts are concerned that the hike in hotel fees could drive away lucrative conventions, such as the annual Comic-Con gathering.
San Diego voters, to their credit, seem very skeptical about the deal. A poll published last week by the San Diego Union-Tribune found that only 39% of likely voters supported Measure C, the ballot initiative. That’s an increase of nine percentage points from a survey five weeks earlier. But it shows that the measure, which requires a two-thirds vote, still has a ways to go.
One reason may be that San Diegans know what it’s like to be burned by the NFL. The city is still shouldering $50 million in debt from a 1997 renovation of the Chargers’ existing home, Qualcomm Stadium, which the Chargers are threatening to abandon either by moving into a new San Diego park or leaving the city.
Then there’s the fiasco of the Qualcomm ticket guarantee: In order to keep the team, the city promised in 1997 that 60,000 seats would be sold for every home game, or it would make up the difference. From then until 2004, when the guarantee was cancelled, the city paid the Chargers more than $36 million. But it collected only $43 million in rent, reducing its average annual take from Qualcomm to a measly $1 million a year.
Stadium promoters, of course, maintain that the projects bring hundreds of millions of dollars in economic gains to their host cities. This argument has long since been exploded. As long ago as 2001, a study by the Federal Reserve Bank of St. Louis found that the rate of return for cities investing in stadium projects generally lags alternative municipal investments. “Metro areas that have invested heavily in sports stadiums and arenas have, on average, experienced slower income growth than those that have not,” reported the author, Adam M. Zaretsky.
Generally speaking, the projects involved huge public expenditures for an industry that contributed a minuscule amount to the local economy. Even if the public owns the stadium, the biggest gain from construction still ends up in the team owners’ pockets. That’s because it tends to show up as a higher resale price for a team playing in a newish park. Zaretsky cites the experience of Eli Jacobs, who bought the Baltimore Orioles for $70 million in 1989. In 1992, one year after the state of Maryland-built Camden Yards opened for the Orioles, Jacobs sold the team for $173 million — “an almost 150 percent return, with no money out-of-pocket for the new ballpark.”
Such factors make the Las Vegas and San Diego projects look even more absurd. Does Las Vegas really need a sports stadium to attract tourists? Adelson told the Review-Journal that the fall and winter schedules of the NFL would help buck up visitorship during off months. He complained that Sands occupancy is down to 50% for most of December.
Overall occupancy figures create grounds to doubt that figure. Last year, according to the Las Vegas Convention and Visitors Authority, occupancy rates fell from a peak of 92.8% in October to 78.5% in December. On the Strip, where Adelson’s Venetian resort is, occupancy was nearly 80%. Average occupancy year-round was 87.7%. Even if visitorship dips in the winter, one has to ask how much difference a stadium would make, and who would get the money. It’s worth noting, in any case, that Vegas has been growing smartly in recent years, with visitorship rising to a record 42.3 million last year, a gain of 16.4% over 2009, the post-recession nadir. Without a stadium, that is.
San Diego is also a vacation and convention destination. Its tourism industries are right to worry about the effect a big hike in the hotel tax might have on visitors.
The fundamental question in both cases is not whether the stadiums should be built, but why they should be built with public funds. If local plutocrats want to built monuments to their sports teams, there aren’t many reasons to obstruct them. But since they’re going to be reaping almost all the benefits, they should pay the cost — all of it. As public investments, sports stadiums aren’t “must-haves.” They’re musts to avoid.