City Thinks It’s Fine Business to Attract Raiders

Allen Davis, born 58 years ago on the Fourth of July in Brockton, Mass., and managing partner of the Los Angeles Raiders, has just demonstrated once again that of all the businesses in these United States, the easiest money is in sports.

Davis, who brought his professional football team from Oakland to Los Angeles in 1982, is now moving them to Irwindale, an industrial community in the San Gabriel Valley that has guaranteed Davis $115 million in financing for a new stadium and handed him $10 million in earnest money up front. Eventually, when all the taxpayer-supported financing is paid off, Davis--not the city of Irwindale--will own the stadium.

Meanwhile, across the country, Joseph Robbie, owner of the Miami Dolphins, has built his own stadium after failing to persuade Miami taxpayers to pay for improvements on the Orange Bowl. But Robbie, too, had public help in the form of Dade County tax-exempt revenue bonds that lowered the interest rate on his financing.

Elsewhere, it is estimated, 20 cities plan to build stadiums in hopes of attracting a franchise from the 28-team National Football League or the 26-team major leagues of baseball. Others are building sports arenas to attract teams from the National Basketball Assn. or the National Hockey League.

Why are municipalities, which usually cry poverty, shelling out financing for stadiums and sports arenas? Why don’t more of them tell team owners, as Miami’s citizens told Joe Robbie, to build their own ballparks? Because there are more cities than teams and the competition to be “major league” is intense. So city and state officials offer deals to sports team owners that you don’t find in any other line of business.

Tax-Exempt Bonds Disallowed

Baltimore, for example, was willing several years ago to pay Robert Irsay, owner of the Colts football team, an above-market price for some land he owned while also lending him money at below-market interest rates in a vain effort to prevent his moving the team to Indianapolis, which in turn had built a domed stadium and given Irsay financial aid in order to keep him away from Phoenix, which also was bidding for the Colts.

New Jersey used tax-exempt revenue bonds to build the Meadowlands sports complex, which attracted football’s New York Giants and Jets. And tax-exempt stadium bonds became so common--financing, among others, the Metrodome for Minnesota’s Vikings and Twins and the Kingdome for Seattle’s Seahawks and Mariners--that Congress disallowed the exemption in the new tax law. So Irwindale must float more expensive taxable bonds to build its stadium for the Raiders.

Oh sure, the use of taxpayers money is defended on grounds of economic benefit. But such claims are frequently overblown. Football’s Green Bay Packers, a team owned by the citizens of that Wisconsin town, have done an economic study that says, between restaurant meals and fill-ups at local gas stations, the Packers bring an additional $12 million to Green Bay. A warehouse or small factory would do more.

And there are hidden costs as well, because stadium bonds are never financed solely through revenue from the box office or concessions.

“Stadiums usually don’t make money,” says Vice President David Hitchcock of Standard & Poor’s bond-rating service. The businesses of Irwindale may face additional taxes to support the Raiders venture. “Generally there’s another tax, a sales tax or hotel tax, that supports the bonds,” explains Edward Kerman, a managing director of Moody’s.

Which means that everybody, rich and poor alike, gets to pay for the stadium. But not everybody gets to watch, because today’s new stadiums concentrate on renting expensive corporate sky boxes and selling blocks of season tickets. That produces a more stable cash flow than the average fan’s ticket purchase did in the days when brewery owner Jacob Ruppert built New York’s Yankee Stadium and attracted the fans to pay for it with a player named Babe Ruth.

But it does no good to get nostalgic. Sports has changed only as our country has changed. In the supposedly good old days, teams played in the biggest cities because that’s where the fans were. Now the fans watch television and the ballparks are becoming, in part, places of tax-deductible business entertainment--with players paid on a scale that can only be afforded because of advertising revenue from TV.

Yes, everybody knows a team is more than a factory; that it really is an emotional rallying point for a community. But it is also a commercial enterprise, and sports entrepreneurs frequently take advantage of the confusion, playing on the emotion but dealing in cold hard cash.

“This business has become sophisticated,” says Anthony Tavares of Spectacor Management, a company that manages stadiums for Pittsburgh, Philadelphia and other cities. “But frequently the city negotiator is only a part-time overseer or, worse, a fan.”

The real problem arises because city officials play like amateurs in a game for professionals--as demonstrated by Irwindale handing $10 million to Al Davis or New York kowtowing to George Steinbrenner lest the Yankees move to New Jersey. Professional negotiators might close the kind of loopholes that Davis has used to escape first Oakland and now the Coliseum for cushier deals elsewhere.