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Build It, Or Else

The strange, broken economics of publicly-financed sports stadiums.

11:00 PM, Feb 21, 2006 • By JAMES THAYER
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EVEN GANGSTERS ARE MORE SUBTLE. In Mario Puzo's The Godfather, consigliore Tom Hagen says, "You've got some labor trouble coming up."

Movie producer Jack Woltz demands, "You trying to muscle me?"

"Absolutely not," Hagen replies smoothly. "I've come to ask a service for a friend."

The Seattle Supersonics have determined that their home, Key Arena--last refurbished 10 years ago to the tune of $95 million--is deficient. Only 45 percent of Key Arena's suites are rented, whereas in other cities the suites run at 90 percent to 100 percent capacity. Renovations are needed and new leases should be negotiated, the team believes. NBA Commissioner David Stern has said the Key Arena lease is the least favorable to a team in the NBA. The Sonics say they have lost $56 million since 2001. The city council and state legislators at first balked at jiggering taxes to help the Sonics.

So the team's principal owner, Howard Schultz, chairman of Starbucks Coffee Company, has begun reading from a well-thumbed script. "We've instructed [the team president] to look at alternatives," he said. "You don't have to be that smart to understand what that might mean."

It means moving the team, of course. Schultz threatens to take his ball and go home. Or to Kansas City, Anaheim, or San Jose, which have been sniffing around the Sonics lately.

So begins another round of the stadium shakedown, the racket where team owners wrest away public money for their private businesses. Threatened with losing a professional sports team, otherwise savvy politicians suddenly suffer spine-ectomies. Time and again the shakedown works.

It shouldn't.

NOT TOO LONG AGO the public would have scoffed at using taxpayer funds for a stadium. Princeton political scientist Michael Danielson writes, "Professional sports were . . . a product of the business ethos[.] Teams were privately owned; they were organized into private leagues; and they played in private ballparks." In 1950 all National League and all American League stadiums except one (Municipal Stadium in Cleveland) were privately owned. The legendary ballparks--Fenway in Boston and Yankee Stadium in New York--were built without taxpayer dollars. Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, notes that Municipal Stadium--often referred to as the Mistake by the Lake--was funded in 1928 when voters approved a $2.5 million bond issue. But it wasn't until almost a half century later, with publicly-funded stadiums in Baltimore and Milwaukee that "the stadium hopping, city-hopping fuse that continues to burn brightly today," was lit, Keating says.

Burning is no longer a sufficient metaphor; gelding might be better. Witness the District of Columbia's recent attempt to lure Montreal's baseball team to the city. The mayor first offered $200 million in city assistance to finance a ballpark. Not enough. So $275 million was put on the table, then $300 million, then $340 million. In for a penny, in for a pound. The city is now issuing $535 million in bonds to build the stadium. A new estimate that the Nationals' stadium might cost $700 million generated hardly a squeak from the trampled and left-for-dead opponents of public financing.

Denver's Coors Field cost taxpayers $200 million--out of a total construction cost of $215 million. Bank One Ballpark in Phoenix, now called Chase Field, cost $355 to build, of which Arizona taxpayers coughed up $238 million. The Seattle Mariners' Safeco Field cost $498 million, and the taxpayers picked up three-fourths of it, $372 million. The list goes on and on.

To justify the giveaways, team owners promise urban renewal and a stronger local economy. The politicians buy into it. Regarding the Sonics proposed stadium refurbishment, Washington State Senator Margarita Prentice gushed, "The ripple effect defies our imagination."

MAYBE OUR IMAGINATION, but little else. University of Maryland professor Dennis Coates and University of Illinois associate professor Brad R. Humphreys studied the effects of pro sports on the economies of 37 cities, and concluded that "claims of large tangible economic benefits do not withstand scrutiny." They examined net benefits, those the city would not have received without the presence of the team.