When the Washington, D.C. city council unanimously approved spending $183 million in cash and tax breaks on a new stadium for D.C. United earlier this month, reactions were split, to say the least. Some in the media celebrated a long-awaited deal to give the 18-year-old Major League Soccer franchise its own soccer-specific stadium for the first time as crucial to keeping the team from leaving the District, while revitalizing an underdeveloped neighborhood. Others (including, yes, me and VICE’s Aaron Gordon) pointed to the fact that this would be the largest public subsidy ever for an MLS franchise, that the company that wrote the economic impact report later admitted that its rosy estimates were overblown, and that soccer stadiums have never been known to revitalize squat, anyway.
And then there were those who wondered: for $183 million, wouldn’t it have been cheaper for D.C. to skip the stadium and just buy the team?
It’s an especially cogent question with D.C. United, since MLS teams haven’t historically come with crazy high price tags. Indonesian media mogul Erick Thohir and sports-agent-turned-NBA-exec Jason Levien paid $30 million for 60 percent of the team two years ago, putting the valuation of the whole franchise at a then-MLS-record $50 million. Yes, some teams have changed hands for more since then—most notably, the owners of Manchester City paid $100 million for the rights to an expansion New York franchise, NYC F.C., that will begin play next spring. But even then, for what it’s paying for a stadium, D.C. could have gotten the whole team and all its future revenues, plus had enough left over for either David Luiz or for keeping 5,000 city residents from becoming homeless, take your pick.
And this isn’t an uncommon scenario. The city of Miami and Dade County spent more than $800 million in 2009 on a new stadium for the Marlins, who according to Forbes’ estimates could have been had at the time, lock, stock, and Hanley Ramirez, for just $277 million. Last year, Glendale, Arizona approved $225 million in operating subsidies for the Coyotes—this on top of the arena the city had already provided to the team—to grease the skids so that new owners could buy the team for $170 million. And mere blocks from the site of the new D.C. United stadium, the Washington Nationals received about $700 million in taxpayer money for their new stadium, even as the team itself was being sold for $450 million.
$700 million? You’d be a sucker not to buy. Photo by Nymfan9 via WikiMedia Commons
The numbers make your eyes glaze over after a bit, but add them up and you get all kinds of crazy. If the goal of fronting cash for new sports venues is to keep team owners from using their monopoly-given right to skip town and leave fans with no one to root for, then one workaround is obvious: cut out the middleman, and buy the team.
If you’re thinking, Wait, my local government can’t even pick up the garbage on time, what would it look like if they had to hold six months of hearings to decide on whether to sign a shortstop?, there’s actually plenty of precedent for this, none of it bad. Several minor-league baseball teams are or have been municipally owned, and manage their operations the same way any billionaire who decides to buy a team as a plaything does: they hire professional managers to run the day-to-day show. A similar mechanism is in place for the three Canadian Football League franchises that are owned by fans via non-profit corporations (a la the Green Bay Packers), not to mention many of Europe’s top soccer teams, including the last two European Champions League winners, Real Madrid and Bayern Munich.
Okay, so there is one small holdup with the public owning sports teams in the U.S., which is that the major pro sports leagues here have dedicated themselves to blocking it at every turn. McDonald’s heiress Joan Kroc once tried to give the Padres to the city of San Diego as a charitable donation, but was overruled by MLB; a similar league edict later prevented the city of Pittsburgh from getting a share of the Pirates in exchange for a $20 million “loan” that was never repaid. The NFL was so freaked by the mere prospect of anyone trying to replicate the Packers that it wrote a ban on non-profit ownership into its league constitution. Congress considered a bill to pull leagues’ antitrust exemption for TV rights if they barred community ownership, but like just about all Congressional attempts to reign in sports leagues, it’s gone nowhere.
Okay, so no league is voluntarily going to allow its franchises to fall into public hands when it can keep on using its monopoly power over team ownership to extract subsidies. Is there any other way to force them to?
The answer is: maybe. And the trick lies in one of the same governmental powers that team owners use on their side in stadium deals: the power of eminent domain.
You’re probably familiar with eminent domain as the means by which the government forcibly takes private land to make way for a highway or public building or hyperspace bypass, having only to pay whatever a court decides after the fact to be fair market value.The legal principle goes back hundreds of years, and doesn’t have a great rep, especially as courts have expanded the notion of “public use” to include taking people’s houses to hand over to private developers so long as it would promote “economic development”—even if there was no guarantee that the development would stick around more than a few years.
In the eyes of the courts, though, there should be no legal difference between a few acres of dirt and other private property such as, say, a pro sports franchise. Back in the dim recesses of sports history, the city of Oakland and state of Maryland attempted to test this theory, launching condemnation proceedings against the Raiders and Colts to try to block those teams’ moves to Los Angeles and Indianapolis in the 1980s. Both were unsuccessful, for different reasons: in the Colts case, a court ruled that the state had acted too late, signing the eminent domain bill into law hours after Colts owner Robert Irsay, seeing what was coming, had packed the team’s entire worldly goods into moving vans and sent them to Indianapolis (via 15 different highways, to avoid arousing suspicion). The Raiders case, meanwhile, bounced around the courts for a while before an appeals judge ruled that seizing the team would unfairly interfere with interstate commerce. (Yes, Oakland and L.A. are both in the same state, but the NFL is interstate, and … something about the Commerce Clause, okay?)
Some old white guys arguing about the commerce clause or whatever. Painting by Junius Brutus Stearns via WikiMedia Commons
And as far as legal precedents go, that’s been it for the past 30 years. Roger Noll, the Stanford economist who’s followed franchise relocations for so long that he actually testified against Bud Selig’s attempt to duck taxes for buying the Seattle Pilots and moving them to Milwaukee, says that “whether eminent domain would work probably varies from state to state and from judge to judge. In the past two decades the courts have become more skeptical of the use of eminent domain and so have narrowed its scope, but this use probably is still in the range of uncertainty.”
Noll says—and David Morris of the Institute for Local Self-Reliance, which has advocated for public ownership of sports teams, agrees—that the bigger problem these days would likely be cost. Franchise values, floated by the cable TV bubble, have soared in recent years to where a United or Marlins situation is less likely—especially if courts require that taxpayers pay a premium in order to buy a team.
Still, eminent domain can be a worthwhile arrow in the municipal quiver. Say you’re a city council with a pro sports team demanding $200 million or so in public cash for a new building—let’s call them the “Milwaukee Bucks”—under threat of leaving town if its owners’ demands aren’t met. Instead of reaching for your municipal checkbook, you respond by drawing up eminent domain paperwork.
In the best case scenario, the mere threat is enough to force the team owners to lower their subsidy demands. In the worst, yes, you’re stuck paying close to $600 million for an NBA franchise, but keep in mind two things: first off, that’s how much the current Bucks owners just paid on the open market for the franchise, so presumably somebody thinks they’ll bring in enough revenue to make that worthwhile. Plus, if you don’t want to be stuck with the risk of the Bucks not earning back your investment, you can always re-sell the team to new private investors—even if you need to sell for $50 million or $100 million less in order to get new owners to agree to an ironclad lease, that’s still cheaper than handing over $200 million for nothing.
Is that all too glib to be politically palatable? Maybe. But if there’s one thing that we’ve seen time and again, it’s that elected officials are—with a few notable exception—way too timid about exploring what cards they have to play in stadium and arena battles. As Chicago White Sox owner Jerry Reinsdorf famously said after threatening to move his team to Florida in order to extract stadium money from the Illinois legislature, “a savvy negotiator creates leverage.” There’s nothing stopping cities from trying to be a little savvy, too.
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