An End to Sports Welfare?

An End to Sports Welfare?
July 1, 2005

When Dallas Cowboys owner Jerry Jones asked Arlington, Texas voters to pay for a new stadium last November, he did not call the classic plays from the sports welfare playbook.

He could not say America's Team needed a state-of-the-art facility to compete, since Texas Stadium (in the Dallas-adjacent suburb of Irving) has more luxury suites than any other stadium in the National Football League (NFL) and the Cowboys won three Super Bowls in the 1990s.

He could not say he was financially strapped, since his franchise ranks sixth in the NFL in profits and second in revenue, according to Forbes magazine. Most importantly, he did not use the team owners' favorite and most effective threat--to move to a new city--because the Cowboys always have had very strong local fan support, the Dallas-Fort Worth media market is the fifth largest in the country, and the Dallas Cowboys is a powerhouse global brand name.



Lease, Election, Court Deadlines

But Jones had three key deadlines to beat. His lease in Irving was scheduled to run out in 2009, so a new stadium deal needed to be done quickly. Electorally speaking, there was no better time to pass a tax increase than during the high-profile presidential vote of 2004; special elections usually draw low turnouts, and the anti-tax older folks show up in droves.

But perhaps the most important deadline of all loomed in 2005, when the window for public financing of sports stadiums in the United States may be slammed shut by two court decisions expected to be handed down during the year.

Kelo v. New London, which the U.S. Supreme Court is scheduled to rule on this summer, could decide once and for all when or even whether governments have the right to use eminent domain to acquire private property for the benefit of private businesses.

Meanwhile, Hamilton County v. Cincinnati Bengals Inc., which is being heard in federal court in Cincinnati, is challenging football's federal antitrust exemption, forcing all NFL teams to open their closely guarded books, and arguing the Bengals' claim of build-it-or-we-can't-compete is tantamount to fraud.



Threat to Tax Funding

Jones' public relations people swear the lawsuits were not on his radar screen. But sports business specialists across the country say these two cases could bring the taxpayer-financed stadium-building boom of the past 15 years to a merciful halt.

For whatever reason, the Cowboys' flamboyant owner convinced the Arlington City Council in August 2004 to rush hikes in sales, rental car, and hotel taxes onto the November 2004 ballot. He then unleashed a mass-media blitz starring old Cowboys heroes such as Roger Staubach and Troy Aikman, spending more than $5 million in all--an extremely high amount for a local election, even in the high-stakes stadium game.

The tax hikes passed 55 percent to 45 percent, and the Cowboys will move into a new, retractable-roof stadium in 2009.

But it could be the last deal of its kind. On the same day Jones received his gift, voters in Kansas City and St. Louis rejected similar measures to fund sports facilities. Since then, Washington, DC has agreed to build a new stadium for the relocated Expos baseball team (now the Nationals), but its city council insisted the stadium be financed with a significant amount of private money. Public sentiment may finally be turning.



$17.3 Billion Since 1990

From 1990 to 2003 there were 66 major construction and renovation projects for professional sports stadiums and arenas in the United States, costing $17.3 billion, according to the League of Fans, a sports welfare watchdog group founded by Ralph Nader. Sixty percent of the funding, an estimated $10.3 billion, came from the public purse.

With the economy and stock market no longer booming, and with the public becoming more skeptical about the rosy economic claims of billionaire team owners, the era of easy money already was drawing to a close. Now the two court cases are poised to determine whether the fundraising tactics of professional sports teams and their local boosters are even legal.



Questions about Eminent Domain

As with the Texas Rangers stadium before it, eminent domain likely will be invoked to assemble land for the Cowboys football stadium. The Arlington City Council already has threatened to use it if any property owners decide to hold out.

The city has claimed the area where the stadium will be built is blighted and full of crime, neither of which is true--the local housing prices and crime rates are about average for the city.

Such spurious claims in the service of forcing small property owners to sell to larger ones have become all too common. If the Supreme Court requires the justifications to be even slightly more rigorous, and if Hamilton County succeeds merely in publicizing the NFL's notoriously secret finances, then the balance of power will shift away from the teams. And if the judges take decisive action, 2005 could be the year the public stops lining the pockets of billionaire owners and millionaire players by paying for the places where they earn their living.


Daniel McGraw is the author of First and Last Seasons: A Father, A Son, and Sunday Afternoon Football (Doubleday). A version of this article appeared in the May issue of Reason, an editorially independent publication of the Reason Foundation. Reprinted by permission.