Recreation and Sport Studies

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Case Study: How The NFL Fleeces Tax-Payers

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lead_largeEasterbrook exemplifies the level of gauging that the NFL and its owners get away with by explaining that since the NFL has obtained a not for profit status and receives tax exemptions from the government, the public is stuck with the burden of paying off the tremendous debts associated with the construction of coliseum like marvels. Easterbrook then provides the reader with an argument for a solution to the end of taxpayer fleecing by the NFL.

Premise

The NFL has government Backing and Non Profit Status. This came effect with Public Law 89-800. The 1966 law was effectively a license for NFL owners to print money. This sweetheart deal [for Non-profit status] was offered to the NFL in exchange only for its promise not to schedule games on Friday nights or Saturdays in autumn, when many high schools and colleges play football.

The non-profit status applies to the NFL’s headquarters, which administers the league and its all-important television contracts. Individual teams are for-profit and presumably pay income taxes—though because all except the Green Bay Packers are privately held and do not disclose their finances, it’s impossible to be sure. 

The NFL burdens the tax payers with the cost of the stadiums while keeping profits to themselves.In a typical arrangement, taxpayers provide most or all of the funds to build an NFL stadium. The team pays the local stadium authority a modest rent, retaining the exclusive right to license images on game days. The team then sells the right to air the games. Finally, the NFL asserts a copyright over what is broadcast. No federal or state law prevents images generated in facilities built at public expense from being privatized in this manner.

Politicians seem more interested in receiving campaign donations and invitations to luxury boxes than in taking on the football powers that be to bargain for a fair deal for ordinary people that use of the game’s images “without the NFL’s consent” is prohibited. Under copyright law, entertainment created in publicly funded stadiums is private property. Public officials who back football-stadium spending, meanwhile, can make lavish promises of jobs and tourism, knowing the invoices won’t come due until after they have left office. Pro-football coaches talk about accountability and self-reliance, yet pro-football owners routinely binge on giveaways and handouts.

Argument

NFL’s non-profit status should be revoked and congress should require that television images created in publicly funded sports facilities cannot be privatized. The result would be that the related costs incurred to the public are minimized and the league owner’s would become accountable to cover the funds the public previously funded (given the tremendous revenue generated by the NFL, Easterbrook does not see that as an issue).

Conclusion

If football images created in places funded by taxpayers became public domain, the league would respond by paying the true cost of future stadiums—while negotiating to repay construction subsidies already received. To do otherwise would mean the loss of billions in television-rights fees. Pro football would remain just as exciting and popular, but would no longer take advantage of average people.

Until public attitudes change, those at the top of the pro-football pyramid will keep getting away with whatever they can. This is troubling not just because ordinary people are taxed so a small number of NFL owners and officers can live as modern feudal lords and ladies. It is troubling because athletics are supposed to set an example—and the example being set by the NFL is one of selfishness.

Roger Goodell and the free market “so-called” defense

The National Football League is about two things: producing high-quality sports entertainment, which it does very well, and exploiting taxpayers, which it also does very well. Goodell should know—his pay, about $30 million in 2011, flows from an organization that does not pay corporate taxes.

His [Roger Goodell’s] windfall has been justified on the grounds that the free market rewards executives whose organizations perform well. But almost nothing about the league’s operations involves the free market. Taxpayers fund most stadium costs; the league itself is tax-exempt; television images made in those publicly funded stadiums are privatized, with all gains kept by the owners; and then the entire organization is walled off behind a moat of antitrust exemptions.

Specific Team of Examples of Fleecing Taxpayers


Washington Redskins

In Virginia, Republican Governor Bob McDonnell, who styles himself as a budget-slashing conservative crusader, took $4 million from taxpayers’ pockets and handed the money to the Washington Redskins, for the team to upgrade a workout facility. The Redskins’ owner, Dan Snyder, has a net worth estimated by Forbes at $1 billion. But even billionaires like to receive expensive gifts. 


Minnesota Vikings

The Minnesota legislature, facing a $1.1 billion budget deficit, extracted $506 million from taxpayers as a gift to the team, covering roughly half the cost of the new facility. Principal owner, Zygmunt Wilf, had a 2011 net worth estimated at $322 million; with the new stadium deal, the Vikings’ value rose about $200 million, by Forbes’s estimate, further enriching Wilf and his family.


San Francisco 49ers

The City of Santa Clara broke ground on a $1.3 billion stadium for the 49ers. Officially, the deal includes $116 million in public funding, with private capital making up the rest. At least, that’s the way the deal was announced. A new government entity, the Santa Clara Stadium Authority, is borrowing $950 million, largely from a consortium led by Goldman Sachs, to provide the majority of the “private” financing. Who are the board members of the Santa Clara Stadium Authority? The members of the Santa Clara City Council. In effect, the city of Santa Clara is providing most of the “private” funding. Should something go wrong, taxpayers will likely take the hit. The 49ers will pay Santa Clara $24.5 million annually in rent for four decades, which makes the deal, from the team’s standpoint, a 40-year loan amortized at less than 1 percent interest. At the time of the agreement, 30-year Treasury bonds were selling for 3 percent, meaning the Santa Clara contract values the NFL as a better risk than the United States government. the new stadium is being underwritten by the public, most football revenue generated within the facility will be pocketed by Denise DeBartolo York, whose net worth is estimated at $1.1 billion, and members of her family.


New Orleans Saints

Taxpayers have, in stages, provided about $1 billion to build and later renovate what is now known as the Mercedes-Benz Superdome. The Saints’ owner, Tom Benson, whose net worth Forbes estimates at $1.2 billion, Though Louisiana Governor Bobby Jindal claims to be an anti-spending conservative, each year the state of Louisiana forcibly extracts up to $6 million from its residents’ pockets and gives the cash to Benson as an “inducement payment”—the actual term used—to keep Benson from developing a wandering eye.


Seattle Seahawks

CenturyLink Field, where the Seattle Seahawks play, opened in 2002, with Washington State taxpayers providing $390 million of the $560 million construction cost. The Seahawks, owned by Paul Allen, one of the richest people in the world, pay the state about $1 million annually in rent in return for most of the revenue from ticket sales, concessions, parking, and broadcasting (all told, perhaps $200 million a year). Average people are taxed to fund Allen’s private-jet lifestyle.


Pittsburgh Steelers

Pennsylvania taxpayers contributed about $260 million to help build Heinz Field—and to retire debt from the Steelers’ previous stadium. Most game-day revenues (including television fees) go to the Rooney family, the majority owner of the team. The team’s owners also kept the $75 million that Heinz paid to name the facility.


Dallas Cowboys

Dallas Cowboys play, with its 80,000 seats, go-go dancers on upper decks, and built-in nightclubs, has been appraised at nearly $1 billion. At the basic property-tax rate of Arlington, Texas, where the stadium is located, Cowboys owner Jerry Jones would owe at least $6 million a year in property taxes. Instead he receives no property-tax bill, so Tarrant County taxes the property of average people more than it otherwise would.


References:

Easterbrook, G. (2015, December 8). How the NFL Fleeces Taxpayers. Retrieved October 03, 2016, from http://www.theatlantic.com/magazine/archive/2013/10/how-the-nfl-fleeces-taxpayers/309448/

Lehman, M. (2015, December 8). Image. Retrieved October 03, 2016, from http://www.theatlantic.com/magazine/archive/2013/10/how-the-nfl-fleeces-taxpayers/309448/

6 thoughts on “Case Study: How The NFL Fleeces Tax-Payers

  1. Every decision made in professional sports is usually made with one idea in mind, the bottom line. In your analysis of Easterbrook’s (2015) How the NFL Fleeces Taxpayers, your sarcastic comparison of NFL owners to “modern feudal lords” clearly indicates your stance on the NFL’s tax schemes. (I would jokingly add that the lack of taxes paid by the League is comparable to one notorious presidential candidate who also seemingly pays no taxes) NFL owners and Roger Goodell are laughing all the way to the bank, snickering at the notion that the palaces they build in the respective communities actually “stimulate the local economy.” Like you, I don’t buy that notion for a second. While some cities do have payment plans that place some of the onus on the tourism industry and alleviate pressures from local taxpayers, for example raising hotel and car rental taxes in the area, for the most part teams are exploiting local taxpayers for all they have.

    The NFL does not always get away with it though. Consider the situation just last year where the NFL was forced to refund taxpayers over $700,000 for their game day profiting of military celebrations.

    http://www.huffingtonpost.com/entry/nfl-to-pay-over-700000-back-to-taxpayers-for-sponsored-patriotism_us_573dffd5e4b0aee7b8e95423

    This article applauds the NFL’s integrity and handling of the situation, but has no mention of the other funds they have been funnelling from taxpayers for years. NFL owners across the league should sent all taxpayers a “thank you card”.

    Lastly, your analysis focuses solely on the NFL – what about other professional leagues? What other consumer exploiting tactics are used by professional sports leagues in order to get the one thing that matters: dollar bills. Consider the NCAA, we’ve known they’ve been exploiting their athletes for years in order to make millions, but what about the American public as taxpayers? Should those in charge of the NCAA be sending taxpayers “thank you cards” as well?

    Just some food for thought.

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    • Hi Sarah, thank you for your insightful comments. I appreciate you continuing the discussion with your thought provoking comments. I would like to further your argument that the NFL does not always get away with exploiting local taxpayers. You mentioned that the NFL was forced to refund taxpayers over $700,000 for their game day profiting of military celebrations, the NFL also donated around $440,000 to military groups as a part of their veterans’ day celebrations. “For Veterans Day last year, the NFL announced that it would donate cash to military groups for each point scored in designated games. During NFL telecasts that weekend, the league was praised for its grand generosity. The total donation came to about $440,000. Annualized, NFL stadium subsidies and tax favors add up to perhaps $1 billion. So the NFL took $1 billion from the public, then sought praise for giving back $440,000—less than a tenth of 1 percent.” (Easterbrook, 2015).

      The link you provided shines some much needed light on the situation. There is literature in the media arguing that the NFL should be praised for its generosity, but when critically analyzing the scope of the situation it seems as if the opposite should be true. I’m personally weary of the NFL’s connections to the media and the leagues control what is written about them considering “This year, CBS, DirecTV, ESPN, Fox, NBC, and Verizon will pay the NFL about $4 billion for the rights to broadcast its games. Next year, that figure will rise to more than $6 billion.” (Easterbrook, 2015)

      I think it is important to note that Gregg Easterbrook, the author of the article this case study is based on has a authoritarian view on Goodell and the NFL. “In return, the NFL creates nothing of social value—while setting bad examples, despite its protests to the contrary, regarding concussions, painkiller misuse, weight gain, and cheating, among other issues. The No. 1 sport in a nation with a childhood-obesity epidemic celebrates weight gain; that’s bad enough. Worse, the sport setting the bad example is subsidized up one side and down the other… Perhaps it is spitting into the wind to ask those who run the National Football League to show a sense of decency regarding the lucrative public trust they hold. Perhaps it is spitting into the wind to expect a son to be half what his father was (a senator until 1971).” (Easterbrook, 2015)

      You brought up a fantastic point. What about other professional sport leagues? Surely we cannot throw the NFL under the bus without other athlete exploiting institutions. Those NCAA executives should be uncapping their official collegiate licensed pens and writing out those thank you cards immediately.

      REFERENCES
      Easterbrook, G. (2015, December 8). How the NFL Fleeces Taxpayers. Retrieved October 03, 2016, from http://www.theatlantic.com/magazine/archive/2013/10/how-the-nfl-fleeces-taxpayers/309448/

      Like

  2. Yes, professional sport stadiums are funded by taxpayer dollars, but many times the tax payers vote in favour of public subsidization of professional sport facilities. For example, 77% of stadium subsidy referenda between 1990 and 2000 passed (Mondello & Anderson, 2004). If taxpayers agree to subsidizing these stadiums, can you really argue that the NFL is taking advantage of taxpayers? It also depends what taxes the money comes from. If the subsidization comes from sin taxes, as opposed to property taxes (like the Gateway Project; Buist & Mason, 2010), couldn’t you argue that the stadium is actually providing a benefit to the city in which it is built?

    Sport is an institution, whose benefits can outweigh any economic costs. While there is research that states that sport stadiums are not a beneficial investment, there is other research that finds that there are economic and intangible benefits to professional sport stadiums. For example, Humphreys and Zhou (2015) found that there was a positive relationship between professional sport stadiums and surrounding residential property value. When the Winnipeg Jets came back, and the MTS Centre was built, it improved the perception of downtown Winnipeg, and increased citizens confidence and civic pride in Winnipeg.

    I’m not sure if making images created in the stadiums public would solve the problem. The stadiums need to be built before these images can be created, so taxpayer money would still be used. You mentioned that the money from the images can repay construction subsidies already incurred, but how would that work? Would taxpayers get some sort of credit?

    Overall, this issue of whether the NFL is taking advantage of taxpayers is very complicated, and I think more than the economic costs need to be considered when evaluating this issue.

    REFERENCES

    Buist, E. A., & Mason, D. (2010). Newspaper framing and stadium subsidization. American Behavioural Scientist, 53(10), 1492-1510.

    Humphreys, B. R., & Zhou, L. (2015). Sports facilities, agglomeration, and public subsidies. Regional Science and Urban Economics, 54, 60-73.

    Mondello, M.J., & Anderson, P. (2004). Stadiums, arenas, and sport referendums: A comparative
    analysis of cities involved in the stadium game. International Journal of Sport Management,
    5, 43–71.

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    • No, I would argue that politicians impose on the taxpayer a situation where the NFL can and does take advantage of them.

      Since The NFL has government backing and non-profit status, the NFL can burden the tax payers with the cost of the stadiums while keeping profits to themselves. In a typical arrangement the taxpayer pays for the stadium and the team pays the local stadium authority a modest rent, retaining the exclusive right to license images on game days. The team then sells the right to air the games. Finally, the NFL asserts a copyright over what is broadcast. No federal or state law prevents images generated in facilities built at public expense from being privatized in this manner. Seem fair?

      You could argue that the stadium is providing benefit to city in which it was built, however the reality that faces cities is that these behemoth stadiums are only used by their NFL teams a few times a year. With that in mind the longevity on the potential of a positive return would be enough to cast doubt in the mind of the person who makes city budget decisions. Money could be spent other ways that give better results in improving the quality of life such as instilling transportation systems, social programs and other services.

      Sport is an institution but I find it a bit of a stretch to think that it is one whose benefits can outweigh any economic costs. Also, although I can see the intended connection I do not feel the comparison of when the Winnipeg Jets came back, and the MTS Centre was built is merited in the discussion of the implications of NFL stadiums due to geographical and social differences.

      Making images created in the stadiums public would solve the problem moving forward. Yes, the stadiums need to be built before these images can be created but the NFL has the resources necessary to build these stadiums so that the burden wouldn’t be on the taxpayer.

      The costs incurred to the public would be minimized and the league owners would become accountable to cover the funds the public previously funded, this could be done through a mass settlement that is passed down to the taxpayer level.

      Overall, I thought you brought up some very interesting points. And I do agree with your statement that more than the economic costs need to be considered when evaluating this issue.

      REFERENCES

      Alexander, Jason. “NHL Versus NFL: In Comparison – Etched In Stone”. Etched In Stone. N.p., 2015. Web. 1 Nov. 2016.
      https://www.stlouisfed.org/publications/regional-economist/april-2001/should-cities-pay-for-sports-facilities

      Worstall, Tim. “Hosting Olympics Bankrupts Another Place: Rio De Janeiro Declares Financial Disaster”. Forbes.com. N.p., 2016. Web. 1 Nov. 2016.
      http://www.forbes.com/sites/timworstall/2016/06/18/hosting-olympics-bankrupts-another-place-rio-de-janeiro-declares-financial-disaster/#14d97636f936

      Like

  3. Hey Jake,

    I wanted to comment as I had heard recently that a Seattle, WA investment group has offered to build a stadium in the hopes of having an NBA team move back there. The initial proposal did involve use of tax-payer money, but the revised plan now involves funding from a businessman named Chris Hansen and his partners. It is one of the first cases, to my knowledge, of a stadium being funded almost entirely from private funds.

    Though there are a few catches, mostly tax-break related (not surprising given the facts of the article you summarized), it seems as though this is finally a positive move towards having these mega-stadiums funded by the “right” people. I agree with your assertion that, until public attitude changes, tax-payers will continue to be “fleeced” by professional sports team owners. With this move, Chris Hansen has begun to shift the paradigm away from what we consider the norm, and onto a more logical and affordable model. After all, it seems silly that the public should pay for something that helps the rich get richer.

    On a final note, I recently read a book called Field of Schemes which delves into this issue in-depth. Definitely worth a read if you can find the time.

    http://www.bizjournals.com/seattle/news/2016/10/25/chris-hansen-seattle-nba-area-offer-tax-breaks.html
    http://money.cnn.com/2016/10/25/news/companies/seattle-nba-team-stadium-proposal/

    Like

    • Hi Brittany,

      Thank you for pointing me on to this. I knew that there was hopes of the supersonics returning back to Seattle, I did not know that they were this far along in doing so. In the article you cited, it is noted that Hansen told the public that he no longer needs public funds in order to continue on with his plans to bring back a NBA franchise to Seattle. While “CenturyLink Field, where the Seattle Seahawks play, opened in 2002, with Washington State taxpayers providing $390 million of the $560 million construction cost.” (Easterbrook, 2015).

      Since your comment on this article, the commissioner of the NBA has commented on possible expansion.“SiriusXM NBA Radio passed along comments Thursday from the league’s chief executive, who admitted he wasn’t sure adding more organizations “is necessarily the right direction to go” at this stage. He expanded on issues like superteams, which make it difficult to have an even balance of talent: Silver directly mentioned Seattle, which has been without an NBA franchise since the SuperSonics moved south to become the Oklahoma City Thunder in 2008. He called it a “first-class market,” but he reiterated the city’s need for a new arena to house a potential team.” (Daniels, 2016)

      Silver goes on to mention that after more pressing matters are resolved they may look at expanding once again. It will be interesting to see moving forward what sort of developments will take place. Will the NBA follow the NFL’s example of fleecing the people of Seattle or will it help enable Hansen to assume financial obligation and lift the burden off the taxpayers?

      REFERENCES
      Easterbrook, G. (2015, December 8). How the NFL Fleeces Taxpayers. Retrieved October 03, 2016, from http://www.theatlantic.com/magazine/archive/2013/10/how-the-nfl-fleeces-taxpayers/309448/

      Daniels, T (2016, Nov 18) Adam Silver Comments on Seattle and Potential NBA Expansion. Retrieved November 28, 2016 from http://bleacherreport.com/articles/2676891-adam-silver-comments-on-seattle-and-potential-nba-expansion

      Like

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