Friday, April 27, 2012

Fund the Bills or the Bulls?

Lose the Bills, Help UB

by Bruce Fisher




How Western New York collegiate athletics could thrive again if we stopped subsidizing the NFL







   The Buffalo Bills won’t leave Buffalo for Los Angeles, no matter how small or how large the shakedown the team manages to get from terrified local officials, because there are three other National Football League cities for which Los Angeles is a more credible threat—to the extent that LA or any other alternative venue is a credible threat at all. The State of California is in structural fiscal crisis and is unlikely to support public funding of any stadiums or arenas, but even within the state’s boundaries, the name of America’s second-largest media market is waved before the noses of cowering officials as a threat to get more money from them for subsidies for professional sports. That’s currently the case in Sacramento, California’s state capitol, where the question is whether a new $400 million arena for the National Basketball Association’s Kings franchise will be delivered on time to the family that owns the team, or whether that team will move instead to Anaheim, which is in the Los Angeles megapolitan area. Los Angeles is currently the threatened destination for the Minnesota Vikings, too, just as it is for the struggling franchises in Jacksonville and New Orleans. If taxpayers in St. Louis don’t come up with money for stadium improvements, the media there say, then Los Angeles could get its Rams franchise back.

     Don’t believe the LA threat. Whether or not Erie County and New York State pony up another $200 million handout to the Buffalo Bills so that “our” NFL franchise can export tens of millions of dollars a year to the Detroit owner and to the non-resident athletes who perform here a dozen times a year, Buffalo will remain a prime site for pro football. That’s because Buffalo has a fan base that stretches far beyond its media market—a media market that is huge, if understated, because it catches most of Upstate New York and Southern Ontario. The actual viewing audience of the licensed television stations here encompasses Toronto, Hamilton, and Niagara Falls, as well as Rochester and northern Pennsylvania, making this market, with more than two million viewers of analog and digital TV signals, number 11 among North American markets. By the numbers, the Buffalo media market is bigger than those of Phoenix, Detroit, Seattle, Minneapolis, Tampa, Miami, Denver, Cleveland, San Diego, Charlotte, Baltimore, Indianapolis, and Pittsburgh, to name just a few NFL cities.

     Across the US, easily bamboozled politicians may be waking up to the emptiness of the threat of relocation. Or maybe not. Two weeks ago, state legislators in Minnesota voted against a $975 million package that would build a new stadium for the Minnesota Vikings NFL franchise, a deal that includes the team’s owner pledging $427 million to the project. The downtown Minneapolis stadium would require city residents to pay $188 million in operation and maintenance over the next two decades over and above the $150 million in up-front, city-funded construction. But thriftier and more populist suburban Republican state legislators and a handful of progressive Democrats—angry that the usual citywide referendum rule was waived for this deal—teamed up to vote against the handout on a roll-call vote. Predictably, after the franchise owners began to mutter publicly about Los Angeles, the legislature is expected to cave by Friday. They will take more voice votes rather calling the roll, in the hope that the voice vote will shield members from voter anger over the giveaway.

     Back in Sacramento, which has a Designated Market Area that delivers 1.4 million viewers (half a million less than see Channel 2, 4, or 7 in the Buffalo-Toronto-Rochester-Jamestown viewing area), the shakedown is for a basketball team. But Sacramento is at or near the epicenter of the mortgage-default crisis zone. Sacramento has 12 percent unemployment in a state with a multi-billion-dollar structural deficit. Anybody who believes that an NFL team is going to go to a non-NFL market in California is not paying attention to the crisis in municipal finance that is worse in that state than in any other, but that is widespread across the US.

     Meanwhile, in the very healthy economy of Portland, Oregon, which is not in financial crisis, and which in fact is a metro that continues to grow in both population and wealth, there is an example of a fairly large media market that has only one major-league sport franchise, the NBA’s Trailblazers. Portland has never had a National Football League franchise. Portland has also never had a Major League Baseball franchise.

     How can Portland survive with a single major-league pro sport team? The answer seems to be that amateur sports, particularly collegiate sports, fill the bill in Portlandia—and in many other medium-sized and small markets. And the evidence is that the markets without the major league franchises get a much larger economic return on their public investment when the taxpayer dollar goes into college sports rather than into the pockets of pro sports athletes and owners.


College sports enrich regions

     The University of Wisconsin football team, the Badgers, plays in a stadium that seats 80,321 and has 72 suites, 337 club seats, and 590 varsity indoor seats. In 2005, the stadium attendance record was set when Wisconsin played Minnesota before more than 83,000 fans. There are more than 69,000 season-ticket holders for Badgers football.

     There is no professional football team in Madison, where the Badgers play. There is no professional football team in Columbus, where the Ohio State Buckeyes play. There is no professional football team in Urbana-Champaign, Illinois, or in the entire state of Oregon, or in many of the rest of the college towns where Big Ten, PAC-10, and Southeast Conference college football teams play.

     The economic impact of college football has been measured over and over again, and has been found, by both business reporters and by academics, to be huge. In a seminal and often-cited 2000 study for the Journal of Sports Management, University of Kentucky economist Brian Goff found that “evidence indicates that success, and at times merely participation, in college athletics provides several benefits including direct financial gain and such indirect benefits as increased university exposure and, in turn, increased financial contributions and increased student applications and enrollment.”

     Forbes magazine looked at the cash flows of the 20 top-grossing college football programs and found that they are cash cows for their host universities. The Wisconsin Badgers delivered a $20 million profit to the University of Wisconsin in 2009 on $43 million in revenue. The Ohio State Buckeyes “franchise” was worth $78 million based on 2009 revenue of $61 million and profit of $26 million. The Michigan Wolverines in Ann Arbor brought home a profit of $47 million and the Michigan State Spartans a profit of $28 million, and the story is repeated everywhere from Nebraska to Iowa to Pennsylvania to South Carolina, everywhere that big public universities put forward an entertainment product without having to compete against publicly subsidized National Football League franchises.

     Even when collegiate athletics merely break even, there is a large body of evidence that a college football program that dominates in its media market is a net winner to the host community. Fans who are loyal to the college team are prime donors to the college. Fans who attend home games spend their money at home. Rather than an out-of-town owner and non-resident players and staff exporting revenues to their homes elsewhere, college athletics bring outside money in, and keep it in. Even in small markets, there is big money. The latest numbers for Syracuse University are that Orange basketball brought in $10 million in profit to the University on $18 million in revenue.

     That revenue, even for small programs, stands to grow. The National Collegiate Athletic Association last year concluded a revenue-sharing agreement for televised games, and the numbers that have become public are staggering. The average per-team revenue sharing from televised games for Big 10 schools has been calculated on Kristi Dosh and Alicia Jessop’s the Business of College Sports website (businessofcollegesports.com) to be $17.6 million apiece—over and above the proceeds from ticket sales at the home stadiums. Universities in the Pacific and the Southeast conferences stand to get similar numbers, with the smaller conferences getting less money, but money in the millions estimated from $1.1 to $5.3 million a year for as long as broadcasting continues.

     The key contrast between professional sports money and collegiate sports money is this: In pro sports, the taxpayer-funded stadium subsidies and operating expenditures enhance the profits of private owners, whereas in collegiate sports, the taxpayer money returns to taxpayer-supported educational institutions.


If the Bills go, could college sports here grow?

     Someone should ask the State of New York to do an economic-impact analysis of what would happen were the $200+ million that the Buffalo Bills franchise seems to be demanding of taxpayers were to be redirected into the University at Buffalo so that its collegiate athletics could grow to the size, prominence and market-share of Ohio State, Michigan State, Wisconsin, Oregon or any number of other major southern, Midwestern or western public universities.

     Doubtless, there is some value to having a professional football franchise in Buffalo—but the consensus among academic economists is that that value cannot be measured in actual dollars, as the Buffalo Bills do not add economic value to the regional economy, but rather subtract value, and export it. Any economic analysis should include the impact of the ticket-buying fans spending somewhat less on collegiate sports tickets—a season ticket to the Wisconsin Badgers costs $294 for the seven-game home season, compared to $320 to $640 for a lower-level outdoor eight-game Buffalo Bills season ticket. Such an analysis should also collate the numbers when fans, and non-fans alike, spend many tens of millions of dollars less on annual subsidies to the professional sports franchise. Slightly fewer sales tax dollars would be generated if 80,000 tickets were each sold for seven college football games compared to eight professional football games and the odd pre-season game, but then all the revenue from concessions, parking, jerseys with team insignia and other sources would go to the University and not to out-of-state owners were the fans to turn out for UB rather than the Bills. The substitution effect is pretty straightforward: in markets without pro football, football fans buy college football. And then some of them stick around to support basketball, and then other sports, too.
     The obstacle that keeps the University of Buffalo’s Division I football team from becoming a popular, profitable, well-known attractor of new donations to a major research university is simply that there is a taxpayer-funded competitor in the media market called the Buffalo Bills. Apparently, there simply isn’t enough taxpayer money in the community to support both the college sports product and the professional sports product.

     But the studies show that the college or university that sponsors the team delivers a return to the host community. This is because whatever public money is required to run the stadium, pay the coaches, and to equip and subsidize the athletes, is overwhelmingly overmatched by the income—including alumni and corporate support—that the university gets in return. Where college football programs fail to deliver big profits to their hometowns is in markets dominated by the National Football League. Compare the Big 10 teams in Wisconsin, Iowa, central Illinois, Nebraska and Indiana to Northwestern University. Everybody profits, but Northwestern brings in far less money in a media market dominated by Da Bears.

     The University of Wisconsin Badgers play in a stadium known as Camp Randall, named for the Civil War-era mustering point from which Wisconsin volunteers went forth to conquer the Confederacy and rescue the Union. In 2005, the University of Wisconsin finished a $109.5 million renovation of the stadium that made the place a palace for collegiate athletics. The ongoing stream of profits from the Badgers helps to fund one of the most comprehensive athletics programs in the country on a university campus that is at once an intellectual and research powerhouse, a major employer, and a country club for its 42,500 students. Among public universities in 2009, the University of Wisconsin ranks fourth in federally funded research, second in total science and engineering research, and second in overall research expenditures, and brings in over $479 million in federal research grants to add to the $209 million in gifts it obtained just for research.

     One can only wonder what would happen if our politicians decided that the next dollar of stadium-upgrade financing for luxury suites, indoor seating, locker rooms, practice fields, and associated construction would go to a sports franchise already owned by the taxpayers—a franchise that puts money back into the regional economy rather than draining it.

     It’s pie-in-the-sky to expect that the UB Bulls could quickly build a program as profitable as the University of Texas Longhorns, which in 2011 produced a profit of $68.3 million on revenue of $93.9 million. But Syracuse University earned over $3 million in profit from its football team last year. And except for the money spent on materials imported from outside the Syracuse region, the $19 million in revenues stayed inside the Syracuse region.

     The question the NFL would like taxpayers here to ask is how much we intend to give to the NFL for the privilege of keeping the Bills. The question we should ask ourselves is something quite different: What prevents college sports from doing for UB, Buffalo State, Canisius, and the other Catholic colleges what college sports do for the Big Ten schools, for Syracuse, and for all those other schools that thrive on the revenue, the institutional PR, and the buzz of non-professional sports? The answer is not one that the NFL wants you to hear, which is that in a medium-sized market like Buffalo, it makes no economic sense to subsidize professional sports when professional sports probably starves collegiate athletics.

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