Wednesday, April 25, 2012

NFL Shakedown

Buffalo, The NFL, and Deja Vu


by Bruce Fisher




Another $200 million for football but not for ECC?

     Back when there were 17 of them, Greg Olma was one of only two Erie County legislators to vote against former Erie County Executive Dennis Gorski’s $202 million subsidy deal with the Buffalo Bills. Gorski’s 1997 deal guaranteed Ralph Wilson’s house, which means that Wilson would receive all the money he’d get from selling all his seats whether or not his firm actually filled all the seats in the county-owned stadium. Gorski also “negotiated” free public safety for the Buffalo Bills provided by the Erie County Sheriff, plus frequent stadium improvements, plus all the parking and game-day refreshment revenue generated there. The deal has been an uncontested part of each Erie County budget since then, as durable as any bond covenant; back in 2005 when the Legislature wouldn’t give the county executive the revenue his budget required, everything but bond payments and the Buffalo Bills got cut. Gorski’s deal has been a boon to the television stations and to the daily newspaper, too, which have given the Buffalo Bills almost daily coverage, relying as they do on the advertising revenue they generate by delivering their audiences of sports fans. Current County Executive Mark Poloncarz hired Gorski’s staff to negotiate the new long-term Buffalo Bills lease deal. The question today is not whether the new county executive will offer up the equivalent of an entire year’s Erie County property tax to the Buffalo Bills just as Gorski did, but whether the new county executive will offer up even more public money than Gorski did.

     Looking at the current Erie County Legislature, which has shrunk by six seats, it’s hard to imagine any legislator, even one with a pro-labor, pro-environment, and pro-urban voting record, challenging the idea that the citizens of Erie County should continue to give one elderly Detroit-area businessman more than $14 million a year for the next 15 years, as Gorski and his team did for the past 15 years, in return for that Detroit-area businessman keeping his business here.

     The only challenge to the multi-billion-dollar international practice of handouts to privately owned professional sports franchises comes from a handful of academic economists who speak truth to all that power in journals and on websites like the Sports Economist (thesportseconomist.com).    Summing up their findings is pretty easy, because they pretty much all conclude that public subsidies for these private enterprises create no new jobs and add no additional regional economic growth in the regions where they operate, nor do they add net wage increases for workers in the hospitality and food-service industries that serve them, nor meaningful additional value to real estate near the stadiums and arenas where professional athletes play. The economists concede that the subsidies do indeed pump some money into construction for as long as it takes to build or augment a stadium or arena, but, then, so does every other kind of construction.

     What is also true, though, is that fans who purchase tickets to professional sports games spend less on restaurants and other entertainment. Economists call this the “substitution effect,” meaning, in plain English, that people who have limited disposable income make choices, and that when they choose one set of amusements on which to spend their money, they don’t have the wherewithal to buy another set of amusements.

     In sum, whether or not you like professional football, you and everybody else in the Buffalo metro region help to write that annual check of about $14 million directly to Ralph Wilson and his Buffalo Bills, even after the stadium where his team plays received almost $70 million in state-funded improvements—mainly so that Wilson’s organization could lease luxury boxes starting at around $30,000 per year, plus the price of tickets, paid by area businesses big enough to buy them.

     And your elected county executive, and his colleagues in the Erie County Legislature, will soon sign you up for another 15 years of sending checks to Ralph Wilson, or to whomsoever succeeds him should he not be able to personally accept your money.

     This annual cash transfer to Ralph Wilson is more than twice what you spend to subsidize the zoo, plus the orchestra, plus the historical and science museums, plus the art galleries and plus 30 or so theaters, dance troupes, bands, and other arts and cultural organizations, none of which is a protected monopoly, and all of whose employees live and pay taxes here in this community. Actually, the football franchise gets almost three times what all those arts and cultural organizations receive from taxpayers combined.

     This is how the National Football League likes it. But this arrangement doesn’t happen everywhere the NFL has a franchise. In other markets, owners have to pitch in. In some big places, they and their fans are the ones who actually have to foot their own bills.

Big money from state, city—and owner

     This very week in Minnesota, home of the Minnesota Vikings professional football franchise, a Democratic governor is trying to get his state legislature to enact a $975 million deal that would see about $550 million in public funds and $427 million from the owner’s wallet going toward building a new Vikings stadium. But state legislators are balking. A Republican asked, at a hearing this past Monday evening, the following question: “Why should the state of Minnesota contribute to a stadium for a billionaire” owner?

     A committee of the Minnesota state legislature ultimately voted the package down, with both Republicans and Democrats concluding that it was a bad deal for taxpayers.

     But in the small- and medium-sized metros around the country, the answer from the politicians has so far been, mainly, yes—except when it gets too rich. What galled the Minnesota legislators most was a requirement that the citizens of Minneapolis give up their right to a referendum on the big new public construction. And even though the NFL and the Vikings franchise owner were going to kick in $427 million of the $975 million cost, the proposed deal would have committed taxpayers of the city of Minneapolis to about $188 million in operating costs over the next 30 years.

     Predictably, Vikings spokesmen are rumbling about the team leaving.

     But where would they go? Perhaps to Los Angeles, where proponents of a new football stadium know that there is no way that the politicians will provide taxpayer money, and where stadium backers nevertheless are arranging private financing. There was no taxpayer funding for the new $1.6 billion Meadowlands stadium for the New York Giants and Jets. The San Francisco 49ers’ planned $1.02 billion stadium includes zero taxpayer subsidy.

     In smaller markets, however, professional sports teams routinely go to the political class for taxpayer money. And they get it. Jacksonville, Cincinnati, Tampa Bay, St. Louis, and Baltimore taxpayers all paid more than 85 percent of the cost of their new or improved football stadiums. In the eight smallest markets, at least 80 percent of the cost of stadiums has been borne by taxpayers. Buffalo is the second-smallest media market, and taxpayers will pick up the tab.

What money can buy

     One senior business leader here told me that he likes the idea of spending more money to keep the Bills here because “football keeps the social classes together.” He thinks it’s insane, however, to go all-out and build a Minneapolis-style domed stadium on the NFTA’s 120 acres of waterfront brownfields that politicians relentlessly exclaim are the key to Buffalo’s economic future. Somewhere between the domed stadium that would consume Governor Andrew Cuomo’s entire $1 billion pledge to Buffalo and the $202 million that Dennis Gorski gave Ralph Wilson and the Buffalo Bills lies the number that politicians will endorse on our behalf.

     Meanwhile, however, Erie County policymakers have stated in public meetings that the county does not have the money to build a new, consolidated Erie Community College campus downtown, even though the 15-year capital cost of maintaining three separate campuses would cost about the same as a new consolidated campus—and less than handing the Buffalo Bills a reprise of the deal Dennis Gorski gave them.

     The new Regional Economic Development Council, headed by UB President Satish Tripathi and businessman Howard Zemsky, issued a detailed set of recommendations for the first $75 million installment of Albany’s economic development assistance to Western New York, and were adamant that money needed to be focused on worker-retraining programs located where displaced workers are most numerous, and most in need, i.e., inside the city limits of Buffalo, where public transit access is quickest and most readily available.

     The economists who criticize subsidies to NFL franchises will be ignored here just as they are everywhere else. Hundreds of millions of dollars will almost certainly keep flowing to Detroit from Erie County taxpayers, and not just from people who purchase tickets to Buffalo Bills games. Were the Buffalo Bills franchise no longer here, however, the substitution effect in terms of disposable, discretionary income would kick in, redirecting the money currently shipped out-of-market to where the Buffalo Bills team is owned into other entertainment options here.

     Taxpayer money, however, isn’t subject to that same sort of automatic substitution effect. The $14 million a year that is sent by Erie County government to an individual out-of-town business owner wouldn’t necessarily get reprogrammed into fixing a broken worker-training system, or even into a construction project that could bring 12,000 or more new faculty, staff, and students—mainly training-hungry adult workers—into downtown Buffalo on a daily basis. Investing public money so that it serves the regional economy won’t happen without a reasoned decision to change that money’s destination.

     But if there’s entertainment money enough to send to Detroit for the next 15 years, then the least we should ask ourselves is whether we can afford training money for Buffalo, too, for the next 15 years.

 Bruce Fisher is director of the the Center for Economic and Policy Studies at Buffalo State College. His new book is Borderland: Essays from the US-Canada Divide, available at bookstores or at www.sunypress.edu.

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