It is about time that political leaders step up in the labor disputes because whether Americans like it or not, they are partners in sports because sports owners’ didn’t just build that business alone. Municipalities have paid billions of dollars to build stadiums and arenas for sports owners and have in some cases given an owner as much as 92 percent of the revenues generated in the building keeping just eight cents on a dollar for debt payment and building maintenance. Because of the possibility of allowing as much as 92 cents for every dollar generated in a building to go into an owner’s pocket, cities have had to raise water taxes, sewer taxes, property taxes, impose sales tax hikes, hotel/motel tax hikes, car rental hikes, restaurant tax hikes or sell off municipal property to pay down the debt for sports facilities.
The Politicians’ Role in Creating Sports Lockouts in the United States
It is about time that a mayor has opined about the latest in a series of labor disputes in North American sports. There is an upcoming National Hockey League owners’ lockout and Mayor Karl Dean is not too pleased with the owners because he feels there will be an impact on downtown Nashville and how some businesses will be economically hurt without Nashville Predators’ home games.
“This is a private dispute between the players organization and the owners,” Dean said in a Tennessean report. “But what I do think both sides–and I guess the owners are the ones talking about a lockout–is that they need to stop and think about the greater good.”
Dean’s words are encouraging.
In New York, Mayor Ed Koch orchestrated a plan in 1982 that took Madison Square Garden off the New York City property tax rolls in what can now be described in perpetuity. Today, the former New York City mayor pleads ignorance in not knowing the Garden would never pay property tax again. Thirty years ago, the Garden owners–Gulf and Western–claimed that they would have to move the New York Knicks to the Nassau Coliseum in suburban Uniondale in Nassau County and the New York Rangers to the New Jersey Meadowlands, if they didn’t get the property tax break because the teams would not be able to compete for players.
Koch lobbied the New York State Legislature and New York Gov. Mario Cuomo to give Gulf and Western the tax break.
The NHL lockout is the fourth labor action since 1992 and fans are blaming NHL Commissioner Gary Bettman for the problem. Bettman is merely the owners’ negotiator, if the owners were so upset with Bettman he would have been banished from his position a long time ago. There is so much that isn’t being said about these negotiations, which should make a number of people irate, not just hockey fans.
Cable TV subscribers should be on the top of the list. When NHL games vanish from the cable TV schedules, cable TV, satellite and phone company subscribers should be getting a refund for missed programming. But that never occurs.
Because of the 1984 cable TV legislation signed into law by free market proponent Ronald Reagan, sports owners have gotten an incredible revenue stream. The Reagan enacted legislation forces cable TV subscribers to either take or decline a basic expanded tier where “networks” are bundled together and sold as one (which violates the Sherman Antitrust Act). The expanded basic tier is the mother lode for the owners as once a network works out a deal with a multiple systems operator like Comcast (the owners of the Philadelphia Flyers) or Cablevision (the owners of the New York Knicks and Rangers), that network becomes one of the most expensive items on the cable bill—the cost is hidden from subscribers because the multiple systems operators don’t have to itemize bills. So the consumer never sees the real cost of ESPN or the regional cable TV networks.
Some teams (the Rangers, the Flyers, the Avalanche) own the local cable channels outright, some franchises have huge local deals (Devils, the Islanders) from the Madison Square Garden Network, Comcast’s regional sports networks and Rupert Murdoch’s regional FOX sports channels. The same is true in Canada.
Pay TV subscribers are still waiting for refunds from the 1990 Major League Baseball owners’ lockout. The 1994-95 Major League Baseball strike, the 1994-95 NHL owners’ lockout, the 1998-99 National Basketball Association owners’ lockout, the 2004-05 NHL owners’ lockout and the 2011 NBA lockout.
The Nashville mayor seemingly admits his hands are tied because the lockout is a private dispute between a group of owners and employees. Mayor Dean is correct about that however his taxpayers are, whether he likes it or not, a party with a major invested interest in the dispute. They have funded the factory (the arena) and have given copious tax breaks and a sweetheart lease to the local owner and that is repeated in most NHL or major league sports cities.
Reagan’s signature shifted the burden of paying off arena or stadium debt from an owner to the taxpayers.
Reagan gave the owners a major negotiating tool in 1986 after he along with both houses of Congress revised the tax code. The 92/8 revenue formula for paying off a municipally built arena or stadium resulted from the reforms. It is no coincidence that in Bettman’s league virtually every American based team has a new or renovated facility with just the New York Islanders franchise twisting in the wind with a bad lease in an old facility until 2015 . The same is true of National Basketball Association teams except in Milwaukee and Sacramento. Both Major League Baseball and the National Football League have an Oakland problem although even that facility was renovated in 1996.
Corporate America didn’t seem to be too bothered by the National Basketball Association lockout in 2011. Marketing partners stayed along with television partners. The same will hold true in the NHL.
NHL owners aren’t very concerned about the “fans” or what sportswriters and radio sports talk show hosts might say. NHL owners want customers not fans in their buildings because customers will spend money for higher priced seats, use in-arena restaurants and valet parking and spend liberally at various concession stands. Meanwhile fans would rather use mass transit to get to games, bring a homemade sandwich to a game and maybe buy a jersey or a T-shirt with a logo once in a while.
The customers buy club seats and luxury boxes and get tax breaks as those seats become a business expense.
At some point, the owners and players will reach an agreement and the hockey customer and fan will come back in droves, although some fans may grumble. The lockout will become a distant memory.
Mayor Dean’s words are a little step in the right direction but he is just one mayor talking about the lockout. The heavy hitters, Michael Bloomberg in New York, Rahm Emanuel in Chicago, Antonio Villaraigosa in Los Angeles are mute as are potential presidential candidates in 2016, New York Governor Andrew Cuomo and New Jersey Governor Chris Christie.
Elected officials may think they have no footing in this dispute but they or their predecessors signed these sweetheart leases that required taxpayers to put up hundreds of millions of dollars for sports palaces. They should be jawboning the owners and players because they have provided the financial wherewithal through the building or venues and created tax breaks to set up cable TV monopolies that have benefited the industry. It is not 1965 anymore in the NHL where the four American teams were playing in privately owned facilities and paying property tax.
The NHL lockout is not merely a private dispute as Mayor Dean suggests. The government, which includes politicians from both sides of the aisle, built the present day business in the United States whether people want to admit that or not.
Evan Weiner, the winner of the United States Sports Academy’s 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on “The Politics of Sports Business.” He can be reached at email@example.com His book, “The Business and Politics of Sports, Second Edition” is available at www.bickley.com and Amazon.com.