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MR. WATTENBERG: Hello, Iím Ben Wattenberg at Market Square Arenain Indianapolis. American cities are spending billions of dollars tolure or keep their professional sports teams, and many people arebeginning to ask, is it worth it? The topic before the house, shouldAmerican cities play ball with professional sports, this week onThink Tank.
MR. WATTENBERG: The Roman poet Juvenal (sp) said that the peopleonly wanted two things, bread and circuses, and to give them thelatter Roman emperors spent vast sums building public arenas. Notmuch has changed in 2,000 years. Fans flock to American stylecircuses, in modern and very expensive stadiums. In Cleveland,Jacobís Field and the nearby Gund Arena cost over $300 million whenthey were built in 1994. Baltimore spend $210 million to buildOriole Park at Camden Yards, breathing new life into the heart ofdowntown. The stadium packs in fans, and has become the symbol ofthe new, old-style, more intimate ballparks. Who pays for thesestadiums? That depends, 14 percent are funded privately, at littlecost to the taxpayers. For example, in Washington the Capitals andthe Wizards owner Abe Polen pulled out his checkbook for the new MCICenter in the heart of downtown. Another 20 percent are fundedentirely at taxpayer expense, often to lure a new team into a city. The majority of stadiums, about two-thirds of them, are funded bysome sort of public-private partnership, using a variety of taxes andgovernment bonds. As the competition for teams and stadiumsincreases, so do the costs. And opponents charge that the owners andplayers are making out like bandits, at taxpayer expense. SenatorDaniel P. Moynihan doesnít like it. He has proposed a bill to endthe tax exemption for municipal bonds that fund these arenas. Sowhatís all the fuss about? In a few moments we will turn to anexpert panel. But, for background, we took a look at one city,Indianapolis, and talked to owners, politicians, and team management. Indianapolis is an example of the 40 cities that play host to majorprofessional sports teams in America. Back in 1984, Indianapolis hitthe front pages by allegedly stealing the revered Baltimore Colts,part of the deal, a sweetheart lease at a brand new, $95 million DomeStadium. Now, only 13 years later, the Colts are once again unhappy.
MR. IRSAY: Between í98 and 2001, I lose $30 million. I mean,there is no ifs, ands, or buts. I mean, itís not a question ofmaybe. But clearly, you cannot survive if you stay at the figuresthat we are with our stadium.
MR. WATTENBERG: What do you get out of a new stadium that makesit so attractive?
MR. IRSAY: I think that the key thing for a new stadium has tobring the ability for you to be able to market yourself and sellseats, particularly the expensive suites and club seats, thatís whereyou gain the biggest jump. I mean, Iíll give you an example, theRedskins are building a new stadium, in your part of the world.
MR. WATTENBERG: Right.
MR. IRSAY: Two-hundred and eighty suites --
MR. WATTENBERG: The center of the world, as we like to describeit.
MR. IRSAY: The center, no question.
MR. WATTENBERG: Where all your money goes, right.
MR. IRSAY: No, question, 280 suites at $100,000 a suite. Now,that is not shared with other teams, because suite revenue isnít. Thatís $28 million a year, $28 million that they receive directly. Now, what do I have? I have 90 suites at $30,000. Thatís $2.7million. Iím not asking for a new stadium at this date. Itís thePacers turn. I have no problem with that. You know, our stadium was$82 million to build, the Pacers stadium is going to be $175 million. But, Iím not asking for a new stadium, even though I donít think itwould be unusual to do so. Detroit, the Silver Dome is coming down,new stadium. Seattle, the King Dome is coming down, new stadium. Minnesota, the Metro Dome is coming -- the only dome thatís --
MR. WATTENBERG: And basically, even more so than here inIndianapolis, those cities are getting taxpayer relief for thosestadiums?
MR. IRSAY: All of them are. And I think weíve entered this veryinteresting world, where now as an owner, youíve become partpolitical animal. I mean, you have no choice but to enter the fray. And youíre almost like some sort of, you know, political figure thathas to go into the marketplace. You know, Eddie de Bardlow (sp), agreat friend of mine in San Francisco, just had to go door to door,and try to garner support for the referendum to get the vote andbarely got it. But, I mean, I talked to Eddie and, I mean, heísknocking on doors in San Francisco trying to get the vote. I mean,no different than a mayor or a governor.
MR. WATTENBERG: When you come to renegotiate, or opennegotiations with the City of Indianapolis, your basic position ofstrength is, although you say, look, I donít want to move this team,I love Indianapolis, itís a great sports town, all the things thatyou say, and quite convincingly, but the club in the closet,unstated, that you donít have to say to anybody is, look, you know,satisfy me, Iím out of here.
MR. IRSAY: That is a factor, and thatís the biggest bomb, thatísyour hydrogen bomb. But, let me really emphasize that what happensmore times than not, and can happen, and would happen with me morelikely, is I have one place to go to and thatís player costs. Cincinnati did it, the Brown family had to address -- run their teamlike a business. There has been family ownership there for years. Mike Brown said, I have a bad stadium deal, I have a difficultycompeting in revenues, until I fix this my only solution is to go toplayer costs.
MR. WATTENBERG: The Colts are not the only fidgety team in town. The city has just broken ground on a new stadium to hold onto itsbasketball team, the Indiana Pacers. In an era of munificent playersalaries, the Pacers say they need a new arena to remain competitive. Donnie Walsh is the President of the Pacers.
MR. WALSH: The NBA shares some revenues, we have a commonnational TV contract, and several others. But, we donít pool all therevenues. And so there is a distinct difference between thetelevision markets in New York, and the television market in LA, andthe television market in Chicago, and that in Indiana. And thatísone big disparity. But, we have to recognize that we are in asmaller market where we canít compete, and so therefore, we are goingto our city and saying, we have to have a new arena, because if wedonít -- arenít able to generate the revenues that can keep uscompetitive, then it puts us in a difficult position.
MR. WATTENBERG: There are supporters and detractors of the newIndianapolis arena. And, as so frequently happens, the elected mayorhas to please both sides. Mayor Goldsmith, you are known as a sortof Mayor privatizer. Youíre a strong believer in the market. And wehave a situation here in Indianapolis with the new arena going up,maybe you could tell us about it, and why you are sort ofschizophrenic about it?
MAYOR GOLDSMITH: Well, schizophrenic is a good word. This is areal test of our philosophy. Weíve reduced government down to itscore, privatized/competed 70 city services, reduced the work force by45 percent on the premise that the best place to create wealth andvalue is the marketplace. Now, suddenly, Iím a partner in abasketball/entertainment arena for the Pacers. The migration or thetension resulted from the fact that in center cities,hospitality/entertainment are great sources of jobs. Itís a45,000-person hospitality, itís a 45,000-person employment center,$1.6 billion effect on our local economy.
MR. WATTENBERG: Here in Indianapolis?
MAYOR GOLDSMITH: In Indianapolis. And, you know, around thecountry, large cities are relying on entertainment/hospitalityconvention as one of the core competitive advantages of the innercity. Now, thatís not driven necessarily by an arena, itís drivenmore by a convention center, but itís a package of activities. So, Icame to the conclusion that if I could keep the Pacers, build thearena, bring two million people downtown into the arena for concerts,not raise taxes, and not divert any money from what would otherwisehave been available for streets and schools, then I would help withthe arena. And thatís where we ended up.
MR. WATTENBERG: Market Square Arena in downtown Indianapolis isthe present home of the Pacers, and the momentary home of Think Tank. We are joined by Professor Mark Rosentraub, director of IndianaUniversityís Center for Urban Policy and the Environment, and authorof Major League Losers, the Real Costs of Sports and Whoís Paying Forit, and William Hudnut, former Mayor of Indianapolis, and now asenior fellow in Washington, D.C., at the Urban Land Institute. Gentlemen, start your engines.
MR. HUDNUT: Good line.
MR. WATTENBERG: Good line. At your prompting, Bill Hudnut, andMark Rosentraub, itís good to have you with us on Think Tank. Weírein Indianapolis, regarded, I guess, by some as the most sports crazytown in the country, athletic capital, NCAA is coming here, and so onand so forth. Could, between the two of you, before we get into anargument, could you try to sketch in what is going on in America? You have billions of dollars of new arenas and new stadiums beingbuilt all over the country. So, Mark, do you want to start?
MR. ROSENTRAUB: Well, youíve had for the last five years a realrage. I mean, in some ways it was kicked off by the BaltimoreOrioles building their facility, but it has picked up incrediblesteam. I mean, from New York to LA, from the Canadian Border toSouth Texas, there is virtually no state that is not engaged in ahundred million dollar capital construction program for professionalsports.
MR. WATTENBERG: Why is it happening?
MR. ROSENTRAUB: Basically, the economics of the industry changes. Itís like any other business. Itís no different from the massmedia. The economics of professional sports has changed, and now thefacility is a source of revenue. For a long period of time, as youwell know, the biggest source of revenue was television. But now,luxury suites, club seating, fancy restaurants, night clubs, museums,are all part of the sports complex. And if you donít have an arenaor a stadium that generates that kind of money, then youíre quicklybecoming a poor relative in Major League sports.
MR. HUDNUT: I think the thing thatís driving it is the impulse inAmerica to sports. People love sports. Itís part of Americanculture, as Mark points out in his book, itís deep in our language. You know, you hit a home run, you strike out. You, you know, dropthe ball with the bases loaded, or whatever. And people are lookingfor simplistic solutions to difficult problems today, and sportsprovides that. Thereís a winner and a loser. And that then getsinto this whole business of the economics of it, and pretty soonyouíve got a real cottage industry going, and no mayor wants to beleft out.
MR. WATTENBERG: Thatís what I want to talk about, whether thiswhole thing helps cities or harms cities. Thatís really what weweíre trying to get at.
MR. ROSENTRAUB: But let me give you two examples here inIndianapolis which is sort of doing sports right, as opposed to doingthe welfare system. When the lease was negotiated for this facilityfor the Indiana Pacers, there was a clause in the lease that saysthat if the Pacers ever leave the city, theyíre either sold or theyleave the city, the City of Indianapolis gets 50 percent of the valueof the team. So, it is true that tax dollars went to build thisfacility, but there was an exchange. And you may say, well, look,that wasnít a good deal. We could have gotten a better deal. But,if the Indiana Pacers leave, and they go to Nashville, or they go towherever they would end up, if the team is worth $100 million --
MR. WATTENBERG: Who would determine that? It wouldnít have to besold, the team could leave and youíd have a fair market appraisal?
MR. ROSENTRAUB: Exactly. And there are many, many firms that dothat. And if the team was appraised at $100 million, then the Cityof Indianapolis gets a check for $50 million. Thatís anunprecedented deal which helped protect the taxpayers. And, in thatcase, itís an investment. And you and I could --
MR. WATTENBERG: And itís enough to keep them here, typically.
MR. ROSENTRAUB: Well, exactly. Because, if they leave, thatís anice check. And, in fact, after Mayor Hudnut left, there was a groupthat wanted to buy the team, and the city had to think for a secondwhether it would be better to have the money or have the team. Butat least thatís an option that the city has. The second thing is,when we did the Dome here, that Dome is tied to a convention center. And, as Iíve pointed out a lot of times, if the Indianapolis Coltsleft town, believe it or not, the City of Indianapolis would makemore money than if the Colts stay because of the revenue generated bythe Dome. So, if you can take a Dome, tie it to a convention centerand it works out well, you can make sports right. Now, thatís realdifferent from the welfare system elsewhere.
MR. WATTENBERG: The Colts came here in the dead of night. Theywere spirited out of our neighboring City of Baltimore.
MR. ROSENTRAUB: And thatís where Iíll attack our good friend. But Iíll let my good friend go.
MR. HUDNUT: Well, Baltimore lost the Colts. Indianapolis didnítsteal them. He was shopping his franchise, Mr. Irsay was, lookingaround Jacksonville, Phoenix, what-have-you. Finally ended up here,we negotiated the deal in broad daylight. And I called up the mayorof Baltimore at the beginning of the Odyssey and said --
MR. WATTENBERG: Was that then Kurt Schmoke?
MR. HUDNUT: No. That was William Donald Schaefer, who hasnítreally spoken to me since. And he said, fine, Bill, go ahead. Butthen, when we got them, he turned very petulant. But the point, Iguess, is that we built the stadium before we knew the Colts weregoing to be in it, and we tied it into the convention center. AndMark is right, itís not just used 11 days a year for a football game. According to the statistics right now, last year that place wasfilled with events 59.6 percent of the time. So, on a basis of 365days, you know, youíre talking 200 days that that stadium was beingused for something. Not for sports necessarily, but square dances,religious conventions, tractor pulls, whatever.
MR. WATTENBERG: So whatís your problem?
MR. ROSENTRAUB: Well, the problem is, professional sports is amonopoly. And when Indianapolis steals Baltimoreís team, theyíre ina sense feeding the beast. Weíve deregulated the airlines. Weívederegulated telephones. Weíre deregulating electric power, and weíregoing to deregulate gas power.
MR. WATTENBERG: And we deregulated playersí salaries.
MR. ROSENTRAUB: And we deregulated playersí salaries, but wedonít deregulate the control that the NFL, Major League Baseball, theNHL, and the NBA have to say where teams will play and under whatterms and conditions. And when an Indianapolis steals the Colts, andwhen a Nashville steals the Oilers, by giving unprecedented deals andunprecedented welfare, and each time the team --
MR. WATTENBERG: When you say welfare, youíre talking aboutcorporate and government welfare to teams, and owners, andconsequently to the players?
MR. ROSENTRAUB: Exactly right. What I always try to telleverybody, the dollars are split, depending on the sport, roughly 52percent to the players, 48 percent to the owners. So, when you givea tax dollar to a team, 52 cents goes to the players, more or less,and 48 cents goes to the owners. So, make no mistake about that whenyou provide those subsidies. What Indianapolis did, which I havechastised is, it started a process or continued a process that beganwith LA and New York over the Dodgers. It continued it, which thenbrings us to St. Louis and Anaheim and the Rams. It brings us towhat went on with Baltimore and the Cleveland Browns. It brings usto what went on with Nashville and the Houston Oilers. And each timethe ante gets ratcheted up, the welfare gets larger, the lower andmiddle income classes lose more, and the economically privilegedgain.
MR. WATTENBERG: But old Hudnut gave welfare also, didnít he? Imean, heís making --
MR. ROSENTRAUB: Not as much, to be honest about it.
MR. WATTENBERG: Not as much. I mean, thatís what Steve Goldsmithsays now, this new deal for the redoing of Market Square Arena. Hesays, well, I started out against it for all of these sort offree-market reasons, but we got a pretty good deal. But, in point offact, heís also giving out some corporate welfare, or some governmentwelfare.
MR. HUDNUT: I think Mark makes a good point in his book, which isthat the economic impact, direct economic impact, of these franchise,these teams, is negligible, and it might even be a minus rather thanjust being a zero or a modest plus. The point is the indirectimpact.
MR. ROSENTRAUB: Heís found religion.
MR. WATTENBERG: No, no.
MR. HUDNUT: The point is the indirect impact. The point is thebusiness that it generates that you canít quantify as an economist. The point is what it does to the spirit of the community. The pointis what it does to the image of the city. The point is what it doesfor land use, because you usually are building these things wherethere was nothing before. And, as old Mayor Daley used to say, well,whatís your program? If you donít like a Hoosier Dome or an RCA Domeover there on all that land that was empty before, what would you putthere?
MR. WATTENBERG: I think Iíd put a stadium there. I know, Ihappen -- I mean --
MR. HUDNUT: Now see whoís got religion.
MR. WATTENBERG: Thatís right. No, no. I mean, I think BillHudnut, as far as Iím concerned, as I try to understand this, saidthe magic word, which is spirit. I mean, you know, as you all said,everybody, including the panelists here, loves sports, everybody inAmerica. I have never visited a foreign country where you get into aconversation, tell me what X, your country, is like.
MR. HUDNUT: Youíve never been to a soccer game overseas?
MR. WATTENBERG: No, no. And you always get this, well, you know,Argentina, weíre a sports crazy country. Australia, you know, thisis really different about us, weíre a sports crazy country. Theworld, human beings are sports crazy. Which is fine, I mean itísbetter than war, itís better than a lot of things.
MR. HUDNUT: Exactly.
MR. WATTENBERG: And, to build these -- to have this edificecomplex and build grand arenas so people, among other things, feelbetter, and say weíre important. Indianapolis, weíre now in theMajor Leagues, whatís wrong with that?
MR. ROSENTRAUB: Iím 100 percent with you.
MR. HUDNUT: Itís more than just feel good, though.
MR. ROSENTRAUB: I just donít want it -- I donít want to do it onthe backs of low and moderate income people.
MR. HUDNUT: And I --
MR. ROSENTRAUB: Ben, this generates enough money. Wait a second. This past week, we had Jerry Reinsdorf sign Phil Jackson to a $6million contract, and heís going to sign a contract with MichaelJordan for between $36 and $40 million. And Iím going to tell youpoint blank, this one man, Jerry Reinsdorf, can pay those two mencombined $46 million, and make a profit.
MR. WATTENBERG: Thatís more than the three of us make in twoyears.
MR. HUDNUT: Two of your best years.
MR. ROSENTRAUB: If sports generates that much money, it doesnítneed our sales taxes, it doesnít need our property taxes. Governments need to focus on what governments need to do, schools,infrastructure, environment, public safety.
MR. HUDNUT: Thatís a typical egghead point of view.
MR. ROSENTRAUB: Egghead?
MR. HUDNUT: You academics always criticize sports, and theeconomics of sports. And, basically, I think youíre right, Mark.
MR. ROSENTRAUB: Listen, Iíve got five season tickets to thePacers. How could you criticize me?
MR. HUDNUT: Iíve got two.
MR. ROSENTRAUB: Yeah, but I paid for mine.
MR. HUDNUT: Iím a life member. Let me say this about that, wedid a study in 1991, the Chamber commissioned it, Mark glosses overthis pretty quickly in his book. And it said that for $164 millionworth of investment here in Indianapolis in sports facilities, we hada return of $1.02 billion. Now, thatís not a bad return on yourinvestment, compute it how you will, disagree with it how you will.
MR. WATTENBERG: You were just saying a minute ago -- you werejust saying a minute ago that itís not a good economic deal. I mean,youíre arguing both side of this equation. And thereís a new studyout by the Brookings Institution that says these are bad deals.
MR. HUDNUT: Well, as I said to Mark before the program began,itís lucky I read his book after we built the Dome Stadium, becausewe might not have built it if I had read it before. But I think, inretrospect, it was not just the Dome Stadium by itself, it was theNatatorium, the Veladrome, these other facilities that we built herein order to attract events, to hold the NCAA, to put on their FinalFour, to put on the Pan-Am Games, and all the rest of it. But Ithink Mark makes a good point at the end of his book, which is that-- and theyíll never do it -- but the mayors ought to get togetherand agree among themselves that none of us is going to subsidize aprofessional franchise.
MR. WATTENBERG: Would that be a violation of the anti-trust?
MR. HUDNUT: Probably.
MR. WATTENBERG: Many of these arenas go into desolate, downtown,troubled, deteriorated neighborhoods, and they tend to, at least, insome measure, breathe some life back into it. And these are basketcases, frequently, economically, and theyíre --
MR. ROSENTRAUB: Right, I couldnít agree more, Ben.
MR. HUDNUT: Like Camden Yards.
MR. WATTENBERG: Well, you could agree more by saying, do it.
MR. ROSENTRAUB: But I donít want to subsidize it into existence. Let me give you an example.
MR. WATTENBERG: Well, why donít you want to? I mean, you canítdo it if you donít subsidize it.
MR. ROSENTRAUB: Thatís not true, the market will work. Come on,youíve had good things built in downtown Washington.
MR. WATTENBERG: But the market --
MR. HUDNUT: Well, these guys are so rich, they could build themthemselves.
MR. WATTENBERG: But the market wouldnít put it down there.
MR. ROSENTRAUB: Yes, it would.
MR. WATTENBERG: The market would put it out in Bloomington, orArlington.
MR. HUDNUT: No, because thereís no synergy there.
MR. ROSENTRAUB: And not only that, Ben, when youíve got to sellluxury suites at $70,000 a pop, youíve got to have clients to buy it. Weíre not in an era of sports economics, where youíre going to makeyour money by selling individual tickets to suburbanite fans. Youneed big businesses that are going to lay down $70,000 for a luxurysuite, and on top of that --
MR. WATTENBERG: And they call that a business expense.
MR. HUDNUT: Right.
MR. WATTENBERG: So that is taking additional tax dollars fromthis middle-class -- the federal mechanism, or the state income tax.
MR. ROSENTRAUB: Just to keep the record straight, the $70,000 isnot deductible, the tickets are. But, thatís because the IRS changed-- Congress changed the code on that. But, you are right. It issubsidization. But, my point is, to sell those luxury suites, youívegot to be where the businesses are. And the business is downtown,that are going to buy those suites.
MR. HUDNUT: Plus the restaurants and the entertainment. Why isthe Silver Dome moving back downtown? Itís leaving Pontiac and goingback to downtown Detroit, because they discovered they cannot beisolated out in a cornfield, particularly if it freezes over in thewinter time, like it did when they had the Super Bowl there, andnobody could get into the place.
MR. WATTENBERG: In Washington, Abe Polen is building a downtownarena for the hockey and the basketball franchises, and itís aprivate deal.
MR. ROSENTRAUB: Exactly. There are plenty of examples we can gointo.
MR. HUDNUT: But, in Virginia, for the football -- Iím sorry, forthe baseball theyíre looking at a $350 million price tag for abaseball stadium. Theyíve got about six or eight sites. Theyhavenít selected one yet. Theyíre going to fund it, and Mark saysthis is wrong in his book, with a lottery tax.
MR. ROSENTRAUB: Well, let me give you an example, youíre talkingabout downtown. Nobody did downtown professional team sports biggerthan Cleveland, when they built the facility for the ClevelandIndians, Jacobís Field, when they built Gund Arena. Beautifulfacilities, attracting probably between 5 and 6 million people a day,in the city -- 5-6 million people a year, to events. In the City ofCleveland, almost half the population still doesnít earn above thepoverty level. This doesnít change the economy of a city.
MR. WATTENBERG: And on that note, thank you both very much. Andthank you. For Think Tank, Iím Ben Wattenberg.
ANNOUNCER: We at Think Tank depend on your views to make our showbetter. Please send your questions and comments to: New RiverMedia, 1150 Seventeenth Street, Northwest, Washington, D.C. 20036;or email us at email@example.com. To learn more about Think Tankvisit PBS On-line at www.pbs.org. And please let us know where youwatch Think Tank. This has been a production of BJW, Incorporated,in association with New River Media, which are solely responsible forits content. Brought to you in part by ADM, feeding the world is thebiggest challenge of the new century, which is why ADM promotessatellite technology to help the American farmer be even moreproductive. ADM, supermarket to the world. Additional funding isprovided by the John M. Olin Foundation, the Lilly Endowment, theLynde and Harry Bradley Foundation, and the Smith RichardsonFoundation.
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