Taxpayers Catching on to Sports' Dirty Secret: Scott Soshnick
July 27 (Bloomberg) -- Taxpayers are finally catching on.
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Professional sports is big-time business. Only rich owners don't want to pay for where their teams play.
If you build it we will stay, owners tell their fans. Voters are asked to approve tax hikes in order to keep their teams. Sales tax, hotel tax, rental car tax, sin tax, whatever.
Enough is enough, at least in Seattle.
There's a formula to these stadium negotiations, if you can call them that. It goes like this:
Owner says he or she's losing money. Owner projects mounting losses. Even Microsoft Corp. co-founder and Portland Trail Blazers owner Paul Allen, the world's sixth-richest man, followed that script.
Owner then demands a new arena. Owner floats the idea of public financing. Public shows outrage. Owner threatens to relocate. Public relents. Grinning owner stages groundbreaking ceremony. Repeat in 10 years.
It's hard to imagine such a scenario working in any other industry. For example, would the public endorse a tax hike to build, let's say, a Wal-Mart?
Heck no. Besides, Wal-Mart doesn't ask, company spokesman Keith Morris says. In fact, unlike sports teams, the public sector generally doesn't pay to improve roads or traffic signals near a Wal-Mart, either.
``We're expected to bear the cost of that infrastructure,'' Morris said. Pro sports teams aren't.
Sports Is Different
Pro sports is different, though. Here's how:
``The major difference is you've got addicts as your clientele,'' says Seattle City Council President Nick Licata. ``Once you're addicted you forget it's a business.''
After chipping in for football and baseball stadiums, Seattle's taxpayers finally had enough. Good for them.
Seattle said no to the National Basketball Association's SuperSonics, who until recently were owned by a group fronted by Starbucks Corp. Chairman Howard Schultz.
The Sonics play at outdated KeyArena. They have a bad lease. The worst lease in the NBA, actually, according to Commissioner David Stern. Schultz, however, knew all of that when he bought the teams. And still he went ahead with the transaction.
The city resisted the team's demand for a $250 million renovation of KeyArena, which was built for the World's Fair in 1962 and updated just 10 years ago.
``The Sonics are caught in the bad economic model of all pro sports -- they need massive public subsidies,'' Licata says.
Higher Priorities
Only this time they didn't get it.
Seattle has a list of priorities, and watching Ray Allen's smooth jumper isn't high on it.
The folks of Seattle would rather replace the Alaskan Way Viaduct, which, according to the Washington State Department of Transportation, ``plays a major role in sustaining our economy and maintaining citizens' ability to move throughout Seattle.''
Now I'm no expert on viaducts, but that sure sounds important.
Seattle would also rather spend its tax dollars on the 42- year-old 520 Bridge, which, according to WSDOT, ``is very vulnerable to windstorms and earthquakes and needs to be replaced.''
So here's the score: Highways 2, Basketball O.
``People finally recognize there's only so many tax dollars to go around,'' Licata says.
If Schultz and his well-off partners want a new building let them follow the lead of Washington Wizards owner Abe Pollin, who in 1997 built the Verizon Center with more than $200 million of his own money.
Connect the Dots
Predictably, Schultz last week sold the Sonics and the Women's National Basketball Association's Storm to an ownership group based in Oklahoma City of all places. Schultz got $350 million, $150 million more than he paid for the club in 2001.
This is where we play connect-the-dots.
Oklahoma City already has an arena. Last year, the city warmly received the New Orleans Hornets, who were displaced by Hurricane Katrina. The Hornets are heading home after next season.
So, Oklahoma City will have an empty building, a hankering for hoops and Stern's endorsement. Bye-bye Sonics.
This isn't just any team in any town. The Sonics, established in 1967, won the NBA title in 1979. It's the team of ``Downtown'' Freddie Brown, Nate McMillan, Lenny Wilkens and Gus Williams.
Institutions
Owners like Schultz like to speak of teams as institutions or part of the social fabric in their home cities.
Seattle mistakenly trusted Schultz, who isn't above marketing gimmicks to make a buck. Try asking for a small coffee in a Starbucks, which, by the way, is based in Seattle. Really, try it. Small doesn't exist at the world's largest coffee-shop chain. Small is called tall.
Why?
At a Starbucks the other day a pleasant gentleman behind the counter answered that question.
``Starbucks,'' he said, ``likes to be different.''
The truth is, when it comes to sports ownership Schultz is the same as most others: a bottom-line guardian who offered lip service to his team as a public trust.
(Scott Soshnick is a Bloomberg News columnist. The opinions expressed are his own.)
