For the bullet summary, please go here.
I came across a very informative column that describes very well the ‘usual’ situation for sports teams using public money to finance their arenas and stadiums.
The principal is called ’eminent domain’. If my understanding is close to correct, the idea that Glendale would have with the Coyotes is that of expectation of area development, and spending in local businesses as a spinoff of the hockey operations. For this reason the public purse is justified, as the growth factor (promise of growth) justifies the taxpayer cost.
Well, the article is so well written, that it clearly cites cases (that I will leave to you to read), that show, that ‘usually’ the owners of the teams acquiring the stadiums and arenas win big.
The reason is this. When a stadium goes in (or arena), it is common for the owner to want to take a piece of the sales tax for the businesses that surround the arena. This is what part of the negotiation was with Jerry Reinsdorf. An 11% so-called voluntary tax, give or take .5%. Hey, when it’s at 11% already, what’s a half point amongst friends, right?
And here is an interesting fact that plays into the difficulty Glendale experienced. Usually, a family (fans) have their own habits. So, if they haven’t loaded up on the free deals (or close to free) in the arena that lured them there in the first place, then they are likely to go to their usual eating and entertainment spots.
So, a family from the valley, would likely tend to get in their car after a game, and drive back to ‘their restaurant’ that they normally would go to. And, voila, yet again, not a huge amount of sales tax increase as a result of the team in Glendale. This would leave the City scratching their heads in wonder as to what went wrong.
Eminent domain is a great way for sports owners to reap lots of value from the arena or stadium. And what better example of proof that government was in bed with this idea than our dear friend, George W. Bush:
One of the most famous eminent domain cases involved the Cowboys’ future home of Arlington, where baseball’s Texas Rangers, at the time owned by George W. Bush, convinced local voters to approve a 1991 tax increase that helped build a new $191 million stadium. The city of Arlington used eminent domain to acquire the property from hundreds of private owners, claiming that the stadium was a “public use,” just like highways, schools, or government buildings. Several property owners were lowballed, and court decisions increased their take. (The city, not the team, was responsible for the larger payments. The compensation for one 13-acre plot was increased from $877,000 to $5 million, for example.)
The stadium clearly benefited the Rangers’ owners more than anyone else: Bush turned his initial $600,000 investment into $15 million when the team was sold in 1999. But it has produced little of the promised economic benefit to Arlington, and there has never been a real “public use” factor aside from baseball fans’ paying their money to see games.
Here is the link to this must read article, produced in 2005. Due to two court cases at the time, it was believed that public funding of sports facilities might be near an end, as lessons learned. Is this why the City of New York, and the Dolan’s came to their senses and decided to pay out of revenue for the improvements to Madison Square Garden?The initial negotiations and ‘selling job’ by Related Companies was in 2006. I guess they didn’t get the memo, or decided not to look. I think the mayor of New York got the memo though, and shook off the spell pretty quickly.
What brings us back in this case are a couple of obvious things.
One, where was the advice to Jerry Moyes that he too should be tapping the Glendale sales tax pot? And two, if Jerry Reinsdorf, in the know, comes in realizing that Moyes was not provided with the proper arrangement, why would he think he could get it?
It brings us back to the Reinsdorf and Reinsdorf question. Where was the consideration for Jerry Moyes? It’s not like there wasn’t plenty of expertise and experience nearby.
Where eminent domain usually benefits the owners of teams, Jerry Moyes’ admitted lack of knowledge about how the ‘real sports world’ works was sadly missing.
But the bigger issue is, the support from many people surrounding him was sorely missing as well.
In the next article, we will examine the full circle.
Could this have been planned? Was ’eminent domain’ known to be eminently impossible? Was the workings of the stay home bid an appeasement to pin the blame on Glendale, so the true ambition of relocation would be possible? So the lease could be severed with little penalty?
Was this a master plan in disguise?
And, who, if anybody is going to come from the rabbit hole now, to front a relocation bid with the blessings of the NHL head office? Has Gary Bettman got one more trick up his sleeve?
We will look at this again next time. Until then, try to remember, hockey is fun!