Friday, October 01, 2004

Stadium Talk

Three years ago, a local sportswriter took a break from smoochin' the buttcheaks of local sport's team owners to castigate Carl Pohlad for attempting to contract the Twins. Then a local judge forced the Twins to remain in existence and, suddenly, our local sportswriter had a change of heart, reverting to his former, well-known, butt-smoochin' ways.

Today, that very columnist is once again beating the drum of despair, attempting to frighten locals into believing that the departure of the Twins and Vikings is imminent failing legislative funding for new stadiums for both teams.

The most interesting/laughable contention that our local columnist makes today is that the Vikings and Twins cannot compete on a regular basis without the additional revenue provided by a new stadium. Of course, this is sheer idiocy.

With the exception of the past three years, the Vikings have been at least as consistent as any other NFL team in making the playoffs. And this is not a surprise given the talent that the Vikings have had on their roster for the better part of the past 30 years.

But how can this be? The Vikings have never enjoyed the revenue streams now associated with ownership rights to stadium revenue. They have never had seat licenses, full concession rights, full parking revenues, naming rights, limitless corporate skyboxes, or advertising rights. Being competitive thus seems virtually impossible--particularly when many teams already have some, if not all of these ownership revenue streams.

The answer for the Vikings is that each NFL team receives a motherload of annual revenue from the league and the league has a hard salary cap. The largesse bestowed upon each team by the NFL, as a result of licensing agreements and television rights, provides each team enough revenue to meet approximately 70% of the cap. Teams must rely on their own resources to account for the remaining 30%, with the most prominent source of additional revenue being ticket sales. Because the Vikings consistently sell out at an average ticket price of approximately $40 and a seating capacity of 60,000+, the Vikings gross approximately $2.5 million per game on ticket sales alone. That equates to $25 million per season, not including interest earned on season ticket sales and waiting list down payments, putting the Vikings' revenues well over the NFL spending cap. And it does not include what is probably another $20 million in tax breaks (as a conservative estimate) owing to salaries and other business expenses.

To put it mildly, no matter the Vikings' "loss" of revenue from non-existent revenue streams, the Vikings remain competitive because they are able to spend to the cap (even though they do not) and still turn a hefty profit. The fact that Red wants a new stadium thus has nothing to do with Red's ability or willingness to spend more on the team and everything to do with Red wanting a greater return on his investment. There is nothing inherently wrong with Red's ambition, but there is something wrong with Red's message--carried to us via his local sportswriting stooge--that he must, out of economic necessity, leave town if a new stadium is not built soon.

The Twins have a more compelling claim, if also fraudulent, that they need a new stadium to compete. As evidence of this need, our local sportswriter notes that other teams have new baseball stadiums, including Baltimore, Colorado, San Francisco, Milwaukee, Texas, Cleveland, Detroit, Seattle, Houston, Cincinnati, Pittsburgh, Philadelphia, San Diego, and Arizona, and that the Twins are falling behind in the competitive race.

Let's see. The Twins are in the playoffs for the third straight season, playing in a "low-revenue" stadium. Of the 14 teams with new stadiums, none have yet secured a playoff spot this year and only one likely will. What does that suggest about new stadiums and all their revenue? Merely that there is no necessary correlation between increased team revenue and the ability to compete.

What is even more damning of the argument that teams need publicly financed stadiums to compete, however, is that there is a built in rebuttal to any criticism of a team's failure to make good on its promise to be competitive with a new stadium--teams can always say that, with the proliferation of new stadiums, they are able merely to maintain the status quo. Most assuredly, the next step will be to approach the locals for even greater subsidies than already conceded in conforming with the teams' request for a new stadium. And if the locals finally put their foot down, the team will threaten to move. Which is right where we started, right?

The only solution is to determine the value to the locals of maintaining a sports franchise and, if that franchise is deemed of sufficient value to the community, to work with ownership to make retention of the team viable for both the club and the locals. Build a new stadium in a rundown part of town, give the keys to the owner, let the owner decide the concessions, and give the city naming rights and parking revenue, and slap a tax on the tickets to pay for construction. Once construction is paid for, save the tax revenue for what is sure to be the next request for a publicly funded stadium. Finally, reach agreements with the respective league and team by which ownership agrees not to move the team for X number of years--preferably correlated with the number of years it will take to pay off construction of the stadium.

But certainly don't be cajoled into buying the story of despair offered by our local columnist on a routine basis. He has a stump, but that stump is rotten and void of any thoughtful analysis of the issue.


10 comments:

Anonymous said...

Part of what you are forgetting about with revenue is more than just the players salaries. Rent payments, coaches and other employees of the Vikes/Twins, training camp costs, minor league systems for the Twins (they cannot support themselves), equipment for the players, travel and lodging costs during the season, etc. This all comes out of the $ that the team brings in. Ticket sales will only account for $20 (not $25) million/yr. Plus, with the Vikes, the signing bonuses that teams spend has to come from this fund as well, so if 10 players are signed, for a total of $40 million in signing bonuses, that $ has to be available right then and there. You leave too much out of the financial picture.

The Twins have very good young talent and it is going to cost them $, lots of it. That is the nature of the beast in MLB. How much is Santana going to cost when his contract comes up, especially if he wins the Cy? 8-10 million/year. Morneau's deal if he continues what would have been a 50HR season? 6 million/year easy. Silva will get 4-5 million/year. $20 million/yr for those players on a $55 million team? The Twins farm system is nearly empty of major league talent right now. The minor league tree is now bearing fruit. Other than a stadium, there is virtually no other revenue source for the Twins. Revenue sharing is pathetic and they have no leverage for a TV/radio deal of the other major teams. No one is saying to spend 90-100 million a year, but they will have to spend $ to keep.

The 14 teams with newer stadiums, all but 1 has a better attendence this year then the Twins did. What does that say about a value of a new park? Lots. People will come to a new, outdoor baseball stadium in droves, because it is enjoyable. The Twins have not hit 2 million in attendance for the last 4 years, why? Crummy ballpark. Bottom line, the Dome is a crappy place to watch a baseball game, the seats past 3rd and 1st base do not even point towards the infield, it's ridiculous.

Tony for TwinDomes said...

Vikes Geek.... the solution to MN's stadium conundrum is our TwinDomes stadia proposal. Visit our website and download our proposal. www.TwinDomes.com

Imagine side-by-side stadium which share a common retractable-roof, land, infrastructure, heating & cooling systems, etc., etc...

Tony for TwinDomes said...

Vikes Geek..... email me if you have any questions about our 80% private / 20% public VENTURE FUNDING FORMULA....

I believe the public contribution can be limited to land, infrastructure, and tax relief. Tony

www.TwinDomes.com

Vikes Geek said...

I also left out sources of revenue and gave a very conservative estimate on the revenue that I mentioned (BTW, If you are relying on my estimates for Vikings' revenue, you need to throw in two pre-season games).

As for "forgetting" other expenses, I allude to other expenses--rent, non-player salaries, equipment--when I note the tax deduction for each.

My conclusion--and, frankly, one that the Vikings do not contest--is that the Vikings do quite well financially. And, under the financial constraints imposed by the NFL's salary cap, there is no demonstrable competitive advantage to be gained by having a new football stadium. The Vikings claim that they need a new stadium to compete, but ask them what that means. You should hear resounding silence.

As for the Twins, I acknowledge that they live in a different economic world. A new baseball stadium, however, is no panacea. I won't rehash this argument here as I have written on it numerous times in the past. Suffice it to say, though, that if all the teams in MLB have new stadiums, we are back at square one, i.e., the Twins will be unable to compete (if that is truly the state that they are in now). How, then, will the Twins become competitive in such an environment? Will they ask for donations?

Nobody (and I mean nobody) argues that the metrodome is a nice baseball stadium. It is not. The sight lines are terrible. The roof does not retract to allow the team to take advantage of nice summer and fall days. And there are plenty of other problems (food is awful at best, restrooms are a hazard when accesible). But that does not support the argument that taxpayers ought to foot the bill for a new stadium. Does it?

I can see ceding land that needs restoration. I can see ceding certain tax concessions (are there really any left to give?). But if you are going to commit public funds to an enterprise you need to get some guarantees and you need to make the production cooperative--i.e., the owner must contribute to the enterprise. I noted several revenue streams frequently associated with a new stadium (seat license, naming rights, parking fees, concessions). What those in the discussion need to address is how to allocate these streams to offset costs and to give the greater return to the party with the greater investment. Who gives now is entitled to get more later. Who gets now is entitled to get less later.

VG

Vikes Geek said...

Tony,

I will check it out.

VG

job opportunitya said...

Fruitful blog. I favor your site and I shall
return to it! I go to sites like this when I get the
chance, and find blog just like this.
Come as you are and look at my sally mae student loan consolidation blog.

fall-time said...

Excellent blog.  I go though the web in search of
blogs like this one. Its so good, that I plan on
returning to its site!
Hey why don't you peep my cash advance pittsburgh blog site.

no fax payday loans said...

hey what a nice site . your blog is great .

regards
cash advance

Anonymous said...

cant stop my self from commenting your nice blog . it was just so simple. do keep on writing. quick payday

average nfl salary said...

Your blog I found to be very interesting!
I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
I have a average nfl salary
site.
Come and check it out if you get time :-)
Best regards!