Connecting state and local government leaders
They say the move would reveal the true value of the facilities and teams for taxpayers.
This article was first published by Route Fifty partner publication City & State Pennsylvania.
State Rep. Jim Gregory’s history with the Pittsburgh Pirates goes back well before he ran for public office.
He spent 12 years as a sports reporter for WTAJ-TV and covered the Pirates’ division wins in the early 1990s.
“One of my prized possessions is a picture of me doing an interview in the Pirates clubhouse after they clinched the division in 1991 and Stan Belinda is pouring a beer over my head,” Gregory told City & State.
Such fond memories are one of the several reasons why Gregory, alongside fellow state Rep. Tim Bonner, introduced a proposal to review the economic impact of pro sports stadiums and teams’ financial calculations.
The two western Pennsylvania lawmakers have proposed legislation that would require audits related to the construction of the four sports stadiums in Philadelphia and Pittsburgh. With the current legislative session ending at the end of the year, Gregory and Bonner shared a co-sponsorship memo in October to gauge interest among members ahead of next year, when they plan to reintroduce the bill.
The legislature “had a big role at that time in getting the stadiums done,” Gregory, a Republican from Blair County, said. “This is the legislature’s way to provide a picture for the entities that will sit at that table and will renegotiate those new leases to know exactly what the return on that investment is.”
The four stadiums – the Eagles’ Lincoln Financial Field, the Phillies’ Citizens Bank Park, the Steelers’ Acrisure Stadium and the Pirates’ PNC Park – were given state funds through Act 1 of 1999, known as the Capital Facilities Debt Enabling Act.
At the time, the teams negotiated with Harrisburg lawmakers in order to get a total of $320 million in grants between 2002 and 2006. The Philadelphia teams each received $85 million and each Pittsburgh team received $75 million in an agreement with the 30-year lease term. The terms of the deal also required the teams to report finances in 10-year intervals, with each team expected to prove it generated at least $25 million in additional tax revenues – or pay the difference.
All of the teams exceeded that amount in their first reports, and as the second 10-year reports are expected this month, the legislation calls for two specific measures to provide further transparency.
With Act 1 of 1999 being focused on keeping baseball teams in the state, the first measure requires the Independent Fiscal Office to conduct studies looking at the regional economic benefits resulting from the two taxpayer-funded ballparks for the Phillies and Pirates. The second would require the Auditor General to audit the team’s financial calculations.
While both Gregory and Bonner said they don’t anticipate any wrongdoings on behalf of the teams, they’re particularly concerned with teams like the Pirates that have shown decreased attendance and on-field success, not only compared to their cross-state rival but across the league as well.
“I do believe that the region is concerned about the level of spending by the Pirates. We’re usually ranked in the bottom five in the payroll of all Major League Baseball teams and our attendance reflects that,” Bonner, a Republican from Butler County, told City & State. “What’s the difference of the economic impact of the two teams in their respective regions – and whether, in fact, having a more successful team with higher attendance has greater economic impact on the region – that’s part of the study.”
Whether on-field performance has a positive impact on the economic benefits of a sports stadium remains up in the air. However, economists largely agree that the pros of having taxpayer-funded sports stadiums don’t outweigh the cons, at least in terms of spending brought into the region.
Robert Baade, an economist at Lake Forest College who specializes in stadium finance, told City & State that leakage – where revenues are taken out of the economy and utilized elsewhere – often occurs with sports revenue, where the city is not benefiting from the dollars spent at the stadium. Baade described it as a “reverse Robin Hood effect.”
“You have residents spending money on an activity where most of the revenue generated through the hosting of professional sports teams goes to owners and players … who in some cases don't live in the city in which they are operating the franchise. The leaders do not live in the community in which they play,” Baade said. “If you spent that money on a locally-owned and -operated entertainment activity, you'd have much less leakage.”
Michael Leeds, a sports economist and professor at Temple University, agreed, stating that cities and local politicians are “damned if you do and damned if you don’t” in situations involving publicly funded sports stadiums. The economic benefits teams and stadiums bring to cities may not live up to expectations, but no politician wants to see a team leave their city on their watch.
“The lawmakers aren’t necessarily trying to attack the sports teams because that’s not necessarily good politics,” Leeds said. “They’re just more looking for the side of transparency and understanding what’s actually happening to taxpayers in those cities.”
Stadium benefits are calculated using multipliers, which attempt to measure the domino effect when spending subsequently causes more spending or other related economic activity. For larger cities like Philadelphia, the multiplier effect is likely much smaller as a proportion of the city’s economy when compared to smaller cities such as Pittsburgh.
“Chicago is one of a handful of cities that has four major sports located within the city limits … The income they generate is a fraction of 1% of the total income generated in Chicago in a given year,” Leeds said.
Leeds added that although sports teams garner a lot more attention relative to their economic footprint, that doesn’t diminish their fiscal contributions.
“That’s not necessarily a bad thing. That’s one of the things I want to emphasize, that this is something that an audit will not take account of. These sports teams are not necessarily here to make a profit for the city. Maybe that’s not what we should be looking for,” he said. “Do they make us happy?”
Leeds said for future stadium negotiations, and any consideration of taxpayer-funded subsidies, the key is for officials to “read the fine print” regarding the overall costs.
Teams could “say the city won’t have to pay construction costs, but they will have to provide us with the land, they will have to undergo all sorts of infrastructure expenditure – and they will have to provide us with all sorts of tax breaks. It’s very, very important not to get caught up in
what the team is saying,” Leeds said.
Despite the concerns over public financing of stadiums, Gregory reiterated that the audit proposal isn’t aimed at uncovering wrongdoing by a team’s financial department but to give the public an idea of what it’s getting in return for its investment.
“There are many folks who don’t agree with stadiums being funded publicly; they don’t want to be held hostage. And then there’s the other side of that issue, where people feel like the investment is worth it,” Gregory said. “That’s why we’re doing this – to show that it is or it isn’t (worth it), and I’m pretty confident that we’re going to see that it has been for the most part.”
An Eagles spokesperson declined to comment and representatives from the Steelers and Pirates did not respond by press time.