My post on public ownership of the Chargers if the public is to, you know, invest in the Chargers has generated a lot of discussion. I’d like to respond to a few points.
The point of the post was simple: The Chargers are asking for hundreds of millions of taxpayer dollars to build a new stadium. One of the major candidates for mayor, Bob Filner, says if we invest this kind of money in a stadium, the taxpayers should get some kind of ownership stake in the team.
After all, this is what developers in downtown Los Angeles are demanding. They’re planning on building a stadium largely on their own dime and all they want in exchange is a stake in the ownership of the team that plays in it. I didn’t endorse Filner’s idea, but I said he’s tapping into a strain of taxpayer angst his counterparts should consider.
Unfortunately, the NFL’s bylaws forbid public or nonprofit ownership or the sales of shares of an NFL team.
I argued that rules can change. These aren’t the Ten Commandments. Major League Baseball changed a similar rule.
Reader David Little sent me this:
Great article! Still it lacks something – like why does the NFL want this rule.?
I based my post largely on the Northern Illinois University Law Review article written by Jorge E. Leal Garrett and Bryan A. Green. They conclude that sports team owners are sitting on a “sleeping giant” of capital they could use for all their investment dreams if they could tap into their fans’ desire to invest in the team.
They also address the economics of the league’s reluctance to open up that way.
First off, remember that it is the norm here for a government to own the city’s football stadium. As the authors note, in Britain, most soccer clubs actually bear the costs of owning and maintaining their facilities. And many of those clubs sold shares of stock to the public to raise the money needed.
This, interestingly, is actually a way British teams compete with each other.
Yet here in America, in the 20th century, $20 billion was spent nationwide building pro sports facilities. Of that, taxpayers willingly put up $15 billion of it.
The writers note that the willingness of taxpayers to foot the bill for new stadiums is waning. “With changes in the economy, Americans are beginning to realize that these significant resources could probably better serve other purposes,” they write.
The other day, LaDona Harvey, a radio host at KOGO, asked Chargers’ Mark Fabiani on air about my column and Filner’s idea. His answer was provocative, if you think about it:
You build a new stadium not to be able to say, ‘Hey I got a nice new stadium.’ You build it to because it’s going to generate revenue that will help you compete against the best teams in the league. … It wouldn’t be good for the Chargers, it wouldn’t be good for our fans, because we would have less capability to sign players, less capability to compete with the best teams in the league than we do now. Because we’d be giving away our asset and the asset would then be worth less than it is now, so you’d be in a worse position. You’d be better off simply staying and playing where you are now.
In other words, according to the Chargers, it’s incumbent on taxpayers to fund the on-the-field competitiveness of a pro-football team.
I suppose you can think of less important things for the government to be concerned about right now, but not many. It wouldn’t matter if taxpayers willingly signed off on a tax increase to pay for it, but that’s not being considered right now.
Fabiani was also reflecting the view of the broader National Football League. The league is worried about its famed parity — the fact that small market teams can compete with big-market teams. Major League Baseball does not have similar parity and small-market teams are at a disadvantage (though, not always).
We know this, because, in the past, some folks challenged the leagues rules barring public ownership of a team. The Federal Sherman Antitrust Act prohibits restraint of trade or commerce. The former owner of the New England Patriots, William Sullivan, complained that the rules barring the sale of public shares of a team were an illegal restraint on trade.
The case was dismissed for unrelated issues.
But the law school guys think it’s going to come up again. And they outline the NFL’s fears. Read this fascinating passage from their paper:
The NFL believes that access to public ownership would afford certain teams additional revenue, placing privately funded teams at a disadvantage. They argue that if one team were to go public, all teams would need to go public in order to remain competitive.
In other words, the teams that went public might raise too much money.
Additionally, the NFL believes that allowing public ownership would provide certain teams an unfair advantage due to a team’s location. Inevitably, a team’s local market differs from city to city and team to team, with some having to share a market — e.g., the Oakland Raiders and the San Francisco 49ers of the NFL, and other teams simply located in smaller cities with less thriving economies. The business of competing in professional sports would shift to a business competing for public income. To avoid such an inequitable result, the NFL owners find it prudent to impose a policy prohibiting public ownership of NFL teams.
Finally, yes, I’m conflating two issues: One, the demand from Filner that the team give the city a share of its ownership if the city invests hundreds of millions in a stadium. And, two, that the team could appeal to its fans, sell public shares, and raise the money it wanted for its own facility.
But they’re both the same thing: They both appeal to the angst of worried residents who are having trouble imagining investing in the competitiveness of a football team when we can’t keep the police department fully staffed or libraries open.
Several people responded to my post enthusiastic about the team embarking on a so-called crowdfunding effort. Rather than require taxpayers to invest in a stadium, why not see what they could raise with either a sale of public shares or some other way of getting the people who want a stadium to fund it?
Yes, the taxpayers may want to simply pay for the Chargers to be competitive.
Boosters should begin thinking about the possibility that they may not. But that doesn’t mean there’s no money available for a new stadium. In fact, there may be too much.
I’m Scott Lewis, the CEO of voiceofsandiego.org. Please contact me if you’d like at scott.lewis@voiceofsandiego.org or 619.325.0527 and follow me on Twitter (it’s a blast!):
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