Published on September 27th, 2012 | by James Conley0
NHL Lockout Freezes Owners’ Spending, but Fans Are Still Footing Their Bills
The 2012 NHL Lockout has thus far proven to be a money dispute between the league and its players union, yet the game’s fans are still lavishing their dollars on the brand.
Rather than buying the jerseys, tickets and merchandise that comprise traditional revenue streams, fans are spending on the arenas which NHL owners have indefinitely closed to the taxpayers and hockey players that fill them in the first place.
With or without hockey, fans still pay for these buildings. Almost every venue in the NHL has been paid for with some form of public assistance. Those who don’t watch hockey or even know the name of the team that plays in their city, but simply pay their state and local taxes, are helping to foot the bills for arenas which sit empty in a league which remains locked out.
This isn’t an anomaly, but the rule.
The modern American sportscape is the result of decades of mega-rich franchise owners institutionalizing systems of public extortion. Tax exemptions and municipal funding have become the preferred way to bankroll the construction of buildings which house privately-owned teams, accounting for as much as $14.7 billion since 1990, or two-thirds of all stadium and arena building and renovation costs, according to a 2004 estimate.
Of course, that’s a 2004 estimate. Bloomberg reported in March 2012 that tax-deferred subsidies on bonds used to build municipal stadiums in the big four sports could mean a transfer of $4 billion dollars from taxpayers to franchise owners by the time the last of the issued bonds matures near 2050.
Who says the NHL doesn’t have meaningful revenue sharing?
Certainly not Edmonton Oilers owners Darryl Katz, he of the dog-whistle, “fund my new arena or I’m taking my ball and going to Seattle” vacation set. Katz spent time in Washington in the last week, apparently issuing thinly veiled threats of relocation until it gets him increased public funding to build his new arena (one that will provide him with revenue streams like luxury boxes and increased concessions revenues that he currently doesn’t receive in Rexall Place, because of course).
To date, the city has reportedly pledged to provide more than $400 million for the arena which is expected to cost about $475 million total.
To say Katz is greedy is an understatement. And to say he’s subverting an already broken system to its dystopian upper-limit is no hyperbole—keep in mind, this hat-in-hand businessman authorized more than $80 million in new player contracts in just the week before voting to approve the September 15 lockout that will halt all player salary expenditures until it ends. But the blueprint is in place, and Katz is only following a path which has been established by other NHL owners.
Pittsburgh has been mighty quiet since making waves at the NHL Draft this July, and to get the real thoughts of this or any management group during the work stoppage will be pulling teeth from a hungry tiger. And though the team has steered clear of lockout hypocrisy by opting not to squeeze cap-busting contracts onto their roster just ahead of September 15, they aren’t to be held in higher regard than the typical ownership villains in Boston and Philadelphia.
That’s because despite increasing their franchise value some 164 percent since 2004-05, the Penguins voted for the lockout, too.
All 30 teams did, and many of them have received or continue to receive public money to pay for the arenas taxpayers can’t see the interiors of until the lockout ends. It’s one thing to vote for the work stoppage to stay in lockstep with the rest of ownership—and every team will save buku bucks on salary during this stoppage—but doing so while still taking public money to pay for an arena is a different animal.
Don’t mistake Pittsburgh citizens’ loud, public desire for a new arena as justification for the money it took to build it. Not every taxpayer in Allegheny County is a hockey fan. And even though the Penguins’ post-lockout success on the ice has brought money and prestige to the downtown economy, automatically scoring the peripheral economics of a new arena and a good team as a sound business strategy may be a leap of faith.
But numerous studies show that stadiums and professional sports fail to increase income. Some studies even find a negative impact on income. Coates and Humphreys  estimate that the construction of a new baseball stadium reduces a city’s per capita income by $10, while a new basketball arena lowers per capita income by $73. Baade and Sanderson [1997, 105] find that a city’s share of its state’s employment in leisure and recreation may fall with the addition of a team or new stadium.
The hard numbers for what Penguins games do for the Pittsburgh economy aren’t available or haven’t been comprehensively confirmed. Considering the five-years long home sellout streak, it’s a safe bet that CONSOL has thus far proven to be a good investment. But it isn’t paid off. Hell, even the temporary parking lot formerly known as the Mellon Arena isn’t paid off.
According to a 2010 report, debts owed on capital improvements to the old arena will be paid by the Penguins and the city through 2018. A total of $9.3 million was still owed on Mellon Arena when the Penguins played their last game there in spring 2010.
The arena deal itself is funded through a $7.5 million annual payment for 30 years from the Pittsburgh casino, $7.5 million a year from a state economic development fund backed by slot machine revenues, and about $4 million a year from the Penguins.
Per year, that’s $7.5 million from state and local taxes and $4 million from the building’s primary tenant. The Taxpayer’s Protection Alliance estimates $47.6 million in tax-sourced money has been spent on CONSOL Energy Center already.
There are so, so many numbers to consider that the real economics may have been misrepresented here. But the very obvious fact is that while the NHL Lockout has put a stop to hockey, public money used to pay for the hockey arena hasn’t.
Perhaps, as a show of good faith, the Penguins ought to forego public money used to pay for the arena’s construction. At least for as long as the lockout lasts.
After all, taxpayers voted to keep the Penguins in Pittsburgh and opened their wallets to do so. And if the Penguins voted to approve the lockout as USA Today suggests they did, ownership ought to open its wallet up for the city.
At least until they provide some public admission that the work stoppage works in no one’s favor but their own.
Image axsdeny @ flickr