Post 7: The Raiders Move to Las Vegas and Addressing Public Funding of NFL Stadiums

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Oakland Mayor Libby Schaaf speaking during a press conference on the Raiders move to Las Vegas. (Ray Chavez, Bay Area News Group).

In 2014, the US Census Bureau released its annual report on Public School System Finances. [1] The report presented data on the financial activity of public elementary and secondary schools, including information on state per pupil spending, teacher salaries, administrative costs and demographics. [2]

In terms of per-pupil spending, the report showed a wide-range of state expenditure. For example, New York spent the most with an average of $20,610 per student, and Utah the least with $6500.00 per pupil. [3] Nevada spent under the $11,009 national average, providing $8414.00 for each student. [4]

These numbers, especially from states like Nevada, become eye-catching when compared to the amount of public money spent on construction of new professional football stadiums. Over the last 20 years, American taxpayers have spent more than $7 billion dollars to build or renovate NFL stadiums. [5]

According to a report released by the Taxpayers Protection Alliance, an astonishing amount of public money is used to build new stadiums. For instance, $444 million was provided to the Dallas Cowboys, $600 million for the Indianapolis Colts; and $424 million for the Cincinnati Bengals, a team in a city that later had to sell a public hospital to close budget gaps. [6]

In defense of public financing of stadiums, NFL owners insist that the new venues stimulate local economies. The league’s argument is based on assertions that new stadiums generate employment opportunities, increased consumer traffic and additional tax revenue.

However, many economists hold that stadium benefits are not returned to taxpayers, but instead flow to the NFL. Lake Forest College economics professor Robert Baade has found that investment in NFL stadiums caused cities to perform worse economically than those that did not finance new football venues. [7] Instead, revenue from luxury boxes and seat licenses often go to team owners while the public assumes most of the risk. [8]

 photo 4f592035-b18c-4d8a-a0d2-44b3232932ab_zps4ulpqo2x.jpg
Raiders owner Mark Davis and NFL Commissioner Roger Goodell. (Ross D. Franklin, AP Photos).

So how does the NFL convince municipalities and state legislatures to fund their stadium projects? Quite simply, the NFL exercises a vast amount of power. The league’s influence comes from, among other things, special tax code allowances and influence over elected officials. For example, the NFL is a tax-exempt organization. [9] In 1966, IRS tax code section 501(c)6 was amended to grant non-profit status to “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues.” [10] Thus, the NFL has saved millions in tax payments, which in turn burdens taxpayers to make up the budget shortfall caused by the exemption. [11]

Additionally, the NFL applies financial pressure to local and state elected officials to achieve its ends. During negotiations with local governments, the NFL often threatens to move the team if the new stadium is not publicly financed. [12] The league also provides local and state politicians with campaign donations and complimentary luxury game seats. [13] In fact, the NFL’s political power once led former US Senator Arlen Spector to say that “NFL owners are arrogant people who have abused the public trust, and act like they can get away with anything.” [14]

Nonetheless, in 2015 the state of Nevada approved $750 million in public money to build a new stadium in Las Vegas for the Raiders. [15] The measure is funded through a hotel tax increase and requires an additional $900 million in infrastructure improvements to accommodate the new venue. [16] In all, it will be one of the largest public investments in American sports stadium history. [17]

Nevada lawmakers appropriated the funds despite budget shortfalls in the county where the stadium will be built. For instance, Las Vegas needs a transportation upgrade, including a new light rail system. [18] Also, the county has not hired a firefighter in years [19] and Nevada schools spend $2500 less per student than the national average.  [20] In fact, due to lack of school funding, county officials recently voted to close a school and increase class sizes. [21]

 photo 3d92a492-cc2b-4cc6-aac9-1cf02343fcca_zpstip8kyhs.png
A digital rendition of the future home of the Las Vegas Raiders. (Manica Architecture).

However, before securing funding from Nevada the NFL sought financing from the City of Oakland. Initially, Oakland offered $200 million for infrastructure improvements, though Oakland Mayor Libby Schaaf refused to finance stadium construction. [22] Her decision was based in part on the impact on city finances and a $90 million municipal loan to the Raiders that has not been repaid. [23] In remarks during negotiations, Mayor Schaaf reiterated that Oakland intended to support the Raiders, but “in a way that does not endanger the City’s general fund.” [24]

In response, the Raiders and NFL owners accepted Nevada’s $750 million in public funds and voted to move the team to Las Vegas. Beginning in 2019, the Raiders will play in a $1.9 billion stadium just off the Las Vegas strip. [25] However, as the team opens the 2019 season, Nevada will likely continue to spend less per student than the national average. Additionally, public safety positions will probably remain unfilled and infrastructure upgrades unfunded.

So, if taxpayers feel that local and state governments are irresponsibly subsidizing NFL stadiums, they should look to leaders like Mayor Schaaf for guidance. In negotiations with the NFL, she held fast against its wealth and political clout, and in favor of her constituent’s best interests. Overall, Mayor Schaaf’s regard for sensible public expenditure is a lesson for political leaders negotiating with the NFL: to protect public treasure, you simply must say “no”.

[1] US Census Bureau 2014 Annual Survey of School System Finances.

[2] Id.

[3] Id.

[4] Id.

[5] Foxsports.com. (2016). Taxpayers Have Spent a Staggering Amount of Money on NFL Stadiums in the Last 20 Years. Fox Sports. Retrieved from http://www.foxsports.com/nfl/video/910204483835.

[6] Waldron, T. (2015). Taxpayers Have Spent a Staggering Amount of Money on NFL Stadium. The Huffington Post. Retrieved from http://www.huffingtonpost.com/entry/taxpayers-nfl-stadiums_us_55f08313e4b002d5c077b8ac.

[7] Id.

[8] Id.

[9] Easterbrook, G. (2013). How the NFL Fleeces Taxpayers. The Atlantic. Retrieved from https://www.theatlantic.com/magazine/archive/2013/10/how-the-nfl-fleeces-taxpayers/309448/.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] New York Times. (2016). To Entice Oakland Raiders, $750 Million is Approved for Las Vegas Stadium. The New York Times. Retrieved from https://www.nytimes.com/2016/10/16/sports/football/oakland-raiders-las-vegas-move.html.

[16] Hobson, W. (2017). To Lure Raiders, Nevada Willing to Bet Big- With Public Money. The Washington Post. Retrieved from https://www.washingtonpost.com/news/sports/wp/2017/01/24/to-lure-raiders-nevada-officials-willing-to-bet-big-with-public-money/?utm_term=.93c06e7adf45.

[17] Id.

[18] Id.

[19] Id.

[20] US Census Bureau 2014 Annual Survey of School System Finances.

[21] Powell, M. (2017). The NFL and the Business of Ripping Out the Heart of Oakland. The New York Times. Retrieved from https://www.nytimes.com/2017/03/27/sports/football/raiders-move-oakland-las-vegas.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region&region=top-news&WT.nav=top-news.

[22] Boitano, D. (2017). Oakland: Schaaf Says No to Raiders Stadium Construction Subsidies. East Bay Times. Retrieved from http://www.eastbaytimes.com/2017/02/01/oakland-schaaf-says-no-to-raiders-stadium-construction-subsidies/.

[23] Id.

[24] Mano, D. (2017). Oakland Mayor Libby Schaaf met with NFL Owners about Raiders Stadium. San Jose Mercury News. Retrieved from http://www.mercurynews.com/2017/03/06/oakland-mayor-libby-schaaf-met-with-nfl-owners-about-raiders-stadium/.

[25] Breech, J. (2017). Look: Raiders Release Splashy New Renderings of $1.9 Billion Stadium in Vegas. CBSSports.com. Retrieved from http://www.cbssports.com/nfl/news/look-raiders-release-splashy-new-renderings-of-1-9-billion-stadium-in-vegas/.

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