Hostage Crisis: American Sports Owners and the Cities They Hold Prisoner

When the NFL franchise formerly known as the San Diego Chargers announced in January that, after 56 years, the team would be relocating to Los Angeles, the news did not go over well. Fans in San Diego converged upon the team’s soon-to-be-abandoned headquarters, burning jerseys and hurling eggs. Moving companies in San Diego refused to help the Chargers in their relocation process. Football fans across the league decried the move, frustrated and upset by the potential precedent it could set for other teams across the country.

So why did the Chargers leave a fanbase that was clearly so dedicated? The picture is not so clear: Attendance at Chargers games was the second-lowest in the NFL in 2016, despite San Diego holding a larger population than more successful markets like Green Bay and Kansas City. And other cities certainly do have high demand for NFL franchises. But the main drive behind the move was owner Dean Spanos’ desire for a new stadium, and the city of San Diego’s reluctance to give him one. On election day last November, San Diego voters rejected a referendum to grant the Chargers several hundred million dollars of taxpayer money to build a brand new stadium downtown. For years, Spanos had been seeking a new stadium. Last year the city even offered a package to the team to help build a new stadium in the same Mission Valley location as the old one, but they turned it down in pursuit of a downtown location. Unable to get the city of San Diego to pay for his team’s new stadium in the location he wanted, Spanos decided to uproot everything and move the franchise to Los Angeles.

The Chargers are far from the only team to relocate under similar circumstances. Last year’s move from St. Louis to Los Angeles for the Rams was partially motivated by dissatisfaction with the stadium situation in St. Louis and by the promise of a fancy new facility in Los Angeles. The original Cleveland Browns controversially became the Baltimore Ravens after team owner Art Modell found the costs of stadium upkeep too hefty, even though the city offered a new stadium package. Cleveland voters even approved the redirection of tax revenue to the Browns the day after the announcement, but the move still happened. Furthermore, the Oakland Raiders appear on the verge of making a stadium-motivated move as well, this time to Las Vegas — which has pledged an exorbitant $750 million towards the nearly $2 billion price tag on the new facility.

City governments and populations alike have strong incentives to retain their sports franchises — perhaps stronger than that of any other business… What this incentive does, then, is create a power dynamic that gives team owners far too much control over a city’s finances.

But is this a problem? While it may be unfortunate for fans, shouldn’t business owners be allowed to relocate their headquarters at will? In theory, yes, but the unique business model of sports franchises means that they may have to be dealt with under special circumstances.

First of all, the one-of-a-kind relationship between sports teams and their fans ties the teams to their home city and ensures they have a primarily localized customer base. Likewise, part of a city’s identity is its sports teams; the Yankees are as much a part of New York as Broadway, Boston is pretty much defined by its sports culture, and it is difficult to picture a Cowboy-less Dallas. Therefore, relocating a sports franchise isn’t quite as simple as moving to a city with a better tax rate — it’s particularly worth considering the nature of stadium economics, how this impacts home cities. Game days bring people into the city and businesses near stadiums and arenas often see an uptick in sales, though some have raised doubts as to whether teams raise overall economic activity in their jurisdictions. More often than not, stadiums tend to be glitzy splurges that don’t have enough bang for cities’ bucks.

Thus, city governments and populations alike have strong incentives to retain their sports franchises — perhaps stronger than that of any other business. After spending millions on a stadium — not to mention developing the area around the stadium — and forming a strong, decades-long financial and emotional attachment to a franchise, no city wants to see a team leave. What this incentive does, then, is create a power dynamic that gives team owners far too much control over a city’s finances. Since no city wants to lose its football team, owners can effectively hold municipalities hostage for taxpayer money and grants for a new stadium, threatening to leave if they don’t get their way — which is exactly what happened with the Chargers. Beholden to the will of a single owner or several owners, cities can be presented with a lose-lose scenario: sink hundreds of millions into a new facility and keep the franchise local, or keep the money but risk losing the franchise and all of the financial and social benefits it brings. No other industry has the sway to essentially force governments into building incredibly expensive constructions for private enterprises, and it is extremely problematic that sports franchises have the ability to abuse the system in this way.

This hostage situation is not exclusive to football, either. In the National Hockey League (NHL), for example, a financial nightmare has plagued Glendale, the home city of the Arizona Coyotes, who not only owe debt money for the arena but also potential funds to anyone willing to buy the team from the city. Football is the sport, however, where it probably hurts the most. Of the big four sports — basketball, football, baseball, and hockey — baseball and football are the only two that require sport-specific stadiums that lack versatility and compactness; NBA and NHL teams can share arenas that can also serve other functions like conferences, concerts, and more, and thus relocations don’t render the former homes of teams in those leagues essentially useless. The key difference that makes this an issue for football more than baseball is the ability of teams in each league to relocate. In the NFL, approval from 24 of 32 owners is required for a team to be allowed to move cities. While a variety of factors make MLB relocations tricky, the most pertinent to the issue at hand is the league’s antitrust exemption which grants the commissioner of the league complete control over all relocation efforts — a power not granted to the NFL commissioner.

Antitrust laws exist to curb larger businesses from holding too much power and growing too large, but sports leagues have been given exemptions because sporting events are considered exhibitions, not commercial exercises. The NFL does technically have a minor antitrust exemption, but it applies mainly to specific broadcasting-related taxes, and are not completely exempt from antitrust laws. Only the MLB has a full-fledged exemption among the big four leagues, which is why the commissioner, as part of the league office, has so much control over the teams and more specifically, their ability to relocate. The discrepancy in the number of relocations in the MLB versus the other leagues suggests that the exemption — and particularly, the ability (allowed by the exemption) of the commissioner to control all relocations — plays a major role in preventing teams from changing venues; in the last 40 years, nine NFL teams, eight NHL teams, nine NBA teams, and just one MLB team have relocated. Since the commissioner has this power, team owners know that any relocation will only be permitted if it stands to benefit the league as a whole — a caveat that likely would have prevented the Chargers’ move. Unless there is a clear opportunity to increase the league’s profile and game attendance, MLB teams have to stay put. Without this added layer of difficulty, relocation becomes a less daunting and obstacle-ridden task.
If cities are to be protected from being held prisoner economically by overly-powerful sports owners, all major sports leagues in the United States need to be given antitrust exemptions. Relocations are more often than not bad PR for teams and serve to hurt the overall brand of the leagues and sports in which they play. What’s more, no single business should be able to force the hands of local governments into forking over hundreds of millions of dollars to build them a new stadium. By introducing robust antitrust exemptions to these leagues, the government would be helping to create a better, more level-headed system to help keep teams in check. While still not a perfect system — commissioners do have less motivation to relocate a team than owners would, but are far from infallible — this form of power-checking seems more and more likely as situations like that of the Chargers become more and more plausible.

 

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