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NFL Under Siege

Critics take aim at a league of billionaires.

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Tuesday, November 19, 2013
Sharon Ellman AP photo
The roof is open on the stadium before an NFL football game between the Dallas Cowboys and the Minnesota Vikings Sunday, Nov. 3, 2013, in Arlington, Texas.

It may be true that even bad publicity is better than no publicity. But these days, the NFL (National Football League) is certainly putting that marketing philosophy to the test.

Richie (not so) Incognito and the Miami Dolphins bullying scandal. The Oneida Nation adding its voice to the chorus asking the Washington Redskins to change their team name. Hall of Fame running back Tony Dorsett joining the long line of legendary players speaking out about their concussion-related struggles with CTE (chronic traumatic encephalopathy).

“Are you ready for some football?” With so many off-field concerns casting shadows on today’s game-day action, answering that familiar Monday night refrain is not so easy as it used to be.

Add to that list of troubling professional football issues revelations regarding the league’s status as a nonprofit organization.

This year alone, the NFL will rake in $9 billion in revenue, yet it is technically a nonprofit organization. If you’re thinking that this deal just doesn’t add up—or shouldn’t, at least—you’re not alone. A recent Change.org petition, created by diehard New Orleans Saints fan Lynda Woolard, is asking the U.S. Senate to “Revoke the Tax-Exempt Status of the National Football League.” The petition had garnered 300,000 signatures at press time.

And earlier this fall, arch-conservative senator Tom Coburn (R-Okla.) introduced a “Bill to Restrict Professional Sports Leagues from Qualifying as Tax-Exempt,” which would either prevent said organizations from making over $10 million annually or force them to give up their tax-exempt status.

“Tax earmarks are essentially tax increases for everyone who doesn’t receive the benefits,” Sen. Coburn said in a press release. “In this case, working Americans are paying artificially high rates in order to subsidize special breaks for sports leagues. This is hardly fair.”

But while the league’s offices are tax-exempt due to its nonprofit status, NFL tax attorney Jeremy Spector says individual teams are not. “The NFL, those 32 teams who are making $9 billion, they’re not tax-exempt. I think that’s what’s driving a lot of the confusion,” Spector told NBC News.

The NFL pools together all annual revenue derived from tickets sold, jersey sales, and (the big one) money accrued from broadcasting contracts with TV networks. Then it redistributes that wealth back to the various teams.

But Smith College professor Andrew Zimbalist, who has written extensively about the economics of sports, tells the Advocate that the NFL’s nonprofit status is “merely a coordinating function for the league,” and that he is “not sure why everyone is so upset about it.”

“Any surplus is distributed to the teams,” Zimbalist says, and individual teams do pay business taxes on that income. If the league paid taxes first, less would be received, and therefore taxed, at the team level.

The bigger issue, Zimbalist says, is the publicly financed stadium deals so proliferate in all professional sports, and football in particular.

These days, Zimbalist says, most football stadiums are significantly subsidized by public financing derived from tax revenue. The stadiums are technically owned by public authorities, which charge teams (that is, team owners, most of them billionaires) user’s fees. The teams (team owners) keep all revenue derived from stadium naming rights, concessions, parking and so forth.

League images broadcast on TV in those publicly financed stadiums are then privatized for the benefit of team owners. “Under copyright law, entertainment created in publicly funded stadiums is private property,” Gregg Easterbrook wrote in The Atlantic. “No federal or state law prevents images generated in facilities built at public expense from being privatized in this manner.”

The result is a pretty sweet, heavily subsidized deal for NFL owners, 18 of whom are billionaires, according to Forbes.

Easterbrook cites calculations by Judith Grant Long, a professor of urban planning at Harvard, that “league-wide, 70 percent of the capital cost of NFL stadiums has been provided by taxpayers, not NFL owners. Many cities, counties, and states,” he adds, “also pay the stadiums’ ongoing costs, by providing power, sewer services, other infrastructures, and stadium improvements.”

Easterbrook—whose article was taken in part from his new book, The King of Sports: Football’s Impact on America (spoiler alert: it’s mostly bad)—notes that according to Long, only the New England Patriots, New York Giants and New York Jets “have paid three-quarters or more of their stadium capital costs.”

With both New York football teams sharing a home field in New Jersey’s Meadowlands, that is a grand total of two NFL stadiums not significantly subsidized with funds redistributed from the general public (whether football fans or not) to benefit NFL owners.

The scenario is far worse, notes Easterbrook, in other regions, such as Louisiana, where Woolard’s Saints—that is, their owner Tom Benson—collect(s) $6 million annually from the Bayou State’s taxpayers to guarantee that the team won’t move to another city. Which doesn’t exactly live up to Louisiana’s claim to be “the sportsman’s paradise.”

Likewise, “the futuristic new field where the Dallas Cowboys play, with its 80,000 seats, go-go dancers on upper decks, and built-in nightclubs, has been appraised at nearly $1 billion,” Easterbrook continues. Given the property tax rate in the stadium’s home city of Arlington, Texas, the team’s owner, Jerry Jones would have an annual property tax bill of $6 million or more, he adds. In fact, Jones is assessed no property tax at all.

Patriots owner Bob Kraft tried to secure public financing for a new football stadium in Hartford, Conn., Zimbalist recalls. But when that deal fell through due to environmental regulations and other complications, Kraft decided to keep the team in Foxboro, and built the new stadium himself. With a personal fortune nearing $3 billion, it appears Kraft has managed quite well regardless.

Earlier this year, Forbes released its list of the most valuable sports franchises in the entire world. The Dallas Cowboys were number five, the New England Patriots were number six. The top three were European soccer teams: Real Madrid, Manchester United, and FC Barcelona, respectively. The New York Yankees were fourth. Both Spanish soccer teams are owned by club members, fans who pay a share in ownership.

NFL Commissioner Roger Goodell, whose nonprofit salary brings him $30 million a year, hopes to bring league revenue up to $25 billion, Forbes reports. With all the recent news regarding NFL bullying and the negative long-term impacts on the health of football’s participants, however, it is becoming less certain that fans will go along for the ride.•

 

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