Wednesday, January 2, 2008

How does the federal government impact professional sports in America?

The federal government’s impact on professional sports is a lot greater than just investigating scandals and conducting congressional hearings. The foundation of all of the major American professional teams is government influence.

Regional governments provide a large amount of funding that is used to build sport facilities, be it paying for a facility or turning over land to a team owner who promises to build a sport arena on public land at no cost to the municipalities. Local governments also grant tax breaks which in some cases include waiving property taxes, or arranging for special deals like “payment in lieu of taxes” or “tax increment financing” which give incentives to sports owners. These kinds of incentives and breaks can be seen in other areas of business in addition to sports. It is typical for municipalities who fund sport venue projects to offer sport franchises favorable leases to encourage teams to come to the region. In some situations, municipalities raise sales, hospitality, car rental and water taxes etc… to raise funds to develop infrastructure such as roads, electric, water lines, and sewer systems for new sport complex projects.

Continuing with the theme of taxes, under a 1988 federal law, taxpayers may deduct 80% of payment for the right to purchase seating, naming rights deals, and/or advertising at a collegiate sports event as a charitable contribution. This law really caters to corporations who will purchase luxury suites, which in turn has lead to a boom in stadium renovations in collegiate athletics with projects that range in the hundreds of millions of dollars.

The rapid growth of the National Football league is widely attributed to the federal government passing the Sports Broadcasting Act of 1961, that allowed the NFL (and now many other sports leagues/organizations) to sell itself as a single entity to television networks. In the 1980s Congress deregulated the cable television industry, resulting in cable television content providers banding together on basic expanded cable and then sold as a single entity, - what does all of that jargon mean? The groundwork was put in place for sport networks like ESPN to convince cable systems operators to put their networks on the basic expanded tiers and thus putting ESPN in every basic cable subscriber’s home. Can you imagine the current sports climate without television networks like ESPN, Fox Sports Network, and CBS Sports etc…?

The federal government gives the major professional sport leagues and organizations in America special treatment when it comes to anti-trust laws, but this treatment comes at a cost. It is obvious that these leagues could not operate without this special treatment, and Congress has been known to use that point as leverage, for example, Congress forced Major League Baseball to expand in 1968 and in 1999 by threatening to revoke baseball’s anti-trust status.

It is clear that the American sports industries couldn’t be what they are today without government, but is all of the special treatment good for society? Why is sport held to a different standard? Would professional contests be more affordable if the pro leagues had competing leagues? Would we see better retirement plans and safer conditions, if these leagues were held to the same work-place safety standards? Is it possible that corporations would give charitable contributions to actual charities if they didn’t have the luxury of giving funds to sports venues or leagues and receiving valuable tickets, signage, and naming rights deals for the money? Would I be writing this blog if the government had not nurtured sport into what it is today?

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Anonymous said...

So does our federal goverment make any money from these major league sport teams, or do they just cater to them? These teams are paying their staff salaries more than many state legislators make! The people who make our laws (at least state laws) are paid less than people who play a game! Is it just me, or this as dispicable and disgusting as it sounds? What's the incentive to better our states/country when one can be paid thousands more to play a game? Am I just being cynical, or is there just something seriously wrong with our country's priorities????

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