Ownership Right-of-First-Refusal Needed for Pro Sports Cities

I recently had a conversation with a bitter long-time San Diego Chargers season-ticket holder. He was upset about the Chargers move to Los Angeles. He, and members of his family, had been going to Chargers games for 51 years. He now says he will never spend another dime on a Chargers game ticket or piece of merchandise.

Theres one sports policy change that could significantly limit the movement of pro sports franchises from one city to the next in this country. That policy change is ownership rightoffirstrefusal for cities that have subsidized pro sports franchises via stadium perks (publiclyfinanced stadiums, sweetheart leases, etc.).

Basically, it would work like this: Before a teams owner could move a franchise, or sell it to an owner whose intent is to move it to another city, the team would be offered for sale to the host city.

This type of right-of-first-refusal policy would only be applicable to pro sports franchise owners who have received economic consideration from the local government in the form of tax breaks, taxpayer-financed stadiums, and so forth. It is these tax subsidies that in essence make the local taxpayers partners in the pro sports franchise. Owners who dont receive economic considerations from their host cities/states and who build and operate stadiums/arenas on their own dime wouldnt be subject to this policy.

Similar polices have been ruled enforceable in other industries. For example, a Michigan judge ruled in February 1993 that General Motors (GM) would have to keep operating a plant in Ypsilanti, Michigan, instead of pursuing other options, because of concessions the city had given GM. The judge determined that by taking the concessions, GM was making a commitment to Ypsilanti.

It is not inconceivable that a judge could rule that the same rationale used in the Ypsilanti case could apply to NFL, MLB, NBA and NHL franchises just as well as it does to automakers. An NFL franchise has as great an impact on the local citizenryin economic, psycho-social, and cultural termsas does an auto plant, if not greater.

In many cities, taxpayers are truly partners in the local pro sports franchises because of the huge tax subsidies the team receives via the publicly-financed stadium in which they play, along with other financial perks. This is particularly true in cities where the local franchises enjoy incredible sweetheart lease terms.

This proposed rightoffirstrefusal policy would protect fans in a couple of ways. If the current owners wanted to sell or move the franchise, the city (if the city is a "partner" via the extension of tax subsidies for stadiums and so forth) could step in and buy the franchise at a fair appraised value (a third-party franchise appraiser could set the price) and either run the franchise (some minor league teams are run by the host city), find a local buyer, or sell it to the fans via a public stock offering.

The stock offering to fans option has been done successfully in American professional sports before. The Green Bay Packers of the National Football League (NFL) are owned by the fans via a private stock offering. The Packers are a communityowned, nonprofit corporation.

This "fan ownership" concept would be similar to "plantclosing legislation" passed in 1988. This legislation was designed to give workers of failing companies a "window of opportunity" to take over the failed company before it folded or moved.

When it comes to pro sports, legislation similar to this socalled plantclosing legislation could be applicable for fans in cases where their city's franchise is failing and/or threatening to move. Under this proposal, a city and/or its fans would have a reasonable, specified period to purchase a franchise whose intent is to leave for another locale. This option would help prevent the departure of storied franchises like the NFLs Chargers and Raiders.

Of course, there would be nothing preventing an owner from building his/her own stadium in a particular locale and avoiding this proposal. In such cases, these owners would not be subject to this proposed policy change. But by investing millions into a stadium they would also have much less incentive to vacate the city in which they have invested heavily in a stadium complex. Thus, the fans would still benefit. An owner making a substantial investment in a stadium would not be interested in moving the primary tenant (and source of income) of that stadium. He/she would also be very motivated to put the best product possible on the field to fill his/her stadium with fans.

An additional twist in this public policy change would be allowing host cities that subsidize a local pro sports franchise with taxpayer-financed stadiums, tax breaks and sweetheart leases to receive a certain percentage of profits from a sale of the local franchise.

Profit sharing might be the only way to justify the fact the public is asked to fund a new stadium for a privately-owned pro sports franchise. Since owners will benefit from the appreciation in the franchise's value over time while the stadium will depreciate in value, the host city (and thus, its taxpayers) should be allowed to share in the appreciation of the franchise, if and when the team is soldeven if it is to a local buyer whose intent is to keep the franchise in its current city.

This proposed public policy change is pro-fan and pro-taxpayer. It also would be a way to neuter the unabashed greed of pro sports owners who operate businesses that are, in effect, socio-cultural institutions.