[Senate Hearing 106-484]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-484
 
         STADIUM FINANCING AND FRANCHISE RELOCATION ACT OF 1999

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

                                 S. 952

  A BILL TO EXPAND AN ANTITRUST EXEMPTION APPLICABLE TO PROFESSIONAL 
  SPORTS LEAGUES AND TO REQUIRE, AS A CONDITION OF SUCH AN EXEMPTION, 
PARTICIPATION BY PROFESSIONAL FOOTBALL AND MAJOR LEAGUE BASEBALL SPORTS 
 LEAGUES IN THE FINANCING OF CERTAIN STADIUM CONSTRUCTION ACTIVITIES, 
                         AND FOR OTHER PURPOSES

                               __________

            WASHINGTON, DC; WASHINGTON, DC; PHILADELPHIA, PA

                               __________

                JUNE 15, JUNE 22, AND SEPTEMBER 13, 1999

                               __________

                          Serial No. J-106-32

                               __________

         Printed for the use of the Committee on the Judiciary





                    U.S. GOVERNMENT PRINTING OFFICE
63-000 CC                   WASHINGTON : 2000





                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman

STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona                     HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire

             Manus Cooney, Chief Counsel and Staff Director

                 Bruce A. Cohen, Minority Chief Counsel

                                  (ii)



                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Specter, Hon. Arlen, U.S. Senator from the State of Pennsylvania 
  1, 52, 109.....................................................
Thurmond, Hon. Strom, U.S. Senator from the State of South 
  Carolina.......................................................    51
Feinstein, Hon. Dianne, U.S. Senator from the State of California    54
Schumer, Hon. Charles E., U.S. Senator from the State of New York    55
Feingold, Hon. Russell D., U.S. Senator from the State of 
  Wisconsin......................................................    56
Kennedy, Hon. Edward M., U.S. Senator from the State of 
  Massachusetts..................................................    57
Hatch, Hon. Orrin G., U.S. Senator from the State of Utah........    58
Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont...    72
Biden, Hon. Joseph R., Jr., U.S. Senator from the State of 
  Delaware.......................................................   110
                          PROPOSED LEGISLATION

    S. 952, a bill to expand an antitrust exemption applicable 
to professional sports leagues and to require, as a condition 
of such an exemption, participation by professional football 
and major league baseball sports leagues in the financing of 
certain stadium construction activities, and for other
purpose.........................................................      2


                    CHRONOLOGICAL LIST OF WITNESSES

                             june 15, 1999

    Panel consisting of Hon. Thomas M. Finneran, speaker, 
Massachusetts house of representatives, Boston, MA; Hon. Edith 
G. Prague, assistant majority leader, Connecticut State senate, 
Hartford, CT; John Moag, Jr., Legg Mason Wood Walker, Inc., 
Baltimore, MD; Hon. Jean B. Cryor, delegate, Maryland house of 
delegates, Annapolis, MD; D. Bruce Poole, former delegate, 
Maryland house of delegates, Annapolis, MD; Andrew Zimbalist, 
Robert A. Woods professor of economics, Smith College, 
Northampton, MA; and Mark S. Rosentraub, professor, School of 
Public and Environmental Affairs, Indiana University, 
Indianapolis, IN................................................     13


                             june 22, 1999

    Panel consisting of Jerry Richardson, owner and founder, 
Carolina Panthers, Charlotte, NC; Benjamin Klein, professor of 
economics, University of California at Los Angeles, Los 
Angeles, CA; Gene Upshaw, executive director, National Football 
League Players Association, Washington, DC; Paul Tagliabue, 
commissioner, National Football League, New York, NY; and 
Richard Horrow, president, Horrow Sports Ventures, Miami, FL....     61


                           september 13, 1999

Statement of Hon. Rick Santorum, U.S. Senator from the State of 
  Pennsylvania..................................................   112



               ALPHABETICAL LIST AND MATERIALS SUBMITTED

Carn, Hon. Andrew: Testimony....................................   128

Cryor, Hon. Jean B.: Testimony..................................    30

Finneran, Thomas M.:

    Testimony...................................................    13
    Prepared statement..........................................    18



Horrow, Richard:

  Testimony.....................................................    93
  Prepared statement............................................    95

Katz, Sam: Testimony............................................   131

Klein, Benjamin:

   Testimony....................................................    66

   Prepared statement...........................................    67

 Moag, John, Jr.: Testimony.....................................    25

Poole, D. Bruce:

    Testimony...................................................    33

    Prepared statement..........................................    35

Prague, Edith G.:

   Testimony....................................................    20

   Prepared statement...........................................    23

Rendell, Hon. Ed: Testimony.....................................   114  

Richardson, Jerry:

    Testimony...................................................    61

    Prepared statement..........................................    62

        Letter from Jerry Richardson to Senator Thurmond, 
           dated June 9, 1999...................................    63

        1999 Resolution G-3-As Amended..........................    64 

Rosentraub, Mark S.:
    Testimony...................................................    42

    Prepared statement..........................................    44 

Saidel, Jonathan A.: Testimony..................................   124

Santorum, Hon.Rick: Testimony...................................   112

Tagliabue, Paul:

    Testimony...................................................    76

    Letters from:

        Joe Browne, National Football League, to Marc 

          Morial, Mayor of New Orleans, dated June 11,1999......     78

        Marc H. Morial to Paul Tagliabue, dated June 21, 1999...     79

    Prepared statement..........................................     79

Upshaw, Gene:

   Testimony....................................................    73

   Prepared statement...........................................    74

Zimbalist, Andrew:

   Testimony....................................................    37

   Prepared statement...........................................    40

                                APPENDIX

                         Questions and Answers
Responses of Professor Benjamin Klein to questions from
  Senator Leahy.................................................   143

Responses of Jerry Richardson to questions from Senator 
  Feingold......................................................   144




         STADIUM FINANCING AND FRANCHISE RELOCATION ACT OF 1999

                              ----------                              


                         TUESDAY, JUNE 15, 1999

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 12:04 p.m., in 
room SD-226, Dirksen Senate Office Building Hon. Arlen Specter 
presiding.
    Also present: Senator Feingold.

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Senator Specter. Good afternoon, ladies and gentlemen. We 
will proceed with the hearing on S. 952, which involves the 
conditioning of the antitrust exemptions enjoyed by baseball 
and revenue-sharing on football on the major leagues and the 
National Football League contributing to new stadium 
construction. And another part of the legislation would give 
the National Football League an antitrust exemption to control 
franchise moves.
    [The text of the bill follows:]
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    Senator Specter. Senator Hatch is on the floor at the 
moment and we have been asked to proceed. The chairman will be 
here shortly, but we have a very distinguished array of 
panelists and we will move ahead at this time.
    The crux of the problem might be categorized by the request 
for National Football League teams for publicly-financed 
stadiums at a time when they enjoy an antitrust exemption which 
has enabled them to have enormous revenues, some $17.6 billion 
over a multiyear television contract, and that is by virtue of 
the exemption which the Congress has granted.
    And a fundamental proposition of the proposed legislation 
is that in that context, the NFL ought to be giving something 
back, like paying for its own stadiums, or at least a major 
share of its own stadiums, as this legislation proposes, for 
the NFL and Major League Baseball to pay for half of new 
stadium construction, with a quarter coming from the team 
owners and a quarter coming from public financing. Some of you 
have even protested that that is too much coming from public 
financing, and this is an initial proposal and all subject to 
revision.
    The situation, as well-known, is that America has had a 
longstanding love affair with sports, and I must confess to 
having been a participant in that since I was 8 years old and 
became interested in the Chicago Cubs when I lived in Wichita, 
KS, and gravitated to the Cubs because I traveled to Chicago to 
see the World's Fair. As a youngster, I studied the box score 
assiduously in the Wichita Beacon.
    I later moved to Russell, KS, the home of Senator Dole, who 
made one of his famous quips that in Russell the most popular 
Saturday night entertainment is watching the paint dry, so that 
when the box scores would come in in the morning, that was a 
major source of interest.
    And I can recall as an 11-year-old going to the local 
baseball field to see an exhibition game between the 
Philadelphia Athletics and the Pittsburgh Pirates, and got the 
autographs of Connie Mack, the original one, not the No. 3, who 
is my colleague in the Senate, and Honus Wager, the famous Hall 
of Fame Pirate third basemen.
    And I was one of millions of Americans who were troubled in 
1958 when the Dodgers moved to Los Angeles. I think Los Angeles 
should have had a baseball team, but not Brooklyn's. And San 
Francisco should have had a baseball team, but not the New York 
Giants.
    And we have seen the proliferation of legalized extortion--
and I am not going to bandy any words about it--when teams move 
from one city to another in order to get enormous subsidies 
from stadium construction or stay in the town on the threat of 
moving away, getting stadium construction from the city which 
is there.
    The financing of major league teams implicates necessarily 
some collateral issues such as free agency and revenue-sharing 
for baseball, and there are growing rumbles in America of 
public concern on these issues. Just last week, I noted a 
commentary by Frank DeFord, of Sports Illustrated, on National 
Public Radio last Wednesday, and it encapsulates the problem in 
a nutshell and I shall read a small excerpt from Mr. DeFord's 
statement.

          Even if you aren't a fan of the current best team, 
        you have faith that someday soon your team will rise 
        from the ashes, only baseball, in its greedy 
        shortsightedness, has managed to destroy that sweet 
        reverie. Of course, it's not just the owners of the 
        wealthy, big-market teams who are responsible for this 
        estate, but a filthy-rich share and 
        unlikely alliance with the proletariat, the Players 
        Union, which remains absolute in its position that no 
        limits should be placed on a player's right to 
        remuneration and residence, even if this threatens the 
        very essence of the sport, that faith that tomorrow may 
        be a better day.

    Our initial two hearings are going to involve football 
only, but we will be moving to baseball as well and we will be 
taking up the issues, as I say, which implicate revenue-sharing 
and free agency. For the record, we will make a list of a great 
number of witnesses who have been invited to today's hearings 
who have declined. We have sought witnesses in opposition to 
the legislation, as well as witnesses who might have a 
favorable stance.
    Next Tuesday, on the 22d, we will hear from NFL 
Commissioner Paul Tagliabue, Players Representative Gene 
Upshaw, and Carolina Panthers owner Mr. Jerry Richardson. And 
perhaps other NFL representatives will testify as well 
according to a letter which I just received from the National 
Football League.
    Well, at this time let us proceed to our very distinguished 
panel of witnesses. We are joined by the well-known Speaker of 
the Massachusetts House of Representatives, the Honorable 
Thomas Finneran. He has been a member of the Massachusetts 
House since 1979. He has been a leading figure in the situation 
with the Patriots, in a classic struggle of the home area 
seeking to retain the team against a very substantial bid, $375 
million, by Hartford to move the Patriots down.
    And then when it looked as if Hartford had the team, the 
National Football League came into the picture and the Patriots 
are remaining in Massachusetts, in significant part due to 
Speaker Finneran's persistence and steadfastness in refusing to 
up the ante. And part of that arrangement was some funding by 
the National Football League, and it is just possible that some 
of that might have been influenced by the pending legislation. 
This bill was 
introduced relatively recently, but I have been jawboning with 
Commissioner Tagliabue on this subject for several years, and 
also with the representatives of Major League Baseball.
    So thank you for joining us, Speaker Finneran. The floor is 
yours.

     PANEL CONSISTING OF HON. THOMAS M. FINNERAN, SPEAKER, 
MASSACHUSETTS HOUSE OF REPRESENTATIVES, BOSTON, MA; HON. EDITH 
G. PRAGUE, ASSISTANT MAJORITY LEADER, CONNECTICUT STATE SENATE, 
  HARTFORD, CT; JOHN MOAG, JR., LEGG MASON WOOD WALKER, INC., 
BALTIMORE, MD; HON. JEAN B. CRYOR, DELEGATE, MARYLAND HOUSE OF 
  DELEGATES, ANNAPOLIS, MD; D. BRUCE POOLE, FORMER DELEGATE, 
 MARYLAND HOUSE OF DELEGATES, ANNAPOLIS, MD; ANDREW ZIMBALIST, 
    ROBERT A. WOODS PROFESSOR OF ECONOMICS, SMITH COLLEGE, 
 NORTHAMPTON, MA; AND MARK S. ROSENTRAUB, PROFESSOR, SCHOOL OF 
     PUBLIC AND ENVIRONMENTAL AFFAIRS, INDIANA UNIVERSITY, 
                        INDIANAPOLIS, IN

              STATEMENT OF HON. THOMAS M. FINNERAN

    Mr. Finneran. Thank you, Senator Specter. I appreciate the 
opportunity and the invitation to testify on S. 952. For the 
record, my name is Thomas Finneran. I live in Boston, MA, and I 
am, as you were so gracious enough to point out, the Speaker of 
the House in Massachusetts, the Massachusetts House of 
Representatives.
    I should for the record point out also that I, as a young 
fellow, also fell in love with that habit of going through the 
daily box scores. And while we may have been rooting for 
different teams, I will never forget the heartbreak associated 
with the 1960 World Series, when Bill Mazeroski for the Pirates 
drove a stake into the heart of my--I was a Boston guy and I 
was a Yankee fan. So you try to figure out my politics or my 
leanings and my hungerings. I am not quite sure that I can as 
well.
    Senator Specter. Mr. Speaker, I started off as a Cub fan, 
but my allegiance shifted to the Phillies when I became a 
Pennsylvanian, where I root for the Pirates as well.
    Mr. Finneran. Well, we wish you well in your continued 
support and enthusiasm for the Phillies. I think they miss Mike 
Schmidt and folks who could really throw the ball. But hope 
springs eternal, although Frank DeFord apparently has come to a 
different conclusion, given the intransigence of the Players 
Union and the League.
    Nonetheless, with regard to S. 952 and your proposal, I am 
encouraged quite frankly by your willingness to step into this 
public arena and into this debate, by the jawboning that you 
made 
reference to with regard to Commissioner Tagliabue. I think the 
proposal injects a much needed element of clarity to a debate 
that really suffers from remarkable economic confusion.
    We have such a confusion of interests in which ordinary 
taxpayers are now expected to subsidize the already immense 
wealth of a few players, a handful of players, an even smaller 
handful of agents, and an indescribably small number of owners. 
And that, to me, seems to really turn economics and policy on 
its head.
    The fact is that team actions all across this country 
range, I think--and I have examined your remarks in the 
Congressional Record, and I applaud them and I recommend them 
to anybody who hasn't yet had an opportunity to read them. 
Those actions range from somewhere between extortion, as you 
have pointed out, to seduction, and it is an attempt to, in one 
way or another, take extraordinary advantage of local 
governments and local jurisdictions.
    In Massachusetts, we just concluded a 4-year debate 
regarding the Patriots. Having closed that chapter, we are 
about to open a new chapter with regard to the Red Sox. Boston 
and Massachusetts are home to four professional teams--the 
Celtics, the Bruins, the Patriots and the Red Sox--and we host 
innumerable collegiate and amateur teams. It is a part of the 
fabric of Massachusetts, as I am sure sports are a part of the 
fabric of any particular community.
    Senator Specter. Mr. Speaker, when you mention the teams--
and we have scheduled this at a rather unique hour because 
there were many conflicts with other hearings, and I think we 
can be a little less formal today than we are on so many of the 
hearings with taking the witnesses in order in the interests of 
the economy of time.
    But you do have quite a problem with as many teams as you 
have, and as a Pennsylvania Senator, we are looking at four new 
stadiums. Two are under construction now in western 
Pennsylvania for the Steelers and the Pirates, and two are in 
the immediate offing for the Phillies and the Eagles. And that 
is a $1 billion package and the format is two-thirds public 
subsidy, so that I have a profound interest in this issue as a 
U.S. Senator, but an extraordinary interest as a Pennsylvania 
Senator.
    Mr. Finneran. That is a huge package that you make 
reference to, Senator, and clearly the $1 billion that is 
proposed, at least some part of it, if not the entirety, is 
probably expected or hoped for, at least by the owners of those 
teams, to come from the public treasury, which would clearly 
come at the expense of opportunities for ordinary Pennsylvania 
citizens with regard to education and investment in health and 
infrastructure and public safety and the like.
    And I hope that today my remarks might prove instructive or 
at least give some illumination to the model that we in the end 
embraced in Massachusetts after a great deal of controversy. 
Notwithstanding the presence of those four teams and the 
affiliation, the affection that so many of us feel for those 
teams, we don't allow them to define or shape public policy in 
Massachusetts.
    Indeed, I would say that public policy in Massachusetts, 
and I expect in almost every other jurisdiction, is shaped by 
more universally important things--investments in education, 
investments in infrastructure that allow the swift and rapid 
movement of people and products and goods and services, 
investments in health care and housing and other issues that I 
made reference to.
    We also do have, quite frankly, almost a quaint recognition 
in Massachusetts for the limited role and responsibility of 
government, and we stood up and articulated that without any 
hesitation or equivocation for the better part of 4 years. And 
in the face of an awful lot of pressure both from the press and 
from some powerful economic interests, we said no to what we 
characterized as corporate welfare.
    It seemed to us that this was highly unnecessary, 
particularly in the aftermath of the National Football League 
broadcasting contract, to which you have made reference. As we 
articulated our point of view, our frame of reference, being 
the taxpayers of Massachusetts, and also articulated that 
limited role and responsibility of government, we continued to 
ask the question why. Why are taxpayers expected to subsidize 
already profitable businesses?
    In no other area, in no other realm of our private sector 
economy are taxpayers routinely asked or expected to subsidize 
the profit margins of businesses.
    Senator Specter. Speaker Finneran, don't pay attention to 
the red light. I have interrupted you substantially. Just 
proceed.
    Mr. Finneran. OK, no problem. Let me wrap up because I am 
also quite aware that we have some extraordinary testimony that 
we will take.
    When we articulated these principles, we were greeted with 
smirks, and smirks, I suppose, are part of life in the public 
arena. Whenever any elected official talks about principles, 
the wise guys begin to think that it is nothing but a rouse or 
a smoke screen for something else. These were the principles 
that are now clearly on the record and a part of any debate 
that will occur henceforth in Massachusetts: no public funds 
whatsoever for any part of a stadium facility; no public funds 
or subsidy to be provided directly to the team franchise, which 
was also proposed; no public funds for the purchase and lease-
back of land which would then be used for the benefit of the 
franchise; no expectation that taxpayers should act as either a 
no-cost or low-cost bank or financing mechanism for private 
for-profit businesses; no recognition whatsoever, or acceptance 
or embrace of the so-called economic multiplier models which 
attempt to justify public subsidies of private business 
arrangements; a complete insistence that the leagues and the 
member teams take full responsibility for their facility 
financing needs; and insistence that any public funds be used 
solely and exclusively for infrastructure--an on-ramp, an off-
ramp, a pedestrian overpass, utility or sewerage lines that 
might enhance public safety, public access and public health 
purposes; and finally an insistence that any infrastructure 
expenditure that primarily benefits a private interest would 
also have a revenue stream coming back to, in our case, the 
Commonwealth in order to assist and help support part of that 
debt service.
    With regard to two specific suggestions I might make for S. 
952, you might consider trying to utilize the Massachusetts 
model, recognizing that this is subject to debate and great 
negotiation back and forth. But our insistence that the team 
and or the league take exclusive responsibility and bear that 
cost solely on its own shoulders rather than on the shoulders 
of the taxpayers has been borne out and now embraced by the 
league.
    As you pointed out, the league changed its bylaws in 
February or March, and I think it might be, quite frankly, in 
combination to the bill that you had filed and to the 
resistance that we were able to mount in Massachusetts. If that 
first proposal can't make it or garner majority support in the 
legislative process, I would suggest the following that 
minimally with regard to this two-for-one match mechanism that 
you propose, you might want to make sure that you give local 
governments full financial credit for any infrastructure 
expenditure they are going to make. Those infrastructure 
expenditures are of substantial economic value and worth to the 
franchise, and I think it should be weighed and given full 
credit to the local government so that the local taxpayers 
again aren't picking up the lion's share of the expenses 
associated with this.
    Let me close just by thanking you once again, Senator, not 
only for the invitation but for the courage to enter the fray 
on this public debate. I think it is long overdue and I wish 
you well.
    Senator Specter. Well, thank you, Speaker Finneran. You 
have certainly shown a tenacious approach in Massachusetts. It 
is different from what happened with the Buffalo Bills when 
they threatened to move. There was a subsidy of $180 million 
for renovations of the stadium. The Cincinnati Bengals 
threatened to move, stadium approved with a public subsidy of 
$400 million.
    The Denver Broncos threatened to move. A stadium was 
approved with a public subsidy of $260 million. The Detroit 
Lions got $240 million in subsidies. The Seattle Seahawks 
threatened to move, a $325 million public subsidy. The Tampa 
Bay Buccaneers threatened to move, a $300 million-plus subsidy.
    But let me ask you one threshold question. You were 
prepared to have the Patriots move. I have a little different 
view, and I have noted your testimony with admiration about 
what defines Massachusetts and what defines Boston, as you have 
articulated it. There was a real problem in Pittsburgh with the 
threatened move of the Pirates, and I have publicly thanked 
before Commissioner Selig and Major League Baseball for helping 
to keep the Pirates in Pittsburgh and I do so again today.
    And I worked very hard, along with many others, to keep the 

Pirates in Pittsburgh, Senator Santorum and then Senator 
Wofford both crossing party lines, because I thought the 
Pirates were really important to Pittsburgh. It is a small-
market city and they are struggling to make it. They have got a 
vigorous, able young owner who is working very hard, and I 
really wanted to keep the Pirates there. You were willing to 
take a chance on losing the Patriots.
    A two-part question. How would your constituents have 
responded had you lost the Patriots? And, secondly--well, take 
that one up first and I will ask the second one later.
    Mr. Finneran. My constituents and I think the overall 
citizenry of Massachusetts were pleasantly surprised that 
somebody would stand up and speak for them. They found it both 
rare and refreshing. There is a small segment of the public, 
obviously very enthusiastic fans and some people who are 
patrons of sports radio talk shows, and they tend to work 
themselves up into a lather, some mild form of hysteria from 
time to time.
    Ordinary citizens, however, would literally stop me in the 
subway outside the church and the supermarket and say thanks 
for standing up and injecting an element of common sense into 
this debate.
    Senator Specter. Did any stop you to the contrary?
    Mr. Finneran. Yes, some did stop me to the contrary and 
some told me that they thought I was a complete fool. My wife 
occasionally tells me that as well, as they have company.
    But the Frank DeFord article that you made reference to, I 
think, is again instructive. Sports has lost its connection in 
many ways to common fans and to common citizens or ordinary 
taxpayers. We still root for the home team. When they win, 
there is a buoyancy to our everyday conversations. We rise and 
fall with the pennant race or how the local team is doing.
    But nonetheless, the extraordinary salaries, the 
extraordinary negative attitudes that are reflected by the 
players, by the agents, by the owners, the selfishness and the 
greed that so evident has turned off a great number of people. 
And they literally, I think, are encouraged by public officials 
or leaders who will stand up and say, look, enough is enough. 
We will help, we will assist with infrastructure, but if you 
want us to be a partner, count us in on the equity share, too. 
We don't want to take all the financial risk without assuming 
some of the reward.
    Now, of course, when you talk like that, which is the 
normal language or lexicon of a capitalist and an investor, the 
capitalists and investors who have bought these teams run from 
the room. They want some form of communism in which literally 
the public will provide all the dough to them. It is somewhere 
between socialism and communism that they want for their own 
league and for their own profits and their own benefits.
    Senator Specter. I thought I was tough on the issue, Mr. 
Speaker. [Laughter.]
    I think I am mild when you have characterized them as 
socialists and communists.
    Mr. Finneran. Well, they actually make the commies look 
good.
    Senator Specter. Well, the other half of the question is 
what so many cities respond to--I know Seattle has, as well as 
Pittsburgh and Cincinnati and Buffalo--not wanting to lose big-
league status. How did that influence you, if at all?
    Mr. Finneran. It is relevant and it is important, in all 
honesty, to give appropriate deference and respect to the value 
and importance of any of these franchises. It is probably more 
important psychologically than it is economically. If I had to 
choose, I would rather not make this type of choice, but I 
would rather lose a pro sports franchise than Gillette or 
Raytheon or some major employer who employs thousands of people 
in a range of ordinary occupations rather than a handful of 
multi-million-dollar salaries.
    But there is a legitimacy to that observation.
    One of the things that I thought we had going for us in 
Boston, particularly with regard to the National Football 
League and the Patriots franchise, was a recognition on our 
part, long before any other people commented on it, that we are 
either the No. 5 or No. 6 major media market, and that the 
jurisdictions which were likely to attract the attention of the 
owner and the league were something less than that. And, truly, 
it is the broadcast revenue that is the oxygen to this league.
    It is when we finally stood up--and I suspect that when you 
filed S. 952, the league itself huddled back and decided to 
rearrange their bylaws and provide financing because if I was 
the broadcast executive having just entered into that contract 
for $17.6 billion for 8 years and now saw the market shifting 
from No. 5 or 6 to the Hartford, CT market which is somewhere 
in the 20's, I would be on the phone right away with 
Commissioner Tagliabue and say, ``Hey, that is not the benefit 
of the bargain that I drove and paid for.''
    We recognized in Massachusetts that we had that card in our 
hand and that it was unlikely that they were going to be able 
to move to New York, because you would have the Jets and the 
Giants contesting that, or Chicago or San Francisco or Los 
Angeles. The other major media markets that surpass and eclipse 
even Boston and New England were not likely competitors for us. 
And all the competitors were on the downside and we thought the 
broadcasters would do--I don't know whether they actually did 
it or not, but clearly the NFL changed its bylaws and they had 
never even contemplated that action or that behavior until we 
stood our ground.
    Senator Specter. Well, I am inclined to agree with your 
analysis. We will never know for sure, and changes are 
frequently the result of a great many factors, but I think the 
pendency of the legislation, the so-called jawboning over the 
years, and the growing concern about the greed of players' 
salaries and the free agency all, in combination, are going to 
move the envelope here.
    Mr. Finneran. I agree. It is absolutely out of control, and 
we should keep in mind these are all self-inflicted wounds and 
yet the owners continue to turn to the taxpayers in every 
jurisdiction and say essentially, save us from ourselves. They 
don't show the discipline or restraint that they show in every 
other business that they control. And the players themselves, 
the employees, won't show any restraint.
    And until public leaders such as yourself help change the 
rules and level the field, and the rest of us stand up and 
articulate what are the essential interests of our taxpayers, 
those owners would continue to reach into the public till. I 
think we have changed the model here not just based on 
Massachusetts, but clearly based upon this legislation which 
you have advanced.
    Senator Specter. Well, thank you very much, Speaker 
Finneran.
    Mr. Finneran. Thank you, Senator.
    [The prepared statement of Mr. Finneran follows:]

                Prepared Statement of Thomas M. Finneran

    Thank you, Mr. Chairman.
    For the record, my name is Thomas M. Finneran. I live in Boston, 
Massachusetts and I serve as the Speaker of the Massachusetts House of 
Representatives.
    I am honored to appear before the Committee on the Judiciary of the 
United States Senate relative to Senate No. 952, entitled the ``Stadium 
Financing and Franchise Relocation Act of 1999.'' I thank you, Mr. 
Chairman, Senator Specter, the sponsor of the legislation and all the 
Members of the Committee for such a generous and unique opportunity to 
present testimony in support of this legislation which is consistent--
although not entirely in alignment--with the approach articulated and 
adopted in the Commonwealth of Massachusetts.
    I am proud to say that in Massachusetts we have resisted the 
pressure brought by the owners of professional sports teams who have 
directly or indirectly threatened to move their franchise to another 
city or to sell their team if significant taxpayer money was not 
appropriated to construct a new ballpark or stadium. Far too many teams 
have taken advantage of the unique loyalty held by many fans, who out 
of a love of the game and of sport, champion the cause of team owners 
who do not share or reciprocate such loyalty.
    Massachusetts is home to four major professional sports 
franchises--the Celtics, the Red Sox, the Bruins and the Patriots. 
Massachusetts has a storied sports history and its people are 
passionate about sports--both amateur and professional. We are quite 
proud of our hometown teams but they most emphatically do not 
constitute the essence of the social, cultural, or economic fabric of 
Massachusetts. We truly cherish our historical role in the birth and 
development of our nation; we boast of the fact that we house over 80 
colleges and universities, including some of the most prestigious in 
the world; we value our many artistic and theatrical companies and we 
enjoy as frequently as possible the mountains and forests of western 
Massachusetts, the waters of Boston harbor, and the natural beauty of 
Cape Cod. Professional sports do not and will not define us or shape 
us.
    Education, research, health care, financial services, banking, 
investment, trade, tourism, history, art, culture, drama and the 
natural beauty and bounty of our 
Commonwealth are precious to our heritage and our future. Contrary to 
their self-serving assertions, professional sports teams are not the 
engines that drive local economies. I encourage legitimate economic 
development as an appropriate governmental objective, but multiple 
independent studies--including those given by scholars that have 
testified before you over the last several years, such as Andrew 
Zimbalist and Robert Baade--show no significant positive net economic 
impact derived from professional sports franchises.
    I think it is crucial to bear in mind that the money which fans 
spend on tickets, concessions, and team apparel is purely 
discretionary. Rational economic theory suggests that housing, 
transportation, tuition, food, clothing, and utility expenses are 
essential to every household and therefore claim an economic grounding 
and status which surpasses that of any dollars spent on the options of 
diversion and entertainment. For example, Robert Baade, and Alan 
Sanderson write that during the 1994 major league baseball strike, 
``September 1994 [was] the most successful September in history for 
movies. With no baseball to watch in person or on television, fans and 
their families went to movies, rented videos, ate out more often, and 
visited amusement parks. Very few if any dollars were ``lost'' as a 
result of the baseball strike; they just appeared on other ledgers. A 
sports team's ``multiplier effect'' and contributions to a region's 
economy, trotted out so often by chambers of commerce and team owners * 
* * are invariably gross overestimates, maybe even by a factor of 
ten.'' Intellectual ammunition. The Heartland Institute, March/April 
1996.
    I applaud Senator Specter for recognizing the need to address the 
distasteful ``city-shopping'' by professional sports teams.
    I must respectfully take exception to the legislation's 
encouragement of taxpayer money actually being used for ballpark and 
stadium construction. This provision puts local governments in hock and 
in harness for up to one third of the cost of stadium construction. 
Such a result is troubling.
    In Massachusetts, we have declared that the only appropriate use of 
taxpayer money is for infrastructure improvements. This includes the 
cost of roads, bridges, sewer pipes and traffic controls that have a 
definitive ``public purpose'' to promote and enhance public access, 
public safety, and public health. There is no state taxpayer money for 
``brick or mortar'' to build a new ballpark or stadium. There is no 
state taxpayer money to purchase land or engage in any creative land-
swap or leaseback scheme. In Massachusetts, we recognize that 
infrastructure improvements which carry a valid ``public purpose'' are 
appropriate public expenditures.
    Many leagues talk of ``public-private'' partnerships between the 
professional sports team and the host municipality. To date, such 
relationships have consisted of the municipality assuming the burdens 
of expensive, long-term debt while receiving no stake in the 
exponential increase of the value of the team with whom they are a 
``partner.'' These sports teams are extremely profitable private 
business enterprises. They enjoy astronomical revenues. You are all 
aware of the current National Football League television contract that 
yields that league 17.6 billion dollars over 8 years. When any business 
negotiates such a private transfer of private wealth, there is no 
public injury. However, there should be no confusion regarding 
franchise demands and expectations for public subsidies. Based upon 
that television contract, the National Football League could build 
every single team a brand-new $300 million stadium and still share over 
1 billion dollars a year for 8 years!
    Team owners often argue that there exists a ``psychological value'' 
to a community that hosts a professional sports franchise. Such claims 
are the ego-driven bunk of billionaires and their acolytes. Some 
communities might indulge such superficial and irrational economic and 
psychic claims, but they do so at the obvious expense of essential and 
fundamental public responsibilities. Any ``psychological value'' that 
may be derived from hosting a professional sports team does not pay for 
crumbling school buildings, Social Security, prescription drug programs 
for impoverished seniors, early childhood education, obsolete 
infrastructure, innovative housing programs, public safety, or public 
health. The list of legitimate public responsibilities is lengthy and I 
dare say that all of them are more important than financing a 
stadium for the competitive advantage and benefit of any privately-
owned business venture.
    In Massachusetts, we rejected the notion that taxpayers are 
obligated to subsidize stadiums for professional sports franchises. The 
Massachusetts House of Representatives has consistently articulated a 
set of principles, which are as follows:
     No public funds for any part of a stadium facility;
     No public funds or subsidy for the team franchise;
     No public funds for the purchase and lease-back of land 
for the benefit of the franchise;
     No expectation that taxpayers should act as a no-cost or 
low-cost bank for private, for-profit businesses;
     No recognition, acceptance, or embrace of ``economic 
multiplier models'' which attempt to justify public subsidies of 
private business arrangements;
     An insistence that the leagues and member teams take full 
responsibility for their facility financing needs;
     An insistence that any public funds be used solely for 
infrastructure needs which serve public access, public safety, and/or 
public health purposes;
     An insistence that any infrastructure expenditure which 
primarily or exclusively benefits the individual franchise owners be 
accompanied by an annual revenue stream back to the taxpayers in order 
to help support such an expenditure.

    I believe that these principles represent a balanced, thoughtful 
approach to any public participation in stadium development with 
professional sports franchises. The application of these principles to 
S. 952 would require that monies from the ``special trust fund'' be 
used to pay the entirety of all stadium costs in order to maintain 
certain anti-trust privileges presently enjoyed. At a minimum, the 
legislation should allow local governments full financial credit for 
infrastructure costs in order to trigger the $2 for $1 match. The value 
of infrastructure improvements is of substantial economic significance 
and should be factored in to the overall construction costs of any new 
facility. Such factoring would give due recognition to the costs and 
burdens borne by local governments on behalf of immensely wealthy 
individuals and highly profitable enterprises.
    I thank you for this opportunity to testify before you. I commend 
your willingness to address and resolve this perverse abuse of the 
nation's taxpayers, and I welcome any questions you might have.

    Senator Specter. We now turn to the Honorable Edith Prague, 
elected to the Connecticut Senate in November 1994. Prior 
thereto, Senator Prague was a member of the State House of 
Representatives for four terms, and also the Assistant House 
Majority Leader.
    We very much appreciate your joining us, Senator Prague, 
and look forward to your testimony.

               STATEMENT OF HON. EDITH G. PRAGUE

    Ms. Prague. Thank you, Senator Specter, and thank you for 
the invitation to come and tell you about the Hartford 
experience. I am certainly here in support of S. 952, the 
Stadium Financing and Franchise Relocation Act of 1999. I want 
to tell you about the Hartford deal with the Patriots.
    ``TOUCHDOWN,'' blasted the headlines across the front page 
of the Hartford Courant on November 19, 1998. Governor John 
Rowland and Robert Kraft, owner of the New England Patriots, 
had negotiated a memorandum of understanding, secretively, I 
might add, that would give Robert Kraft what would become known 
as the richest, most egregious deal in the history of 
professional sports, a deal that would put the taxpayers of 
Connecticut in the most unenviable position of paying all the 
bills for 30 years while Mr. Kraft reaped all the profits.
    The deal became known as the biggest giveaway in the 
history of professional sports. The new rent-free stadium for 
the New England Patriots was estimated to cost more than $1 
billion, and the governor was quoted as saying he didn't care 
how rich the State makes the Patriots; he just wanted the 
Patriots to come to 
Hartford.
    And the excitement surrounding these headlines was 
phenomenal. It was really madness. The governor and the 
legislative leaders completely ignored the research done by 
economists such as Professor Andrew Zimbalist, Professor of 
Economics at Smith, and Professor Roger Noll, Professor of 
Economics at Stanford, both of whom are experts in the field of 
economic impact of sports team and stadiums. Both had clearly 
documented after extensive 
research that a new sports facility has an extremely small, 
perhaps even negative effect on the overall economic activity 
and employment of a city, and that no recent facility appears 
to have earned anything approaching a reasonable return on the 
investment. The economic benefits of sports facilities are 
really de minimis. Sports stadiums are clearly not the economic 
engine that would drive a poverty-ridden area to 
revitalization.
    The deal itself was given to the legislators on December 
18, in a 77-page document, 20 minutes before the time to vote. 
The governor had called a special session on December 18. No 
committee hearings in which legislators could examine the 
details and the public could participate were ever held. Absent 
the public hearings, time was not afforded the elected 
officials to examine the details privately and the deal 
followed no prescribed path of democratic government.
    When the details emerged, the shock of its content began to 
take hold. The deal contained a $374 million stadium for Mr. 
Kraft that would be turned over to him rent-free and tax-free, 
and it was a 30-year commitment. The State of Connecticut would 
pay for preparing the site and building any needed 
infrastructure.
    The stadium would have 150 luxury suites and 6,000 club 
seats. The luxury suites would sell for $100,000 to $125,000, 
and the club seats for $5,000. The State guaranteed a minimum 
of $13 million a year toward any shortfall in the sale of these 
seats. The State would provide 25,000 parking spaces. The State 
would provide $15 million for a practice facility. The State 
would provide a stadium capital replacement cost fund of $115 
million over the 30-year period. The State would pay every year 
$250,000 for insurance, $750,000 to move the team from Boston 
to Hartford. The State would even pay $125,000 a year for the 
agency expenses incurred by this deal. After 30 years, we would 
have paid an additional $212 million in interest on the bond.
    The one big unanswered question was the $100 million cost 
to clear the site by moving a steam plant. It was clear Mr. 
Kraft was not going to pay, but just who was remained an open 
question. All this while the city of Hartford is the 10th 
poorest city in the United States of America, according to the 
U.S. Department of Housing and Urban Development statistics, a 
city where 35.2 percent of the residents live in poverty.
    In our State of Connecticut, one out of every five children 
live in poverty. We have the highest property taxes in the 
Nation and the greatest bonded indebtedness. 11.3 percent of 
our $23.8 billion biannual budget goes to debt service.
    In return for the so-called luxury of having the Patriots 
come to Hartford--and I really thank Mr. Finneran for the fact 
that they are going back to Massachusetts--Mr. Kraft would 
receive all revenues from the stadium operations, including all 
ticket sales and luxury seat sales, concessions, food and 
souvenirs from all functions at the stadium except for the 
University of Connecticut football games.
    The stadium would be owned and operated by Mr. Kraft and he 
would receive the revenues from the naming rights, the 
television contracts, and the 5,000 parking spaces abutting the 
stadium. A Hartford Courant article claimed that Mr. Kraft 
would pocket $100 million per year by the fifth year of this 
deal. The State would receive a 10-percent tax on ticket sales. 
And to add insult to injury, if the construction costs came in 
below estimates, Mr. Kraft would pocket the savings. This is 
the deal that Mr. Kraft walked away from on April 30, 1999.
    The Federal Government played a role in this deal and in 
every other deal around the country according to the Brookings 
Review position paper ``Are New Stadiums Worth the Cost,'' a 
copy of which I have submitted for your review. I would like to 
draw your attention to the $7 billion that will be spent on new 
facilities for sports teams before the year 2006. Of that, the 
majority is in public financing. The Federal Government allows 
States to issue tax-exempt bonds costing the Federal Government 
millions of dollars in taxes annually. When these bonds are 
issued for such things as roads or schools, that is fine. But 
to allow these bonds to be used for stadiums to make the team 
owners even wealthier is totally inappropriate.
    S. 952 is very timely. However, I have one suggestion. 
Taxpayers should not bear 25 percent of the cost of any stadium 
unless 25 percent of the profit is returned to those taxpayers.
    Thank you for this opportunity to tell you about the 
Hartford story.
    Senator Specter. Well, I think it appropriate at this point 
to note for the record that both Governor Rowland and Mr. Kraft 
were invited to come and testify today and both declined.
    Senator Prague, you characterized the total cost at $1 
billion. How do you aggregate to that figure?
    Ms. Prague. Well, the cost of the stadium, the $374 
million; the $212 million in interest on the bonds; the $13 
million guarantee every year for 30 years for any shortfall in 
the sale of those seats; the cost of the practice facility; the 
$800,000 that it would cost in legal fees; the $750,000 that it 
would cost to move the team from Boston to Hartford; and the 
$100 million that was in question about who was going to pay 
for the removal of a steam plant where the stadium was going to 
be located. You know, I am sure if you add that up, that is 
very close to $1 billion.
    Senator Specter. I did some mental computation, and 
depending on the contingencies it does get there.
    Senator Prague, you characterized Mr. Kraft's response as 
walking away from the deal. As you articulate it, the natural 
question arose in my mind--I am not saying you are the proper 
person to ask this question to, but you are the only one I have 
available and you said he walked away. Any speculation as to 
why he walked away from such a lucrative deal?
    Ms. Prague. I think there were a number of contributing 
factors, but I think the biggest reason he walked away from the 
deal was that basically he really wanted to stay in Boston. 
That is where his heart is, that is where his family is, and I 
think that is where his loyalty is.
    No. 2, there was a question of whether he would get into 
this stadium by the year 2002, when there were tremendous 
environmental issues involved in clearing the site. Moving the 
steam plant was the next thing to a nightmare, with having to 
move underground pipes that heated and cooled all the office 
buildings in the city of Hartford.
    He was advised by his advisers that it was very unlikely 
that he would get into play in the stadium in the year 2002, 
and I think that that, combined with the opposition that was 
growing amongst the citizens of the State of Connecticut, just 
made his decision for him.
    Senator Specter. Senator Prague, thank you very, very much.
    Ms. Prague. You are very welcome.
    [The prepared statement of Ms. Prague follows:]

               Prepared Statement of Hon. Edith G. Prague

    Good Afternoon, Senator Hatch--members of the Judiciary Committee, 
for the record, I am State Senator Edith Prague of Connecticut and am 
here at the invitation of Senator Arlen Specter to testify on S. 952 
``Stadium Financing and Franchise Relocation Act of 1999.''
    ``TOUCHDOWN'' blasted the headlines across the front of the page of 
the Hartford Courant on November 19, 1998. Govemor John Rowland and 
Robert Kraft, owner of the New England Patriots, had negotiated a 
memorandum of understanding (secretly, I may add) that would give 
Robert Kraft what would become known as the richest, most egregious 
deal in the history of professional sports. A deal that would put the 
taxpayers of Connecticut in the most unenviable position of paying all 
the bills for 30 years, while Mr. Kraft reaped all the profits.
    The deal became known as the biggest giveaway in the history of 
professional sports--the new, ``rent-free'' stadium for the New England 
Patriots was estimated to cost more than a billion dollars and Governor 
Rowland was quoted as saying ``he did not care how rich the state makes 
the Patriots.''
    It was madness. The Governor and legislative leaders ignored the 
research done by economists such as Andrew Zimbalist, Professor of 
Economics at Smith College, and Richard Noll, Professor of Economics at 
Stanford, both of whom are experts in the field of the economic impact 
of sport teams and stadiums. Both had clearly documented after 
extensive research that a new sports facility has an extremely small 
(perhaps, even negative) effect on the overall economic activity, and 
employment of a city, that no recent facility appears to have earned 
anything approaching a reasonable return on investment. And the 
economic benefits of sports facilities are de minimis. Sports stadiums 
are clearly not the economic engine that would drive a poverty-ridden 
area to revitalization.
    The proponents claimed that the stadium would improve the local 
economy in three ways: First, building the facility creates 
construction jobs. Second, people who attend games or work for the team 
generate new spending in the community, expanding local employment. 
Third, a team attracts tourist and companies to the host city further 
increasing local spending and jobs.
    The Governor and Legislative Leaders argued that the stadium would 
spur so much economic growth that it would be self-financing. The 
investment of state dollars would be offset by revenues from the ticket 
sales tax, taxes on concessions and other spending outside the stadium, 
along with property tax increases arising from the stadium's economic 
impact.
    The deal was given to the legislators in a seventy-seven (77) page 
document twenty minutes before the time to vote. No committee hearings 
in which legislators could examine the details and the public could 
participate were ever held. Absent the public hearings, time was not 
afforded the elected officials to examine the details privately. The 
deal followed no prescribed path of democratic government.
    When the details emerged, the shock of its content began to take 
hold. In short, the deal contained:
     1. $374 million for a stadium which when completed would be turned 
over to Mr. Kraft. It would be rent-free and tax-free. It was a thirty-
year commitment.
     2. The State of Connecticut would pay for preparing the site and 
building any needed infrastructure.
     3. The stadium would have 150 luxury suites and 6,000 club seats. 
The luxury suites would sell for $100,000 to $125,000 and the club 
seats for $5,000. The state at first guaranteed $17.5 million a year 
for 30 years toward any shortfall in sales. That figure was lowered to 
$13 million, a reduction presented as a breakthrough in negotiations.
     4. The state would pay $15 million for a practice facility for the 
Patriots.
     5. The state would provide 25,000 parking spaces, 5,000 adjoining 
the stadium, 1,000 within a mile and the rest within a reasonable 
distance.
     6. Mr. Kraft would pay $70 million for a hotel attached to the 
Pavilion. He would be free at any time to sell the hotel and make 
millions in profit.
     7. The state would provide a Stadium Capital Replacement Costs 
Fund of $115 million available over the 30-year period.
     8. The state would pay $250,000 per year for insurance.
     9. The state would incur $125,000 per year for agency expenses.
    10. The state would pay $750,000 to move the Patriots to Hartford.
    11. At the end of 30 years, we would have paid an additional $212 
million in interest on the bonds.
    12. And the state did pay $800,000 in legal fees to hammer out the 
deal.
    13. The one unanswered question was the $100 million cost to clear 
the site by moving a steam plant--and the attendant environmental 
cleanup costs. Mr. Kraft certainly was not going to pay and who was 
remained an open question.
    All this while Hartford is the tenth poorest city in the United 
States of America, according to United States Department of Housing and 
Urban Development statistics--a city where 35.2 percent of the 
residents live in poverty. In our state of Connecticut, one out of 
every five children lives in poverty. We have the highest property 
taxes in the nation and the greatest bonded indebtedness. Eleven 
percent of our $4.5 billion budget goes to debt service.
    In return, for the luxury of having the Patriots come to Hartford, 
Mr. Kraft would receive:
    1. All revenues from stadium operations, including all ticket sales 
and luxury seat sales, concessions--food and souvenirs--from all 
functions at the stadium except for University of Connecticut football 
games. The stadium would be owned and operated by Mr. Kraft and he 
would receive the revenues from the naming rights, television contracts 
and the 5,000 parking spaces abutting the stadium. A Hartford Courant 
article claimed that Mr. Kraft would pocket $100 million per year by 
the fifth year of this deal.
    2. The state would receive a 10 percent tax on ticket sales. And to 
add insult to injury, if the construction costs came in below 
estimates, Mr. Kraft would pocket the savings.
    That is the deal Mr. Kraft walked away from on April 30, 1999.
    The federal government played a role in this deal and in every 
other deal around the country--according to the Brookings Review 
position paper, ``Are New Stadiums Worth the Cost?'' a copy of which I 
am submitting for your review. I would like to draw your attention to 
the $7 billion that will be spent on new facilities for professional 
sports teams before the year 2006. Of that the majority is in public 
financing. Unfortunately the federal government allows states to issue 
tax-exempt bonds, costing the federal government millions of dollars in 
taxes annually.
    S. 952 is very timely. However, I have one suggestion. Taxpayers 
should not bear 25 percent of the cost of a stadium unless 25 percent 
of the profit is returned to the taxpayers.
    Again, thank you for this opportunity to testify. It has been a 
pleasure. I am available for questions.

    Senator Specter. I would like now to turn to the situation 
with the Cleveland Browns and Baltimore Ravens, and we are 
going to turn first to Mr. John Moag, who has a somewhat 
different perspective of the arrangements.
    By way of introduction, the representations I have, subject 
to what Mr. Moag may have to say, are that, well, first of all, 
a problem arose when the Colts left in the middle of the night 
to go to Indianapolis. And I thought Indianapolis should have 
had a football team, but not the Colts. The Colts had a long, 
glorious history in Baltimore with Johnny Unitas and some 
great, great teams.
    And then when Mr. Art Modell had his differences with 
Cleveland, the bidding occurred and Baltimore agreed to a $223 
million stadium, financed, as I have it, with 89 percent public 
funds. The Ravens were required to pay no rent during the 30-
year lease, but do pay operating expenses in the range of $3 to 
$4 million a year.
    And this was an extraordinary provision which I would be 
interested in your comments on, Mr. Moag, among others, that 
the 
Baltimore Ravens paid the Maryland State Stadium Authority $10 
million for the right to sell the name of the team's new 
stadium, and Mr. Modell eventually sold the name to PSINet for 
$105 million. It is a little surprising to me on a number of 
aspects of that transaction.
    We thank you very much for joining us, Mr. Moag, and look 
forward to your testimony.

                  STATEMENT OF JOHN MOAG, JR.

    Mr. Moag. Thank you, Senator. I am the former chairman of 
the Maryland Stadium Authority up until this past January. The 
Maryland Stadium Authority owns and operates Oriole Park at 
Camden Yards and the Ravens stadium. We had a statutory 
directive actually to go out and get an NFL football team, 
either through the expansion process, which we lost, or in 
bringing 
another team to our city.
    And it is a pretty extraordinary piece of legislation which 

directed the chairman of the Stadium Authority to enter into 
any and all agreements necessary or convenient to carry out the 
purpose of this subtitle, which was bring football back.
    Senator Specter. A statutory directive?
    Mr. Moag. With $200 million attached to that directive.
    Senator Specter. Were you limited in how much you could 
spend?
    Mr. Moag. No. There is a fund that is funded by the 
Maryland Lottery. We created a scratch-off lottery game. The 
stadium is funded by Art Modell, in part, as you mentioned; by 
the stadium scratch-off game, which people obviously 
voluntarily purchase; bonds which are retired through the 
lottery and through an admissions tax on the fans. So it is the 
fans, the lottery tickets and Mr. Modell, and also Mr. Angelos 
in the case of the Orioles.
    Senator Specter. Edward Bennett Williams was quoted as 
saying as the owner of the Redskins way back that he hired a 
new head coach and gave him an unlimited budget which was 
exceeded.
    Mr. Moag. He was quite an owner.
    In addition to being the former chairman of the Stadium 
Authority, I am the managing director of Legg Mason's sports 
industry group in our corporate finance department and we have 
been engaged in about 18 different sports transactions, 
different arenas and stadium, both baseball and football, 
around the country. If there is any common denominator to those 
18 deals, it is that none of them are the least bit alike. They 
differ in four major aspects.
    Politics is different everywhere. The politics in Arizona 
are different from your politics in Philly and Pittsburgh and 
Boston and California. Voters react differently and the 
politicians react differently. Second, the financing issues are 
all different. How are you going to pay for these? Is there 
money to pay for them? Do you have bonding capacity? Do you 
have flush budgets? Do you have a tax you can impose? Do you 
have a lottery like we did in Maryland?
    Third, team revenues vary dramatically. We hear over and 
over again about greedy owners holding up cities. The fact 
remains that there are very few franchises that make a lot of 
money. I can tell you certainly that the Pirates and the 
Phillies are not making much money, which helps explain the 
product that is out on the field on Philadelphia.
    They tried to get that budget balanced and they, believe 
me, want to put good product out there because if they have 
product on the field, they generate revenues. But to get that 
product--and it is a circular issue--they need the revenue. 
And, of course, they look to the new stadium for that.
    Finally, franchise revenues are different. All four leagues 
operate differently. The NFL is definitely a socialistic 
organization. Major League Baseball is not, and Major League 
Baseball, like hockey, has some very challenging financial 
issues ahead of it. I like to paraphrase Tip O'Neill that, like 
politics, all sports is local. Because of all those reasons, I 
would unfortunately oppose this legislation, although I applaud 
your intent.
    And let me also mention two other issues, I think, that the 
legislation raises. One is, is it adequate to do what you want 
to do in the first place. In the NFL, I think your legislation 
might raise on the order of $200 million a year, $180 million, 
that you could put in this pot. The NFL is actually already 
doing this in the form of revenue forgone. They are saying 
money the team would normally have to pay into the league to 
visiting share can now be used to build the stadiums. So the 
money the league is allotting for that purpose is actually 
going to be significantly higher than your legislation would 
raise.
    In baseball, you would raise $34 million, something like 
that, not enough to make a dent in some of the projects out 
there. In hockey, you would raise about $12 million. And, of 
course, that doesn't get you anywhere for a $200, $300 million 
building.
    Finally, frankly, I think it is unnecessary. I believe we 
are heading into an era of stabilization in sports. We are 
going to see within about 5 years the completion of most of 
these buildings around the country. The arenas are pretty much 
there. You look at Comcast and MCI here in Washington, DC. 
Pittsburgh has an issue obviously with the Penguins, but there 
aren't many of these left, believe it or not. We are flushing 
out old stadiums that didn't work economically and were bad, 
frankly, for the sports experience.
    We built buildings like the Vet, like Three Rivers in the 
1970s, some of them in the 1980s, that were not functional for 
watching both baseball and football. We thought we were being 
real smart about it. And, of course, the municipalities were 
saving money, but they weren't providing a good arena, if you 
will, to watch a sport. And, of course, they were not 
generating the revenues that had to be generated to keep up 
with these increasing player costs.
    I think again we are getting through that and we are now 
approaching an era where we are going to see very few moves. I 
think there may be a couple left, maybe one or two possibly in 
football. We have a situation in Montreal, obviously, a 
baseball situation, but there are not many of those left around 
the country.
    That is all I had to say and I would be glad to respond to 
any of your questions.
    Senator Specter. Well, Mr. Moag, what do you anticipate 
with respect to Los Angeles, an expansion team, not a team 
moving in?
    Mr. Moag. Going back to the issue of all sports is local 
and all politics is local, I am pretty familiar with the Los 
Angeles situation and it is a mess. It is a real mess. They 
have basically decided as a community that they are not going 
to put any public money into a facility out there.
    So you have a contest, if you will, between the economics 
of the sport and the politics of Los Angeles. To get into the 
Los Angeles market could very well cost $1 billion, and it is a 
market that the NFL does not want to lose. But the building, 
redoing that Coliseum out there, is probably a $350 million 
issue. There are parking spaces that are needed that are 
probably another $200 million issue. And, again, the public is 
reticent about doing that.
    Well, that begs the issue, then, obviously who pays. Is a 
new expansion owner going to pay for that, and can he pay for 
it. Right now, you have a situation in Los Angeles where the 
expansion entity, if you will, is probably not financable on 
the private side because there is just too much of a nut to 
bite off and not enough income.
    Senator Specter. What is going to happen with Houston?
    Mr. Moag. I think Houston gets a team. Again, you have a 
contribution in Houston from the local government down there. 
They have stepped up to the plate. In combination with the 
rodeo, the economics of building that stadium with a roof over 
it will work, and I suspect Mr. McNair and the people of 
Houston are going to have a football team and it may very well 
be before Los Angeles has a football team.
    Senator Specter. Well, there are many other cities which 
aspire to be NFL cities. I can't begin to pick them out, but 
there are plenty of them around. Notwithstanding Senator 
Prague, Hartford may yet have aspirations. Birmingham has 
aspirations. You can run over the map. It is big status to be 
in the NFL. You have got a competing league coming in. The USFL 
tried to crack in in the 1980s.
    It seems to me that football is going to have to look at 
their expansion issues and how they handle their matters. I 
know that both baseball and football have their representatives 
here today, very confident people who are going to be 
dissecting all the innuendoes as to what we have to say.
    Senator Feingold has joined us. The floor is yours.
    Senator Feingold. Thank you, Mr. Chairman. I just wanted to 
thank everyone for being here today and make a brief statement. 
I want to commend you for holding a hearing on this important 
topic that has an impact on sports fans all across the country. 
I want to especially commend you, Chairman Specter, for your 
efforts to try to think of creative ways to deal with this 
issue.
    I share your desire to alleviate the burden on the 
taxpayers for the financing of stadium renovation and 
construction projects. We have seen some communities pay a very 
high price when their 
beloved team threatens to leave town unless they agree to help 
fund a stadium project. Of course, not all owners are like 
this. In fact, my colleague from Wisconsin, Senator Kohl, who 
helped keep the Milwaukee Bucks from leaving Wisconsin, is a 
good counter-
example, where he was able to do this despite the small size of 
the market.
    But while I agree with the bill's laudable goal, I do have 
some concerns about the method that Senator Specter has chosen 
to achieve that goal. The National Football League made a wise 
decision years ago to enter into a revenue-sharing agreement 
with all of its member teams to the television rights to their 
games. This revenue-sharing agreement has enabled teams like 
our team, the Green Bay Packers, which play in smaller media 
markets to be viable teams.
    As you may know, the Packers operate quite differently from 
other NFL teams. The Packers are not owned by a billionaire or 
a corporate entity. Rather, the Packers are a community-owned 
team. In fact, I have one share of the Packer stock and when I, 
on my financial disclosure report, had to list the value of it, 
I put down ``infinite'' for that.
    The fans of Green Bay, Titletown USA, own the team, but 
because they don't have the ready access to a revenue stream 
that a wealthy or corporate owner brings, they are in a tighter 
financial situation compared to other NFL teams. The Packers 
are also different because they don't have the kind of luxury 
boxes that generate high revenues per year, like the luxury 
boxes in many of the glamorous new stadiums.
    The average club box at Lambeau Field generates $30,000 a 
year, at best, while the average club box at other NFL stadiums 
generates $60,000 per season, that's twice as much. In the 
newer NFL stadiums, luxury boxes typically generate even more 
revenue and can command as much as $165,000 per person. As a 
result, the Packers are dependent chiefly on their share of the 
television revenues from the NFL. In fact, 60 percent of the 
Packers' operating revenues are derived from these funds.
    What this means is that this bill's trust fund provision 
will 
severely hurt the ability of the Packers to survive. The 
Packers have obviously done amazing things, and I am not just 
talking about their two recent trips to the Super Bowl. The 
Packers have managed to thrive as the NFL's only truly 
community-oriented team in an era when teams are going to the 
highest bidder and sometimes losing any sense of connection to 
the cities they once called home.
    The Packers have maintained their rich history and a 
passionate base of followers precisely because they are a 100-
percent community-owned team. I don't think we should threaten 
the viability of the Packers or any other small-market team 
that heavily relies on its share of media revenues.
    So, Mr. Chairman, I do support the goals of the bill, and I 
think we may need to think of another way to assist communities 
and teams with stadium construction. I certainly thank you for 
letting me interrupt at this point to make this statement.
    Thank you, Mr. Chairman.
    Senator Specter. Well, thank you very much, Senator 
Feingold. The goose that lays the golden egg, of course, on 
revenue-sharing comes from the 1961 exemption. So it is a 
special privilege for revenue-sharing in the NFL. But you and I 
have worked together on a great many projects and we will put 
our collective thinking 
together on this one as well.
    Senator Feingold. Thank you, Mr. Chairman.
    Senator Specter. Just one or two more questions, Mr. Moag. 
Some of the stadiums have been privately financed--the Miami 
Stadium. How were they able to work it out contrasted with, 
let's say, Baltimore?
    Mr. Moag. You are talking about what was the Joe Robbie 
Stadium. Actually, the Robbies unfortunately were bankrupted by 
that project. It was way too early for a project like that to 
happen 
because the media income that the league enjoys simply wasn't 
there.
    Senator Specter. Is the time right now?
    Mr. Moag. You are getting close, but neither baseball nor 
football are really totally there. They are getting close. If 
you have a basketball team and a hockey team, you can do it, as 
evidenced here with the MCI building. That is enough revenue to 
make it work.
    Football--you know, again you are seeing owners who are 
able to contribute $100, $150 million. In baseball, the same 
thing, so we are getting there, but the revenues are still not 
quite there. The politicians are smart now about sports. They 
weren't so smart 5 years ago. They are asking to look at the 
balance sheets. They are looking to see what these teams end up 
with and that bottom line after you build these buildings, and 
then they are kind of working backwards into the contribution, 
which is a smart and fair thing to do.
    You know, again, the good news about this whole process is 
that we are talking about financing buildings now that are old 
or in bad shape that were by and large, every one of them, 
built with public money. And we are in a new era where we are 
able to go to these owners and they are saying back to us, 
``Yes, you know, we understand, we will make more money and we 
will contribute''. The Red Sox are generously talking about 
$300 million up in Boston.
    Senator Specter. Well, I am glad to hear you say that you 
think it is a fair question for the political leaders to ask 
about the financial status of the teams because if the teams 
are asking for public assistance on the ground that they can't 
afford it, that raises the obvious question of their profits 
and their financial ability to afford it.
    Recently, a controversy was publicized in Philadelphia 
about the Phillies with a national publication printing a 
figure of profitability for the Phillies and the Phillies 
management denying it. It is easy to put it in print, and what 
has to be done is the facts have to be ascertained. But I am 
glad to hear you say you think that is a fair question.
    Mr. Moag. And Mayor Rendell, I believe, has seen the 
Phillies' books. And I am aware of the Phillies' books and they 
are not making any money right now. They will make money in a 
new stadium. I was up there in your city this week.
    Senator Specter. They had a pretty good crowd on Sunday.
    Mr. Moag. They had actually two good crowds in a row with 
the Yanks.
    Senator Specter. I was there on Sunday. They had terrific 
crowds in Baltimore.
    Mr. Moag. Yes. We had our largest sellout ever the weekend 
before, and it was Pennsylvanians all over the place spending 
their money in our town, which is what we like. [Laughter.]
    Senator Specter. Thank you, Amtrak.
    Mr. Moag. Thank you, sir.
    Senator Specter. We turn now to the Honorable Jean Cryor, a 
Delegate in the Maryland House of Delegates since 1995. She was 
very heavily involved in the issue on the Baltimore Ravens. And 
on a personal note her husband, Dan Cryor, used to cover the 
local district attorney in Philadelphia for TV 10.
    Thank you, Delegate Cryor, and the floor is yours.

                STATEMENT OF HON. JEAN B. CRYOR

    Ms. Cryor. Thank you very much. It is obviously a great 
honor to be asked to testify about this question. I am most 
grateful.
    The anger and resentment felt by the taxpayers over the 
expenditure colors, the political environment. It detracts 
truly from the work that is being done by government. And worst 
of all, I think it fuels this idea that government is just out 
of touch with its own citizens. It brings forward the question 
of how did government get in the business of entertaining its 
citizens, as opposed to educating them, building roads, 
building bridges.
    In Maryland, we have a football stadium built with terrible 
controversy. The anger felt by the citizens of Maryland when 
they learned that the Cleveland Browns were coming to Baltimore 
to play in a stadium not built by private funds dominated our 
news for months and months. From columnist Jonathan Yardley of 
the Washington Post, who usually writes of a very genteel 
world, to every call-in radio show, everyone weighed in in 
opposition.
    The statewide anger was apparently unexpected by our 
Governor. After all, Baltimore, as you referred to, is a city 
where its professional football team, the Colts, slipped out of 
town one miserable night and never came back. And years later, 
some fans still meet and wear their Colts T-shirts to buoy 
their spirits. And as one Colt fan explained to me at a hearing 
in Annapolis concerning the new team, she said to me when 
people come to visit you from other States, it gives you 
something to brag about; your city has a professional football 
team.
    But bragging only carries the issue so far, and frankly 
there are just not enough tough-minded braggarts to go around. 
Real anger centered on the use of public funds being funneled 
to a privately-owned football stadium. It mattered little that 
the State government hustled out news releases on a steady 
basis that the stadium was really being financed by State 
lottery. And if you do not want to support the stadium, they 
said, then don't buy the tickets.
    Well, people may not understand every nuance of spending 
affordability provisions or education funding formulas, but 
they knew that public money was headed to the stadium. After 
the feel-good arguments fell flat, the governor, who probably 
and justifiably, I think, felt the citizens were treating him 
pretty shabbily--after all, he had brought a team back to 
Baltimore--tried to tie the stadium to economic development.
    And critics loved that argument. They pointed out the cost 
of building the stadium, in excess of $200 million. The people 
hurling the peanuts and the fellow pointing out where to park 
your car would have to earn about $80,000 a year to make this 
argument.
    The economic argument then turned to the size of the wallet 
of the fan. It was argued people would come to Baltimore City, 
see the games, be so euphoric and giddy about the joy of seeing 
live football that they would lavishly spend their money on 
meals, expensive trinkets, and stay overnight. The city would 
be engulfed in a wave of tourism money. Unfortunately, 
geography was not with that argument. It quickly dissolved with 
the realization that most fans would drive to Baltimore to see 
the game and then drive home.
    A singular problem Baltimore had that would not be shared 
by most cities is that the people felt guilty about the way the 
town was gaining a team. The Browns were leaving Cleveland, a 
town that loved them. Baltimore found it heard to celebrate 
with Cleveland's gloom hanging over them. It did not help when 
a Cleveland magazine article reported the owner of the 
Cleveland Browns telling his wife to pack and leave town before 
Cleveland fans found out about the move. The good feeling 
balloon was definitely coming down.
    And the news kept getting worse. The State would build the 
stadium, but it would not get any proceeds from other events 
held there. Every economist, I believe, in the State of 
Maryland wrote to us legislators to tell us this is a bad deal.
    I would suggest that if public money is being used to build 
a stadium, the lion's share of the money netted by the stadium 
from parking to rent for rock concerts be returned back to the 
city or the State, and not just by the sales tax. The State 
should get a generous cut from any license to sell seats to 
ticket purchasers. And the lucrative naming of the stadium 
should remain the property of the people who build the stadium.
    Threats made by team owners that they will go elsewhere if 
they do not have a new publicly-funded stadium needs Federal 
legislation to put a limit on the public financial help. Today, 
team owners are holding the baby captive and waiting for 
ransom. They are using the fear of losing everything to force 
the ransom payment. It is time to rescue the States and cities. 
Only the Federal Government can out-muscle the team owners.
    If the owner is so eager for a new stadium, then let the 
owner build it, for while the public was footing the bill in 
Baltimore City, at the same time Jack Kent Cooke was building a 
stadium in Prince George's and he only asked for road 
assistance. If the business community of the city or State 
wants a new stadium, let them put together a good chunk of 
financing. I support your legislation, and I particularly 
support your comments made in the Congressional Record. It is 
not a good feeling for the State of Maryland.
    Senator Specter. Thank you very much, Delegate Cryor. Are 
your views as to the issue with the Ravens similar as to the 
construction of Camden Yards for the Orioles?
    Ms. Cryor. I must tell you I was not in office when Camden 
Yards was built. And, of course, Camden Yards has been very 
successful in many, many ways. Camden Yards did not face the 
kind of problems that the Ravens stadium faced. I just heard 
someone say earlier that all stadiums are publicly funded. That 
may be so, but not with a great amount of money.
    I want to remind you Baltimore City is a city where only 
three elementary schools have enough books in their libraries 
to meet the State requirements. We have children who literally 
can't read in the city of Baltimore. Those parents came to my 
colleague and myself to talk about why this shouldn't happen. 
This kind of expenditure--no matter how you look at, the people 
say this is out of touch, this is not what we are looking for.
    And I want to remind you of the difference between Camden 
Yards and a football stadium. They play baseball all the time. 
They hardly ever, it seems to me, play football. It is a very 
few weeks in the fall. That makes an enormous difference when 
you figure out how many weeks are actually being devoted to the 
sport for which this is being built. That is one of the other 
things that drove people crazy.
    Looking at this, it was a very elitist idea, when we have 
other problems. And I think the government tried its best in 
our State to work with the problem. But, frankly, we are 
dealing with goliaths all over the place coming at you from no 
end of different directions. As it was said earlier, they all 
have a different plan, they all have a different platform, and 
we are there trying to hold back we don't know what--a 
hurricane, a typhoon, a storm, a fire. We are not sure, but one 
thing we do know is we are in trouble.
    Senator Specter. What weight, if any, will you give to the 
sense that you have to have an NFL team if you are going to be 
a big-league city?
    Ms. Cryor. I find that to be one of the most curious 
comments ever because it is the final argument. In other words, 
everything else falls before. When you look at the arguments of 
economic 
development and you look at everything, you end up with only 
one argument: we want to feel good about ourselves.
    Senator Specter. You have a pretty strong argument if only 
three libraries have enough school books to comply with State 
law.
    Ms. Cryor. The libraries, yes, have enough. I think the 
arguments are very strong. I have to tell you the feel-good 
argument to me and to many of my colleagues is pathetic. It is 
not what we are talking about at all. And if people want to 
build things, let the rich build what they want to build. They 
have that right, but don't turn to the citizens, who frankly 
will never be able to buy a ticket to this. It is out of their 
range, and yet they--and whether you want to say it is lottery 
proceeds or anything else like that--I am on Ways and Means. 
The lottery comes under Ways and Means. We have people tell us 
all the time they don't want to buy lottery tickets because of 
the stadium. It is a very small number, but you shouldn't have 
people and the citizens of a State turn to you and say why 
couldn't you have stopped it, when to them it is obviously not 
enough to feel good. There are not enough people to feel good 
about this.
    Senator Specter. Thank you very much, Delegate Cryor.
    Ms. Cryor. Thank you.
    Senator Specter. We turn now to Bruce Poole, former 
delegate to the Maryland House of Delegates; served as the 
House majority leader from 1991 to 1994, one of the youngest 
ever elected to that position. Delegate Poole is now a partner 
in the firm of Poole and Poole, P.A.
    Welcome, Mr. Poole, and the floor is yours.

                  STATEMENT OF D. BRUCE POOLE

    Mr. Poole. Thank you very much. It is a real honor to be 
here today, and I wish to testify in favor of S. 952. I guess 
preliminarily I would disagree--I feel like it is old home week 
because I have got Jean Cryor here, who I fought the fight 
with, and I have somebody I admire greatly and like, John Moag, 
who I fought against.
    Once again, John and I, I think, disagree on a very 
fundamental issue. I think John says that the legislation now 
may not be needed because stability is coming to the forefront 
in this area. And that may be so, but I would ask that the 
committee do further investigation on the issue because of two 
reasons.
    First of all, I would suspect that even if John's premise 
is true that the construction of these stadiums is now about 
finished and that we have reached going through the cycle, I 
will submit to you that there will come a time when yet again 
that cycle will go full measure and we will find ourselves 
again with stadiums that are deemed to be outmoded, and so once 
again we will find this problem.
    However, I would suspect that even prior to that--the truth 
of the matter is this is not just a question about construction 
of a stadium; it is the question of a whole package, and that 
is really what it is. We are not just talking about, will you 
build me a stadium. We are talking about, how much is the 
stadium going to cost and then, in turn, who gets the money 
that is generated from that.
    And I would like to go through my remarks today, but if I 
may follow forward, I think you will see where I am coming 
from. I was a member of the Maryland General Assembly at the 
time that the debate came, and I was actually the person who 
offered the amendment on the House floor to block taxpayer 
funding of the Ravens stadium in Baltimore. And after rancorous 
debate, we lost by just a handful of votes. It was very, very 
close.
    And I would submit to you that as you go through this 
process, probably the thought process that we followed then is 
very helpful as the committee considers the bill before it. 
Now, I will say to you today the Baltimore Ravens stadium is a 
beautiful stadium. Truly, John Moag does a great job. He does a 
great job every time that I have seen him in action. But I 
still don't think that the taxpayers should have built the 
stadium. And it supplements Oriole Park at Camden Yards, as we 
know, another taxpayer-funded stadium.
    To me, there really are two questions that are fundamental 
to the debate, and if you understand these two questions, the 
rest of the debate flows easily. No. 1, are we really 
generating revenues or are we shifting revenues? And No. 2, if 
there is value-added to the equation, where is that value-added 
and who receives it?
    Now, let me answer the first question, the question of 
whether or not there is, in fact, a revenue generation. We are 
going to hear all sorts of talk as this debate ensues about 
multiplier effects. 
Everybody is nodding their head on this side; we have already 
heard it. You are going to hear all sorts of talk, spin about 
ripple effects and everything else. And the premise is made 
time and again from those who are proponents that, in fact, 
stadiums create revenues.
    I look at it this way. In terms of the Maryland government, 
there were only two ways that that could have been the case. 
Either the stadium was going to cause people who lived in 
Maryland who traditionally would have spent that money outside 
of our boundaries, outside of our borders, to now spend it in 
Maryland or, on the other hand, it was going to cause people 
outside the State of Maryland to come in and spend money here 
in our State of Maryland which they otherwise would have spent 
outside the State.
    That is not really what stadiums do. Yes, it is true that 
on any given day you will find people from Philadelphia coming 
down to an Orioles, and you will find people going back and 
forth. But the same is true that Maryland citizens, in turn, go 
over to Philadelphia and spend their money there, and it 
probably all balances out.
    Really, what stadiums do is they tend to make people make a 
choice about how they are going to spend money, and it is money 
that is finite in quantity. I guess that if we really were ever 
able to pull back the veneer and look at the true effect, the 
truth of the matter is that the Ravens stadium has made people 
choose as to whether or not they want to spend money on the 
Ravens or whether they want to go golfing, whether they want to 
go to the sports bar that is in the stadium or whether they 
want to go to a pub or a restaurant, whether they want to go on 
some other outing inside the State of Maryland or whether, in 
fact, on that particular day they want to go see NFL football. 
That is really what it is about.
    Now, the second question, I guess, that needs to be 
answered then is, is valued added, and if so, to whom. The 
value that is added is added after the stadium is built. 
Effectively, the taxpayers pay the mortgage, and the gold then 
goes to the owners, to the franchises. And the reason it does 
so is because they largely get the benefits.
    Senator I see the light taking off there. I will try to 
speed through this, but let me get some figures at hand. These 
are figures that were compiled from data available through 
Maryland Legislative Services and these are some of the costs 
to the taxpayer: Gift of the land, $50 million; construction of 
the stadium--and when I say gift, fee simple was not 
transferred to the Ravens, but effectively that is land that we 
could have used for something else is now a football stadium; 
construction of the stadium, $223 million; concession stands 
and equipment, $6 million; light-rail walkway, $5 million; debt 
service, $101 million; relocation expenses paid to the Ravens, 
which includes transferring what we would call personal seat 
licensing, which actually gives you the right to buy tickets in 
the first place, $68 million; naming rights value transferred 
over to the owner--actually, I wish to amend the testimony. It 
states in here $15 million, and the Senator is correct. If you 
deduct out the payment that was made, in fact, that is $5 
million, not $15 million, although the Ravens will receive 
$105.5 million from PSINet so that it can be a presenting 
sponsor of the team as part of the name sale agreement.
    Finally, for the deliberations of the Senate, I submit that 
there is one other question that we really didn't have to ask 
and answer but would be appropriate here, and that is the 
question of who can say no. Certainly, there are several people 
here who have shown valor under fire and have said no. But, 
largely, public officials are unwilling to say no to an NFL 
football team, whether it is a question of whether it should 
stay or whether it should come. And the reason is because of 
the perspective.
    Today, we live in a world where you are defined as a 
metropolitan area as to whether or not you have a professional 
sports team. If you lose that team or you fail to get a team, 
you are deemed to have suffered losses in many scales. It is 
seen as being a loss of favorable exposure.
    Senator Specter. How do you evaluate that, Delegate Poole? 
I have asked the other witnesses that question. My recollection 
is that at one time Baltimore did not have a baseball team. You 
had the Orioles in the old days with Wee Willie Keeler, but you 
went through a long period of time when Baltimore did not have 
a baseball team. At that time, Baltimore did have a football 
team, so you have never been without one or the other and big-
league status.
    Mr. Poole. Yes.
    Senator Specter. How do you evaluate that?
    Mr. Poole. Well, part of the problem, is that you cannot 
quantify that. So, sure enough, the proponents are going to 
come in and say, ``Look, if you lose this team, you are going 
to be branded a loser''. Certainly, Baltimore received a blow 
to the ego at the time that the Colts left. And I have to tell 
you, sure enough, if we had blocked the Ravens stadium and the 
Ravens had not ended up being in Baltimore, there would have 
been all sorts of rancor about whether or not we should have 
had the team and what it means for Baltimore now.
    Senator Specter. Well, there is an enormous impetus if you 
take the Pirates with world championship teams and Willie 
Stargell, or the Steelers and the Iron Curtain, or the 1980 
Phillies and the world championship. I was there in 1960--I am 
sorry Senator Feingold has left--when the Eagles beat the 
Packers. That is the last time the Eagles did it. It has been a 
long time. I started off being an Eagles season ticket-holder 
in 1958, and I go to the Phillies regularly on Sundays, like I 
did 2 days ago, when I am in town and they are in town. So you 
have that intangible that is hard to quantify.
    Mr. Poole. Yes, sir, and it pulls at the heart strings and 
it is an emotional argument, and it is what is trotted out and 
it is a very effective argument.
    [The prepared statement of Mr. Poole follows:]

                  Prepared Statement of D. Bruce Poole

    Mr. Chairman, Members of the Committee, it is a great honor to be 
here today. I have come to support S. 952.
    I was a member of the Maryland House of Delegates from 1987 until 
1999. In 1995, I was the person who offered the Amendment on the House 
floor to block tax-payer funding of construction of the Baltimore 
Ravens football stadium. After rancorous debate, that Amendment failed 
by a handful of votes.
    Four years later, we have a new football stadium in Baltimore, 
which supplements Oriole Park at Camden Yards. The facility is state of 
the art and testament to the fact that the State of Maryland produces 
top quality. Having said that, I still believe it was a bad idea to use 
public funds to build the Ravens stadium and submit to you that 
virtually the same thought process I used in concluding I would oppose 
the Ravens stadium should guide your consideration of the Bill before 
you.
    In my deliberations, I concluded there were two fundamental 
questions. Answer these questions, and the rest of the debate flows 
easily. First, do stadiums create revenue or do they shift revenue? 
Second, at what point is value added?
    Let me answer the first question. For all of the talk about 
``ripple effects'' and ``multipliers'', the truth of the matter is that 
stadiums do not make much new revenue. For Maryland government 
purposes, there were two ways the stadium could have created new 
revenue: either keep money inside Maryland that otherwise would have 
gone elsewhere or bring money into the state that would otherwise not 
have come in.
    That is not what stadiums do. Stadiums tend to simply cause people 
in an area to make a new choice. The choice is how to spend the finite 
amount of money that the people have. In Maryland, citizens who now 
spend their money on the Ravens probably had spent their money at a 
restaurant or pub in Maryland, golfing in Maryland or on some other 
activity in Maryland. So, when the Ravens came to town, their true 
effect was not to generate spending but to substitute spending, not to 
create new revenue, but instead shift monies spent mostly around the 
state and concentrate that spending to the vicinity of the stadium.
    This leads me to my second question: Where in the equation is value 
added? The answer, clearly, is that the value is added to the 
franchise, after the stadium is built. For owners, this really is the 
most ingenious part of the whole trend. Since public funding of 
professional stadiums has become the vogue, effectively, the taxpayers 
incur the costs and the franchises reap the rewards. The rewards, of 
course come from ticket sales, seat licenses, marketing and copyright 
use, but the real money comes from television viewing rights. Since the 
owners control viewing privileges, they make the rules and they get the 
gold. By being allowed to pool broadcasting revenues, the owners now 
get a lot of gold.
    On the other hand, taxpayers get the mortgage. Let me quote for you 
some of the true costs of ownership for the Ravens stadium. These 
figures were compiled from data available through Maryland Legislative 
Services:


 
 
------------------------------------------------------------------------
Gift of Land............................................    $ 50 million
Construction of Stadium.................................     223 million
Concession Stands and Equipment.........................       6 million
Light-rail Walkway......................................       5 million
Debt Service............................................     101 million
Relocation Expenses, etc., paid to Ravens (includes seat      68 million
 licensing).............................................
Naming Rights Value of Owner:...........................        \1\ 14.9
                                                                 million
------------------------------------------------------------------------
\1\ Estimated (although the Ravens will receive $105.5 million from
  PSINet so that it can be ``Presenting Sponsor'' of the team as part of
  the sale of the naming rights)


    Finally, for your deliberations, I have one last question: Who can 
say ``No''? Where are the public officials who are willings to walk 
away from having professional sports teams in their city or state at 
any cost? By that I am not speaking of state legislators--I am speaking 
of mayors and governors who ultimately have to make a very tough 
decision, knowing that if they do not get or keep a team, their 
jurisdiction will be marred. Loss of a professional sports team has 
become synonymous with loss of status, loss of prestige, loss of 
favorable exposure, and loss of opportunity at many levels.
    In Maryland's case, this quandary became most evident in the 1998 
Gubernatorial race. While voters were angry at the incumbent for 
backing the stadium, his primary and general election challengers were 
noticeably silent on the issue. Purportedly, this was because polling 
indicated that attack ads on this issue would anger two sets of 
voters--one for the candidate and one against the candidate. It was a 
no-win situation, which was fitting. I say that because no-win 
situations are precisely what public officials and taxpayers 
contemplating the construction of professional football stadiums face 
in this environment. Thank you.

    Senator Specter. We now turn to the first of two very 
distinguished authors on this subject, our expert witnesses, so 
to speak. Dr. Andrew Zimbalist is the Robert A. Woods Professor 
of Economics at Smith College, in Northampton, MA, where he has 
been since 1974. He has published two major books on sports 
economics, ``Baseball and Billions'' and ``Sports Jobs and 
Taxes.'' He has also written articles on sports economics and 
is a contributor columnist to the Sports Business Journal.
    Thank you for joining us, Dr. Zimbalist, and what is the 
answer?

                 STATEMENT OF ANDREW ZIMBALIST

    Mr. Zimbalist. Thank you for having me, Senator. One of the 
advantages of going toward the end is that a lot of the things 
I was going to say have been said. Let me depart from my formal 
remarks and make some comments on what has been said and then a 
few comments on your bill.
    Let me begin by noting that I agree wholeheartedly with the 
tenets of equity financing that Speaker Finneran suggested to 
us, and I applaud Speaker Finneran for the heroism and tenacity 
that he displayed with regard to the Patriots. But I also think 
it is important to point out--and Speaker Finneran recognized 
this--that Boston is the sixth largest media market in the 
United States, and that gave Boston a good deal of leverage 
that most other sports cities won't have.
    That is why it is very important for there to be some kind 
of national policy with regard to stadiums. We cannot depend on 
the Thomas Finnerans around the United States to do what 
happened in Boston.
    Senator Specter. Not enough of them?
    Mr. Zimbalist. There are not enough of them in the sixth 
largest media market in the United States.
    Second, a topic that often comes up in these discussions is 
that there are companies in the United States that get 
subsidies from cities to move their plants into their cities, 
and if private companies can sometimes do this, why shouldn't 
sports teams do it as well?
    Well, first of all, it is not at all routine for that to 
happen for manufacturing companies. But there is a very large 
difference between the manufacturing company that comes into 
town, builds a plant, hires 500 or 1,000 workers, produces a 
good and then sells that good to the rest of the country and 
the rest of the world. They are exporting their product. They 
are bringing money from the rest of the world into the city.
    As some of the speakers have pointed out, most recently Mr. 
Poole, most of the money that gets spent at a sports arena or 
sports facility is recirculated money within the town. It does 
not generate new value-added.
    A third comment--this is just to improve the record--is on 
the issue about $1 billion being spent on the stadium deal in 
Hartford. Senator Prague gave a very exhaustive list, but she 
left out one important item, which is that there was a 
provision in the agreement for approximately $170 million to go 
into a stadium improvement fund. Then that amount would be 
increased by the rate of inflation, as would several of the 
other amounts that she alluded to.
    Fourth, you asked Mr. Moag about expansion in the NFL, and 
I would like to remind you and remind your colleagues in the 
Senate that when Commissioner Rozelle testified before this 
body in the late 1960s, asking for permission to have an 
exemption from antitrust so that the AFL and the NFL could 
merge, one Senator asked Mr. Rozelle, he said the NFL has been 
expanding in the last several years. In fact, it had just 
expanded on two occasions by two teams in the previous 4 years.
    And he said, Mr. Rozelle, can you guarantee to us if we 
allow this merger that you won't abuse your monopoly power and 
that you will continue to expand? And Mr. Rozelle said 
absolutely, and he committed himself to an ongoing process of 
expansion. They got two teams in 1976, after Mr. Rozelle 
intimated that they would come in 1970, and then the NFL didn't 
expand again until 1995.
    Senator Specter. What is the Senate's remedy now, Professor 
Zimbalist?
    Mr. Zimbalist. Well, let me say that an economist has no 
difficulty--before you talk about remedies, you have to talk 
about the root of the problem. An economist has no difficulty 
in identifying monopoly as the root of the problem. The sports 
leagues that we are talking about are monopoly sports leagues. 
There is only one National Football League that provides top-
level professional football in the United States, and the same 
for the other professional team sports leagues in the United 
States.
    There are two ways that economists say you can deal with 
monopolies. One is to break them up, to have a bill that would 
force divestiture, put the NFL back into the AFL, make them 
compete on business grounds, let them cooperate on playing 
rules, let them cooperate on the post-season, let them have a 
Super Bowl, to be sure, but make them compete. In baseball, 
make the AL and the NL two different leagues, make them compete 
on business terms. If you had the AL and the NL competing in 
business terms in baseball, you wouldn't have had Washington, 
DC, one of the 10 largest media markets in the United States, 
without a baseball team since 1972. So, that is one possible 
remedy, divestiture.
    The other remedy is some kind of regulation, which your 
bill provides, and I think it is a good effort. But by the same 
token, I think that there are some weaknesses in your approach. 
I think that you are, No. 1, looking for a single formula to 
apply to very distinct circumstances and very distinct leagues.
    As it has been pointed out, the NFL has a tremendous amount 
of revenue-sharing, whereas baseball and the other leagues have 
very little. That means that all of the owners of football 
teams can benefit if there is a new stadium in Boston or a new 
stadium in Hartford. That revenue spreads out to the whole 
league, and when there is one team that is doing very poorly, 
that is a loss that is absorbed by the whole league. So, to 
have a mandated funding program from the league is much 
different, carries much different economic incentives from one 
league to another.
    Another problem--I agree with John Moag that the financing 
provision, particularly as it applies to Major League Baseball, 
is inadequate. If you take a $340 million yearly TV contract 
and take 10 percent of that and put it into a stadium fund, you 
are not going to have enough money to get anywhere near the 50 
percent that you are looking for.
    Third, and I think this is very important, the National 
Football League Players Association and the owners have come to 
an agreement which provides for the Players Association to 
contribute in any financing that is done by league funds for 
new stadiums. They have already handled that and they are 
already discussing and negotiating means to extend that with 
regard to the new bylaw in the NFL. So they are doing that 
particular thing on their own, and I don't think it is 
necessary for your bill to insert the Federal Government into a 
collective bargaining relationship, particularly a collective 
bargaining relationship that has been so successful.
    Fourth, I agree with Senator Feingold. I think you have got 
the wrong punishment in your bill. I think it would be 
perfectly appropriate, for instance, to remove the Federal 
exemption on municipal bonds for a league that didn't comply. I 
think you are going to wreak havoc and financial disarray if 
you take away the Sports Broadcasting Act powers from the 
sports leagues.
    You simply can't take $71 million from the coffers of the 
Jacksonville Jaguars or the Carolina Panthers and expect them 
to play NFL football. You are going to create similar kinds of 
problems, not quite as severe but similar kinds of problems if 
you take the $14 million away that goes to each of the major 
league baseball teams that comes from the Federal contract.
    Let me lastly say that with regard to the bylaw change in 
the NFL that they are, as Mr. Moag suggests, taking a step in 
the right direction. They are not nearly going far enough with 
that, and they are particularly not going far enough in the 
medium-sized and small cities.
    Senator Specter. What should they do if they are going to 
follow their current path?
    Mr. Zimbalist. Well, the problem here is that they are 
going to make a very large contribution in New England because 
Robert Kraft is going to spend about $250 million and the NFL 
is going to contribute $125 million. But one of the reasons why 
Robert Kraft has to spend $250 million is because Boston is the 
sixth largest media market. When you go to smaller media 
markets, without legislation similar to the one that you are 
proposing, the medium and smaller-sized cities are not going to 
get that kind of private financing. So the NFL is going to be 
contributing a smaller share, less than 50 percent, to a much, 
much smaller commitment from the private sector. So I think 
that you need to do more.
    In terms of what the NFL should do, I wouldn't put the 
burden on them. They are a monopoly sports league. They are 
going to maximize their profits the best they can. I think 
again we need Federal action, we need Federal policy, and I 
think either divestiture or a bill that moves toward the 
direction that yours moves is appropriate.
    Senator Specter. Well, thank you very much, Professor 
Zimbalist. One further question. Washington is the tenth 
largest media market with no baseball team. Not enough 
political clout in this town?
    Mr. Zimbalist. Well, I think that that is a question that 
you could provide more insight to than I could. There have been 
powerful owners of the Baltimore Orioles and Baltimore football 
teams which have lobbied effectively in the past to keep 
professional baseball out of Washington. But, again, I think 
there are probably nuances to your question that you could 
provide more insight for than I could.
    Senator Specter. Thank you very much, Dr. Zimbalist.
    [The prepared statement of Mr. Zimbalist follows:]

               Prepared Statement of Andrew Zimbalist \1\

    Good afternoon. I would like to begin by commending Senator Specter 
for making an earnest effort at ameliorating what has been a growing 
problem in our country, the most recent instance of which was the 
unsavory competition between Connecticut and Massachusetts over the New 
England Patriots. For over four decades U.S. states and cities have 
used increasing public subsidies to compete with each other over 
professional sports teams, only to see ever higher franchise values. 
Modern stadium architecture and new revenue-generating accoutrements 
have led to an explosion in both the number and cost of publicly-
financed facilities during the 1990s.
---------------------------------------------------------------------------
    \1\ Andrew Zimbalist is Robert A. Woods, Professor of Economics, 
Smith College, Northampton, Ma. He has written about and consulted 
extensively in the sports industry. His next book, Unpaid 
Professionals: Commercialism and Conflict in Big-Time College Sports, 
will be published by Princeton University Press in August 1999.
---------------------------------------------------------------------------
    With few exceptions, the competition among our states and cities 
over sports teams is supported by the U.S. Government which grants tax 
exemption on the interest from the municipal bonds which are floated to 
finance sports facility construction. An effort to limit the use of 
this exemption for publicly-funded sports facilities in the 1986 tax 
reform only backfired, as financing loopholes were discovered which 
actually led to lower team rental payments.
    Although teams and leagues often hire consulting firms to publicize 
purported positive economic impact from sports stadiums, all 
independent academic studies have found that there is no statistically 
significant positive effect from having a new team or stadium on an 
area's economy. This fact alone does not mean that there should be no 
public subsidization of new stadium construction. If the voting public 
in an area believes that having a new facility or team would enhance 
the local culture and create a positive consumption value for its 
citizens, then the public may very well decide to expend tax dollars in 
support of sports teams--much the same way they may decide to use 
public funds to park construction (albeit in the case of sports teams 
the subsidies are eventually appropriated by the private owners of the 
franchises). The voters, however, need to understand that they are 
voting for cultural, not economic, value. The voters are also entitled 
to make this election without the threat of extortion by the monopoly 
sports leagues.
    Economists have no difficulty identifying the source of this 
problem. Both the National Football League (NFL) and Major League 
Baseball (MLB) are monopolies. As such, they artificially limit output 
(i.e., the number of teams) below the demand for teams from 
economically-viable cities. With excess demand for teams, cities are 
thrust into competition with each other.
    Economists also have no difficulty identifying the possible 
remedies. There are two choices. Either create competition or regulate. 
The easiest way to create competition is to force league divestiture. 
That is, the league could be broken up into two competing business 
entities while being allowed to set common playing rules and post-
season competition. If baseball had two competing leagues, the American 
League and the National League, it would be inconceivable that 
Washington, D.C. would go 27 years without a team. It is one of the ten 
largest media markets in the country and the two leagues would be 
tripping over each other to occupy it. Similarly, cities like New York 
would have more than two teams and the competitive advantage Mr. 
Steinbrenner derives from his MSG contract would attenuate. Compelling 
divestiture via legislation, however, is not something the U.S. 
Congress is likely to embrace.
    Another route, heretofore spurned by the Congress, is meaningful 
regulation of the monopoly abuses perpetrated by the major sports 
leagues. Senator Specter's present bill is but the most recent of 
several failed efforts at partial regulation of the sports industry.
    The Senator's goal--to obligate MLB and the NFL to put aside 10 
percent of their national television contracts in order to finance up 
to 50 percent of new ballpark construction--is admirable. Senator 
Specter also suggests in his floor statement that of the remaining 50 
percent, half should be public money and half should come from the team 
owner.
    I am supportive of the Senator's ends but a bit skeptical of his 
means. Let me explain. First, specifying a single formula for distinct 
situations, especially when the lease terms for the new facility have 
not been spelled out, is problematic. Second, the present size of MLB's 
network contract renders it insufficient to meet the financing 
expectations of the bill.
    Third, while franchise geographic stability has its virtues, in the 
present context extending the NFL an antitrust exemption with regard to 
franchise relocation is potentially perilous. If the NFL is allowed to 
decide when teams move, then it also is allowed to prevent two or more 
teams seeking to move to the same city from competing with each other. 
Such competition would give the city a modicum of bargaining leverage 
in setting the financing arrangements and lease terms for the new 
stadium. Moreover, although it might limit the actual frequency of team 
relocations, it would not prevent teams from threatening their host 
city. No baseball team has relocated since 1972, but many franchises 
have threatened to move and, thereby, obtained tens or hundreds of 
millions of dollars in public subsidies. While it is probable that 
granting the NFL this exemption would reduce the amount of litigation 
against the league, and this is certainly desirable, it is simply too 
dangerous to grant a monopoly league still greater economic power.
    Fourth, the Senator's bill mandates that any monies put into the 
stadium trust fund will be excluded from the NFL's defined gross 
revenue (DGR) and, hence, not subject to the 63 percent sharing with 
the players implied by the league's salary cap. While there is a 
reasonable logic behind this provision, it is inappropriate for the 
U.S. Congress to insert itself into the collective bargaining 
relationship between the owners and players. It would be equally 
inappropriate, for instance, for the bill to require the abolition of 
the NFL's salary cap as a means to bypass its automatic sharing 
provisions and to encourage player contribution to stadium 
construction. In fact, the NFLPA recognizes the value to the players 
from new facilities and already has, on its own accord, entered into 
agreements with the owners that allow the exclusion of certain league 
financing of stadium construction from DGR. This is not an area where 
the NFL and NFLPA have failed. It would set a destructive precedent if 
Congress were to mandate a particular collective bargaining outcome, 
especially on a subject where the league and players have accomplished 
much the same on their own.
    Fifth, Senator Specter's bill proposes to punish a league's failure 
to establish a stadium trust fund by removing its member teams' ability 
to join together to sign a leaguewide network television contract. The 
NFL derived its ability to do this in the 1961 Sports Broadcasting Act. 
MLB claims to have derived its ability from its presumed blanket 
exemption from the nation's antitrust laws granted by the Supreme Court 
in 1922, and MLB is also covered by the Sports Broadcasting Act. But if 
Congress proscribes leaguewide television deals, yet continues to allow 
the NFL and MLB to function as monopolies in other regards, it is 
courting disarray. Revenue from network television are shared equally 
among all the teams. If each NFL team signed its own television deal, 
then the $71 million per team annual average under the current contract 
would disappear. Certain popular, big-city franchises, like the New 
York Giants and Dallas Cowboys, might earn larger contracts, but the 
Charlotte Panthers and Jacksonville Jaguars might find themselves $60-
$70 million in the hole. League financial stability would disappear and 
competitive balance may be undermined. Less dramatically, a similar 
pattern would affect baseball. Thus, the punishment for non-compliance 
is too draconian and certainly would not be in the fans' interests.
    Further, the punishment does not fit the crime. It is a bit like 
punishing a child who steals candy by not letting her go to school. 
Non-compliance in stadium finance would more appropriately be 
sanctioned by removing the opportunities for federal financing of 
stadium construction, i.e., not allowing the interest on municipal 
stadium construction bonds to be exempt from federal income taxation.
    The NFL, in an effort to maximize its long-term television 
revenues, has passed a policy providing league support for financing 
new facility construction. In the case of the six largest NFL markets, 
the league will provide an interest-free loan to a team owner for up to 
half of the owners commitment to stadium financing (with 
proportionately smaller amounts going to teams in smaller markets). The 
loan is repaid by monies that the owner would otherwise have to share 
with the league. Since large cities have more bargaining leverage 
around stadium issues, they are likely to extract a larger component of 
financing from the team owner. This policy is a step in the right 
direction, but it does not go far enough and provides too little 
support for the 25 smallest markets in the league. MLB has no policy at 
all that provides league financing support of facility construction.
    Thus, more needs to be done to bring sports industry welfare under 
control. Senator Spector's effort is to be commended. The task now is 
to make appropriate refinements to the bill and to overcome the ever-
so-effective lobbying efforts of the NFL and MLB by enlisting support 
for the measure among members of Congress from outside the few cities 
and states currently being extorted for large public stadium subsidies.

    Senator Specter. We now turn to Professor Mark Rosentraub, 
Professor and Associate Dean in the School of Public and 
Environmental Affairs at Indiana University in Indianapolis. 
Dr. Rosentraub's research focuses on the relationships between 
sports and economic development in the public sector. He is the 
author of ``Major League Losers: The Real Costs of Sports and 
Who Is Paying for It.''
    Thank you for joining us, Professor Rosentraub, and the 
floor is yours.

                STATEMENT OF MARK S. ROSENTRAUB

    Mr. Rosentraub. Senator, thank you very much for the honor 
to be here, and I will also just briefly summarize a couple of 
points, and batting cleanup gives you that opportunity.
    First, Senator, I want to let you know that--
    Senator Specter. When does the seventh hitter bat cleanup? 
[Laughter.]
    Mr. Rosentraub. Our lineup is so deep, I guess everybody is 
a cleanup hitter.
    It has been honor also--I just want to add one thing that 
is not in my testimony--to work with the city controller in 
Philadelphia on the situation dealing with the Phillies and the 
Eagles, and I continue to enjoy that association. And this is 
just an issue that Mr. Moag and I will differ on very sharply, 
including the profitability of the Philadelphia Phillies. 
Having had the opportunity to work through those numbers with 
the Phillies and with the city, I can tell you there is a real 
divergence of opinion there.
    I also want to point out for the record that I have 
assessed the issue of the intangible benefits that you have 
spoken about, and written and published on that. Part of what I 
am going to recommend today in terms of a solution deals with 
user fee charges that is based on intangible benefit research. 
But let me just highlight five or six points and then turn to 
you for some questions.
    No. 1, it is clear we need to change the financing of 
professional sports facilities because it is the result, 
unfortunately, of actions that the Congress has taken to 
protect the monopoly status of professional sports. But as many 
of my colleagues have spoken to, looking at the media is not 
the right source, given the different sources of income that 
the leagues enjoy. It would perhaps be better to simply develop 
legislation that gave the leagues the 50-percent responsibility 
that you seek and let them choose the revenue sources. As many 
have pointed out, including Andy, the NFL has already gone that 
route. We need to see similar action from the other sports 
leagues.
    It is imperative, though, in your legislation, Senator, 
that you also specify and discuss the repayment of any funds 
that get utilized in terms of local government shares. Part of 
the problem that we will face is that certain communities, 
including Philadelphia, are seeking to use user fees as a way 
because of the very lucrative nature of the Philadelphia market 
for both the Phillies and the Eagles. They should not be 
precluded from passing local taxes that hit fans only and users 
of the facility, as opposed to general revenue or gaming funds.
    As we go through, in terms of my written testimony for the 
record, I have identified several funds that you ought to 
specify cannot be used by local governments to finance their 
share of facilities, but specify the funds that can be used and 
circulate those basically on what occurs at the facility or 
adjacent to the facility itself.
    The Senate bill needs to go a little further, in my view, 
on defining total cost, as many of the State representatives 
have already spoken about. The infrastructure and environmental 
remediation costs of these facilities are quite substantial, 
and if they are not included in the bill, it becomes a mandated 
cost on local governments or it leaves it open to the 
negotiation between teams and State and local governments. And 
as many have talked about, this is not a level playing field in 
which State and local governments can negotiate with it. They 
play in a monopoly world where the cards are held with the 
leagues.
    I talk in my testimony a great deal about using user 
charges as a way to do that. User fees that are paid, whether 
it is a fee for tickets, whether it is a special sales tax of 
all consumption around the area, these are not taxes paid by 
the fans. These are taxes that get split between the players 
and the owners relative to the revenue-sharing agreements that 
go on in those leagues because owners, in the absence of a tax, 
will simply price all products, including tickets, to the 
maximum they can. The tax simply freezes or puts a ceiling on 
it, with a chunk of that money going to facility development. 
And I talk about that extensively.
    I also want to touch on one point which I think no one here 
has yet dealt with, and that is the question of a loophole, as 
I see it, in S. 952. If, for example, the city of Philadelphia, 
Senator, would decide to present to the Eagles and to the 
Phillies a revenue package that included the one-third share, 
as you well know, that the State legislature requires from 
local government to be collected from a series of user fees, 
the owners of both teams might receive more lucrative offers 
from other communities that would be willing to pass a property 
tax or a sales tax or a gaming tax to fund that one-third, and 
hence they would lose the team.
    I would ask that you think about including in S. 952 the 
provision that if any local government came forward with a 
matching funding formula based on users fees and a team left 
that because of monopoly status the NFL or Major League 
Baseball be required within 24 months to award an expansion 
franchise through a bidding process, as they have done in 
Cleveland as they have gone through in Los Angeles, in a way 
that would award a franchise so that a community that believes, 
because of its market size, like Boston--and Philadelphia 
clearly fits into this mode--that if Philadelphia could come 
forward with a user fee basis and if the teams left that 
Philadelphia would be assured of the fact that it would, in 
fact, have a new franchise within 24 months. I talk about that 
in my written testimony, how that would work, because the 
stadiums would not be as subsidized, but, in effect, that would 
be handled in that fashion.
    Senator Specter. Professor Rosentraub, for the fans that is 
totally insufficient to get a new team.
    Mr. Rosentraub. Senator, I agree with you, and I think Andy 
and I have both written about different ways to handle it in 
terms of a set of issues about how you deal with a monopoly. 
But let me point out, Senator, that if the NFL and Major League 
Baseball knew that if a team moved that they had to, in effect, 
expand immediately, you would get pressure not to allow the 
movements to occur.
    We have seen this happen, in fact, when we dealt with the 
situation of the New England Patriots where the loss to the 
media partners and to the NFL were sufficient to encourage them 
to seek a solution to the Boston problem, together with the 
excellent political leadership provided. If, in fact, Major 
League Baseball and the NFL knew that if the Phillies and the 
Eagles left Philadelphia that within 24 months both would have 
to expand, that would create a very powerful incentive for the 
leagues to help explore the solutions.
    So where I agree with you, Senator, that, in effect, the 
fans don't receive the kind of protection that you and I would 
like to afford them, what I would say is that S. 952 could 
create a set of incentives that would require the leagues' 
participation. And based on what we saw in New England, I think 
your legislation and your discussions had an impact. I know 
that the Speaker's work had a great impact, but I also know, 
Senator, that the fear of losing a team's presence in a very 
large media market was something that the media partners were 
not willing to accept and that creates the incentive for a 
solution. If you required expansion, then, in fact, you would 
have an incentive.
    And the last point I will make, adding on to some things 
Andy said, is in 1966 Commissioner Rozelle came before this 
committee and not only did he promise to expand, he also 
guaranteed that there would be no movement of teams from the 
smaller markets and from their existing stadiums. Within 15 
years, that commitment to the Senate Judiciary was left in 
shambles. So it is critical that the bill specify rules for 
expansion and what is expected in return for the monopoly 
status that this committee has been generous in extending to 
professional sports.
    Senator Specter. Well, thank you very much for those ideas 
and for those suggestions, Professor Rosentraub.
    [The prepared statement of Mr. Rosentraub follows:]

                Prepared Statement of Mark S. Rosentraub

                              introduction
    Thank you for the opportunity to address the Committee on Senate 
Bill 952, the Stadium Financing and Relocation Act of 1999.
    Across the past several years there has been an unprecedented level 
of activity in the building of new facilities for professional sports 
teams. The changing economics of the sports business has driven this 
construction boom. While television revenue is still crucial, team 
owners have learned that they can earn substantial amounts of money 
from in-stadium or arena sources including luxury seating and the sale 
of food, beverages, advertising, and souvenirs. Ballparks and arenas 
built in the 1970s did not have luxury suites and club seats; nor did 
they have the concourses needed for a large number of quick sales and a 
variety of food and souvenir outlets. The provision of luxury seating 
also attracts a caste of fans that are highly desired by firms that 
seek to identify themselves in the minds of business leaders and 
consumers.
    The modern ballpark is much like today's airports and the Internet. 
They are filled with glitzy shops, first class seating, exclusive clubs 
and seating areas, and the opportunity to capitalize on the disposable 
wealth of a captive population. Advertising adorns all available space, 
and as technology is coupled with facility design, advertising appears 
on personal video screens along with menus and the latest statistics 
and replays.
    The building of these new facilities should be greeted with uniform 
joy. After all, projects of this nature provide short-term construction 
jobs, other limited service sector employment opportunities, and fans 
generally enjoy the new facilities while eagerly spending far more 
money at the ballgame then they did years ago. Amidst all this good 
news why are some people joyless when plans for new facilities are 
usually announced? It is because team owners want more than a new 
stadium or ballpark. They generally want someone else to pay for their 
new facilities.
    In the vast majority of instances when a plan is announced for a 
new facility state and local taxes rise. State and local governments 
are expected to enter into public/private partnerships with teams. 
These partnerships are somewhat peculiar. Governments provide part and 
sometimes all of the funds for the new facilities, but the teams keep 
the overwhelming majority of the revenues collected at the facility. 
Why do governments agree to these deals? The sports leagues are 
permitted to control the supply of teams and their locations. There are 
always one or two cities without teams, and these areas are used to 
insure that adequate subsidies are provided. If a city fails to provide 
the required subsidy a team just moves to a more pliant area.
    Many have argued that this is not a matter with which the federal 
government or any government ought to concern itself. After all, any 
community is free to decide to assist in the financing of a new stadium 
or ballpark or let a team move to another community that is willing to 
offer what is demanded. State and local govemments make decisions of 
this nature every day in the provision of abatements, the establishment 
of tax increment financing districts, and the provision of other 
incentives to influence the locational decisions of firms and 
households. Why do professional sports--and in the case of Senate bill 
952, the National Football League (NFL) and Major League Baseball (MLB) 
require special treatment or federal legislation?
               the special status of professional sports
    Sports are separated from other businesses by at least two 
characteristics. First, sports require organized competition and 
competitors to be successful. Ford, Microsoft, or American Airlines can 
operate without the existence of other carmakers, software firms, or 
airlines. Baseball and football teams, however, must have competitors 
to be financially successful as fans are attracted to games between 
teams where the outcome is uncertain and both teams are following the 
same rules and procedures to build a winning franchise. Sports 
entrepreneurs did experiment with ``barnstorming'' teams that went from 
city to city playing local athletes. This framework was not as 
successful or profitable as organized leagues of ``conjoint 
competitors'' seeking a championship. Teams do compete with each other 
for players (economic competition) and on the field for championships 
(athletic competition). Yet, every team owner knows the profitability 
of any single franchise depends on the success in staging competitive 
games with unsure outcomes. The success of any sports league comes from 
a form of self-regulation or conjoint competition to insure competitive 
balance. However, self-regulation can under certain circumstances 
create a powerful imbalance in the relationship when leagues control a 
desired 
resource.
    Second, while all corporations that produce goods and services are 
important and valuable, there is a social dimension to sports that 
elevates it to a different position. Sports are, and have been for 
almost 4,000 years, an organizing element of society upon which people 
place extreme value. The Greeks, Romans, and Mayans among ancient 
societies used sports to define critical religious, political, and 
social aspect of their societies. The importance placed on sports was 
no less critical in the time of the Ottoman Republic and the reign of 
the Sultans then it is today for the celebration of American holidays 
and events. Patriotism and civic virtues are tied to athletic events 
today as they have been for thousands of years. The Olympics are 
frequently used to establish political objectives, and teams across the 
US are critical elements in the establishment of a national and 
international identity. Finally, leaders in virtually every city 
believe that hosting a baseball or football team is a necessary 
prerequisite for establishing themselves as a real or ``major league'' 
community. The presence of a large manufacturing plant, bank, or resort 
complex did not mean the same thing to the people of Jacksonville or 
Charlotte when they received a NFL franchise. The extreme steps taken 
by Connecticut and Hartford, as well as St. Louis and Nashville, are 
representative of the importance our society places on sports. The 
subsidies teams receive are the most recent examples of the importance 
people believe everyone places on sports. Without a team a city is not 
seen as being ``major league'' and ``serious'' or ``real'' players in 
the American economy. Without a team communities do not believe they 
are ``real players'' in American society.
    In this environment the power of the supply of teams is not market-
driven but controlled by small groups who use their ability to 
establish the number of teams to secure subsidies. And, unlike an 
automobile plant or airline maintenance facility, if a community loses 
in the subsidy race to get a NFL or MLB team, there are no other 
suppliers of these goods and services with whom the community can 
negotiate.
How Much Are State and Local Governments Paying for Ballparks and 
        Stadia?
    It is estimated that $7 billion has been spent by state and local 
governments since the mid-1980s to build facilities for teams in the 
four major sports leagues. The financing tools used by state and local 
governments to support this investment have led to increased taxes. New 
sales and property taxes have been used as well as special taxes on 
hotel stays and the rental of cars. Table 1 details the subsidies 
received by each team.


  Table 1.--A Selected Overview of Public Subsidies for the Facilities
                   Used by  Professional Sports Teams
------------------------------------------------------------------------
           League/Team                 Situation          Resolution
------------------------------------------------------------------------
Major League Baseball:
 
  Arizona Diamondbacks..........  New Stadium Part    $238 Million
                                   of Expansion Bid.   Subsidy from
                                                       County (sales
                                                       tax)
  Baltimore Orioles.............  Demanded New        Camden Yards,
                                   Stadium.            $200+ Million
                                                       Subsidy, 1992
  Chicago White Sox.............  Threatened to Move  New Stadium, 1991,
                                   to Florida.         100% Public
                                                       Subsidy, $125+
                                                       million
  Cincinnati Reds...............  Threatened to Move  New Stadium
                                                       Approved, 1996;
                                                       $250 miliion
                                                       subsidy
  Cleveland Indians.............  Threatened to Move  New Stadium, 1994
                                   Out of Region.      Public Subsidy In
                                                       Excess of $150
                                                       Million
  Colorado Rockies..............  New Stadium Part    $215 Million
                                   of Expansion Bid.   Subsidy (sales
                                                       tax)
  Detroit Tigers................  Threatened Move to  New Stadium
                                   Suburbs.            Approved, 1997;
                                                       public subsidy
                                                       $240 Million
  Houston Astros................  Threatened to       New Stadium
                                   Leave the Region.   Approved, 1997;
                                                       $180 Million
                                                       public subsidy
  Milwaukee Brewers.............  Threatened to       New Stadium
                                   Leave the Region.   Approved, 1997;
                                                       $232 Million in
                                                       subsidy
  Seattle Mariners..............  Demanded New        $360 Million
                                   Stadium.            Public Subsidy
                                                       For New Stadium
  Texas Rangers.................  Threatened to       New Stadium, 1994
                                   Leave Arlington.    Public Cost $135
                                                       Million
  Toronto Blue Jays.............  New Stadium Opened  Public Cost In
                                   In 1989.            Excess of $262
                                                       Million
                                                       (Canadian)
 
National Basketball Association:
 
  Atlanta Hawks.................  Demanded New Arena  $62 Million In
                                                       Infrastructure
                                                       From Public
                                                       Sector
  Charlotte Hornets.............  New Arena for       100 Percent Public
                                   Expansion Bid,      Financing ($52
                                   1988.               Million)
  Cleveland Cavaliers...........  New Arena To Bring  Public Subsidy In
                                   Team Downtown.      Excess of $100
                                                       Million
  Dallas Mavericks..............  Threatened to Move  Public Subsidy of
                                   to Arlington,       $125 Million
                                   Texas.              Approved, 1998
  Indiana Pacers................  New Arena Approved  $107 Million
                                   in 1996.            Public Subsidy
  Miami Heat....................  New Arena Approved  Public Pays $6.5
                                   in 1996.            million per year
                                                       and $34.7 million
                                                       for land
  Orlando Magic.................  New Arena For       Publicly Financed
                                   Expansion Bid in    $98 Million Arena
                                   1989.
  Phoenix Suns..................  New Arena in 1992.  Public Subsidy
                                                       Exceeds 50
                                                       Percent of $90
                                                       Million Costs
  Sacramento Kings..............  Remodeled Arena in  Public Loan of $70
                                   1997/98.            Million
  Seattle Supersonics...........  Remodeled Arena     Arena Revenues For
                                   1995.               Public Sector's
                                                       $110 Million
                                                       Investment
 
National Football League:
 
  Baltimore Colts...............  Moved to            Received Excellent
                                   Indianapolis.       Lease in 1984;
                                                       revised 1998
  Baltimore Ravens..............  Received New        Public Subsidy In
                                   Stadium To          Excess of $200
                                   Relocate.           Million
  Buffalo Bills.................  Threatened To Move  Public Subsidy,
                                                       $180 Million for
                                                       Renovations;
                                                       Operating Subsidy
  Cleveland Browns..............  New Stadium for     Public Subsidies
                                   1999 Season.        Exceed $200
                                                       Million
  Cincinnati Bengals............  Threatened a Move.  New Stadium
                                                       Approved, public
                                                       subsidy; $400
                                                       Million subsidy
  Denver Broncos................  Threatened a Move.  New Stadium
                                                       Approved, 1998;
                                                       public subsidy of
                                                       $260 Million
  Detroit Lions.................  New Stadium         $240 Million in
                                   Approved in 1996.   public subsidies
  Houston Oilers................  Moved to Nashville  New Stadium in
                                                       1999; $292
                                                       Million Package
                                                       to Move
  Indianapolis Colts............  Moved from          New Lease With
                                   Baltimore in 1984.  Expanded
                                                       Subsidies in 1998
  Jacksonville Jaguars..........  Renovated Stadium   $121 Million
                                   for Expansion Bid.  public subsidy
  Los Angeles Raiders...........  Moved to Oakland..  New Stadium Lease,
                                                       Remodeled
                                                       Stadium; $100
                                                       Million subsidy
  Los Angeles Rams..............  Moved to St. Louis  New Stadium in St.
                                                       Louis; $280
                                                       Million+ public
                                                       subsidy
  Miami Dolphins................  New Stadium in      Privately Financed
                                   1987.
  Minnesota Vikings.............  Want New Stadium..  Unresolved
  New England Patriots..........  Threatened to move  Connecticut
                                   to Hartford,        offered a subsidy
                                   Connecticut.        of more than $350
                                                       million; team
                                                       accepted new
                                                       infrastructure
                                                       from
                                                       Massachusetts and
                                                       assistance from
                                                       the NFL to remain
                                                       in Foxboro,
                                                       Massachusetts
  San Diego Chargers............  Renovated Stadium,  $60 Million public
                                   1997.               subsidy plus
                                                       ticket sale
                                                       guarantee from
                                                       city
  San Francisco 49ers...........  New Stadium         $100 Million
                                   Approved 1997.      subsidy
  Seattle Seahawks..............  Threatened a Move.  New Stadium
                                                       Approved, 1997,
                                                       $325 Million
                                                       Public Subsidy
  Tampa Bay Buccaneers..........  Threatened a Move.  New Stadium 1998,
                                                       $300 Million+
                                                       Subsidy
------------------------------------------------------------------------

    While it is undeniable that there is a level of intangible benefits 
secured by communities from the presence of a team, these benefits do 
not translate into any form of economic gain. Across more than two 
decades a number of researchers from our most acclaimed universities 
and from the federal agencies have studied the economic development 
effects of professional sports. There is no evidence that a team's 
presence generates economic development for a region. Sports facilities 
largely reshuffle existing spending for recreation among activities in 
a region. In other words, in the absence of a team, the money spent by 
people will continue to be expended for other recreational pursuits. To 
be sure teams do attract a number of visitors to a community to attend 
games. In addition, the presence of a team does encourage people to 
spend their discretionary income on local events as opposed to games or 
activities in other regions. The combination of economic development 
from both of these sources has been found to be quite small.
                           leveling the field
    The Congress, through past actions has provided the NFL with 
protection from market forces that has increased the value of each 
team, the profits earned by team owners, and the salaries earned by 
players. Congress approved the merger of the NFL with its rival AFL and 
commitments made by the NFL and its owners to secure that approval have 
not been honored. When the Congress permitted the NFL to merge with a 
competitive league, the NFL gave assurances that teams would remain in 
their existing locations and new franchises would be created. The NFL 
did create one franchise in the aftermath of the merger, but additional 
expansions would not occur for several decades. Today, Los Angeles and 
Houston, still compete for a sole NFL expansion franchise. In addition, 
while the league committed to keep teams in existing markets, less than 
15 years after the merger franchise movement became commonplace. The 
Sports Broadcast Act of 1961 (Public Law 87-331, 15 U.S.C. 1292) also 
had the effect of increasing the value of the NFL. Protecting the 
interests of cities and abating the ability of individual owners to 
stage unfair competitions for franchises whose value the Congress has 
protected and supported in exchange for unmet assurances regarding 
franchise location is not only appropriate, but serves to level the 
bargaining field between cities and teams.
    MLB also has received protection from market forces through its 
limited exemption from anti-trust legislation and the reluctance of the 
Congress to eliminate the special status accorded to baseball. MLB also 
profits from the Sports Broadcast Act, although the NFL enjoys a larger 
concentration of the benefits from this act.
    Towards these ends, then, Senate Bill 952 is both warranted and 
takes important strides to correcting the imbalances between 
communities and teams created as a result of past laws. However, there 
are some additions or changes that I would like to suggest that the 
committee consider.
    First, it is appropriate that revenues from the broadcast of games 
be used to establish a pool for the financing of facilities. However, 
the legislation must make it clear the entity responsible for the 
repayment of any facility financing loans generated by this important 
pool of resources. As written, the proposed legislation does discuss 
the availability of revenue for fnancing a new stadium or the 
rehabilitation of an existing facility, but it is unclear on the issue 
of repayment. Is the intention of Senate Bill 952 to establish a 
revolving loan fund? Or is the intent to establish a source of funds to 
provide matching grants to build facilities? There are ways to make 
both systems work to reach the goals that seem to be the objective of 
Senate Bill 952, but clarification is required to be sure the intent is 
clear and the repayment method specified.
    Second, it is also imperative that the source of funds for 
repayment of any load be specified. A failure to identify the source of 
funds could lead to larger tax burdens for local communities.
    Third, it may be more efficient to simply specify that the leagues 
are responsible for 50 percent of all stadium construction costs rather 
than specifying the specific source of the funds to be used. Given that 
the proportion of team income from media varies by sport, leaving the 
issue of revenue sources to the leagues may be more equitable and far 
more practical.
    Fourth, Senate Bill 952 still leaves open the issues of defining 
the total cost of a stadium project and the share of these total costs 
that should be shared between a team and the local community. The next 
section of my testimony touches on each of these matters.
        matching grants or a revolving loan fund?--methods for 
                          protecting taxpayers
    Matching Grants. If a league was responsible for financing 50 
percent of the cost of a facility in exchange for a commitment of 
participation by a local government, then these funds could be 
considered a grant with any requirements for repayment to the fund left 
to the leagues and their members. If this were the intent of Senate 
Bill 952 then I would recommend that the Committee consider more 
specific language to clarify its intent. A matching grant would, in 
effect, require the league to develop procedures for sharing the cost 
of the grant.
    Revolving Loan Fund. The same objectives relative to insuring that 
a league use its revenues to fund half the cost of a facility can still 
be achieved by treating the funds in the pool as a source of loans if 
the methods of repayment are carefully specified. If any repayments of 
these funds are to be made Senate Bill 952 should require that the 
money used to repay a loan must be generated at the facility. 
Specifically excluded from repayment programs should be broad-based or 
general sales or property taxes. In addition taxes on the short-term 
rental of vehicles, stays in hotels, or citywide or countywide food and 
beverage taxes or taxes on the consumption the tobacco and alcohol 
products should also be deemed inappropriate. I would also ask that 
repayment from gaming revenues (e.g., lotteries or betting pools) also 
be prohibited to insure that income generated only from stadium or 
ballpark-related activities are used for repayment. This would insure 
that the repayment to a loan fund would be the responsibility of a team 
or the league and would not be shifted to taxpayers. In the case of 
utilizing gaming revenues, a reliance on this unpredictable revenue 
stream would constrain its use for other infrastructure projects. In 
addition, if gaming revenues declined a state or local government might 
be required to substitute other funds from their general revenues.
    The NFL has already indicated a willingness to consider such an 
option and to use its own revenues to insure repayment. To help finance 
a new stadium for the New England Patriots the NFL loaned the team half 
of the money for the new facility. Repayment is to be made from 
revenues the Patriots would have had to share with visiting teams 
(luxury seating income). As a result no tax revenues are being used to 
fund this half of the facility's costs. The NFL has also agreed that in 
smaller markets a financing plan of this nature will be used to support 
34 percent of the cost of a new stadium. The cap on financing new 
stadia in large markets is 50 percent to dissuade owners from 
relocating to smaller areas.
    The NFL's actions have been prompted by the movement of teams to 
smaller market areas that have offered large subsidies. The owners that 
accept these subsidies increased their own profits, but the failure to 
have teams in the largest markets is unacceptable to the NFL's media 
partners who have paid large sums of money and want home teams in 
America's largest television markets. Senate Bill 952 would insure that 
the NFL's commitment to financing new facilities continues beyond the 
current wave of construction. Given the changing economics of sports, 
it would be wise to insure that there is an on-going and continual 
requirement for league participation in financing new construction and 
the rehabilitation of existing structures.
    Broadening the Base to Include MLB and Protect Small Market Teams 
in MLB. The Judiciary Committee might also wish to consider the 
stipulation that 50 percent of the cost of facility financing 
(construction or rehabilitation) is the responsibility of the league 
with repayment required from the leagues' existing revenue sources. 
Removing the requirement that media funds are used would simply mean 
that the leagues themselves must develop plans irrespective of the 
source of revenues they identify. The key elements of any proposed 
legislation must be that (1) the league provides the funds and (2) 
repayment must be from facility-related revenues and not from any form 
of taxation related to activities that occur outside of the facility 
(or beyond a one mile radius). This would preclude the possibility of 
shifting the leagues' cost of facility construction to state or local 
tax bases or reducing the level of gaming revenues available to state 
and local governments.
    A requirement of this nature could then be extended to MLB. 
Specifying television revenue works to the disadvantage of MLB teams 
located in smaller television markets. Income from the national media 
contract for MLB is a far smaller portion of total team revenues then 
the national media contract is for teams in the NFL. In MLB the 
difference in revenues earned by teams is partially related to the 
contracts some teams have negotiated for the broadcast of their games 
in local markets. Some teams earn in excess of $45 million while others 
earn less than $5 million. In addition, media-related corporations own 
some teams and it is difficult to accurately account for their income 
from the broadcast of games. As such, a simple solution could be to 
require the NFL and MLB to establish a funding pool for facility 
construction or rehabilitation that insures that league revenues are 
used to support at least 50 percent of the cost of all construction. 
Repayment of any loans received from this fund will be from facility-
related income. Revenues from broad-based taxes, taxes on hotel usage 
or vehicle rentals, and gaming revenues would be exempt from any 
repayment plan.
                            one other issue
    In developing Senate Bill 952 there is at least one other complex 
issue that I would suggest that the Judiciary Committee consider. This 
issue involves both the total cost of constructing a ballpark or 
stadium and the source of local government funds to support the 50 
percent investment required by Senate Bill 952. These issues are 
related and that interrelationship can help forge a solution to a 
complex issue.
    First, as relates to total project cost the required infrastructure 
that is needed for a stadium or ballpark as well as any environmental 
remediation or protection can substantially raise the total cost of a 
facility. A possible interpretation of Senate Bill 952 is that these 
expenses are not part of the construction costs and this could expose 
local communities to the very real possibility that they pay more than 
50 percent of the cost of a project. Virtually every stadium and 
ballpark project requires the investment of millions of dollars in new 
infrastructure or the expenditure of funds to meet environmental 
issues. A failure to include infrastructure and environmental costs in 
estimating the expenses associated with a new facility will increase 
the proportion the public sector pays.
    Second, if a local government would elect to finance their share of 
construction costs for a new stadium or ballpark by administering a 
ticket tax or some other user fee, a new round in the subsidy war could 
actually be instigated by Senate Bill 952. For example, if a city 
agrees to the terms specified in Senate Bill 952, but opts to implement 
a ticket tax to fund their portion of the construction cost of a 
stadium, a team owner could elect to move his team. Ticket taxes (or 
any sort of stadium or ballpark user fee) reduce the income earned by 
teams. Hence to increase their income an owner might well be attracted 
to a community that guaranteed to use a broad-based tax or tax on 
unrelated activities (e.g., vehicle rentals, hotels, etc.) instead of a 
ticket tax or other tax on stadium operations. A city in a large market 
that believes its area affords a team owner an exceptional opportunity 
to earn profits and that elects to fund its portion of the investment 
with a ticket tax or rental charge could lose the team to another area 
willing to provide general tax support. In Massachusetts for example, 
the state will spend but $70 million for infrastructure costs while the 
team pays $1 million in rent and is responsible for all other 
construction costs. In addition, the state will receive some revenue 
from the operation of parking lots. Senate Bill 952 should not preclude 
deals of this nature and these options for state and local governments.
    This dilemma or conundrum can be at least partially addressed by 
requiring the leagues to be responsible for 50 percent of the 
construction cost of a facility while the individual team and the city 
must equally share the remaining construction AND infrastructure costs. 
In addition, and most importantly, if a community implements a user fee 
or other facility-related taxes to support its share of the investment, 
and a team leaves the area, the community must be afforded an immediate 
opportunity to receive an expansion franchise. The award of an 
expansion franchise must be made within 24 months of a team's announced 
intention to relocate. To select a new owner a competitive bidding 
process administered by the league will be held. The league of course 
keeps all revenues from the franchise purchase. However the new team's 
owners must be guaranteed and full and immediate share of all revenues 
pooled by that league.
    The bids received will reflect the structure of the public sector's 
offer to fund its share of the stadium costs. A less subsidized stadium 
creates a team of less value and the bids for prospective owners will 
reflect this outcome. However, if the new owners pay less for their 
team and still share in the pool of league revenues with other owners, 
it will be possible to operate a competitive team and earn a rate of 
return similar to other owners. In this manner if a city has a team and 
meets the requirements of Senate Bill 952 they are assured of a team 
even if they elect to provide less of a subsidy then another community.
    Again, I thank the committee for the opportunity to comment on 
Senate Bill 952 and I hope my suggestions help enhance the discussion 
and add to the bill's abilities to achieve the public policy goals 
established by its authors.

    Senator Specter. We want to really structure it so that we 
don't get expansion teams and you don't put a Cleveland through 
the trauma. We had hearings back in 1982 when the National 
Football League came to the Judiciary Committee, and I was 
consulted because I had two teams. Senator Matthias was one of 
the others. And we had in this room really a phenomenal debate 
between Mr. Rozelle and Mr. Al Davis on those issues.
    It seemed to me at that time, and I said that sports were 
affected with a public interest, that the fans really had a 
significant ownership interest in the team. The Brooklyn 
Dodgers fans had a big ownership interest, aside from Walter 
O'Malley, who got all that real estate in Los Angeles.
    Well, this has been very helpful to me. There have been 
quite a number of suggestions as to how we can sharpen up the 
legislation. I regret we didn't have more of our colleagues, 
but at the noon hour on Tuesdays we have caucus meetings. And I 
had anticipated initially this would be a 10 o'clock hearing, 
and instead we had Mr. Gates down and the entrepreneurs in town 
to coincide with a big event they are having. So there is 
always a lot of competition, but we very much appreciate your 
coming.
    That concludes our hearing.
    [Whereupon, at 1:37 p.m., the committee was adjourned.]

 
         STADIUM FINANCING AND FRANCHISE RELOCATION ACT OF 1999

                              ----------                              


                         TUESDAY, JUNE 22, 1999

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:12 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Arlen Specter 
presiding.
    Also present: Senators Hatch, Thurmond, Kennedy, Feinstein, 
Feingold, and Schumer.
    Senator Specter. Senator Hatch has sent word that while he 
is on his way that it would be appropriate for us to begin the 
hearing.
    The senior Senator here, the senior Senator anywhere, 
Senator Thurmond.

 OPENING STATEMENT OF HON. STROM THURMOND, A U.S. SENATOR FROM 
                  THE STATE OF SOUTH CAROLINA

    Senator Thurmond. Thank you very much. Today, the Judiciary 
Committee is continuing its consideration of S. 952, the 
Stadium Financing and Franchise Relocation Act. I am pleased to 
have this distinguished panel of witnesses with us today. I 
would like to especially welcome Mr. Jerry Richardson, the 
owner and founder of the Carolina Panthers, which joined the 
NFL in 1995.
    Mr. Richardson, stand up and let them see you.
    [Mr. Richardson stood.]
    Senator Thurmond. The team is based in Charlotte, NC, just 
across the border from my State. It is a fine regional team and 
serves many, many loyal fans in South Carolina as well.
    I share the concerns of Mr. Richardson and others regarding 
the legislation we are considering today. Stadiums are 
extremely expensive to build, and I appreciate the frustration 
that many local communities face in their efforts to finance 
the stadiums. However, the question before us today is whether 
the Federal Government should involve itself in regulating the 
financing of stadium construction. I have serious reservations 
about this approach.
    Today, stadiums are financed in many different ways based 
on economic and other factors in the local community. Many are 
financed in public-private partnerships. Others such as the 
Carolina Panthers are financed by the private sector. The key 
is that these are primarily local questions, based on local 
needs and local interests. I do not believe the Federal 
Government should impose a tax that dictates how financing is 
achieved.
    Recent franchise additions located in smaller markets such 
as the Carolina Panthers could be seriously harmed by this 
legislation. This legislation would create a trust fund for 
stadium construction, and the money for the fund would come 
from television revenue which is currently shared among all 
teams. Teams like the Carolina Panthers depend heavily on this 
revenue-sharing to field competitive teams because their local 
television markets do not provide sufficient revenue.
    I am concerned about the impact that this loss of revenue 
would have on teams in small markets. Moreover, the NFL has 
recently passed a resolution increasing its contribution to 
stadium projects. I believe that this will help foster public-
private partnerships to address stadium issues. I am pleased to 
have our witnesses here to discuss this important matter.
    Senator Specter. Thank you very much, Senator Thurmond.
    While we are awaiting Senator Hatch----
    Senator Thurmond. Have the witnesses all come up.
    Senator Specter. Senator Thurmond suggests that the 
witnesses come up and I think that is a good idea. After an 
opening statement, we can begin the testimony.
    Senator Thurmond. We can just start down at the end with 
Mr. Richardson and follow through.
    Oh, Senator Specter, do you have a statement? Excuse me.

STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE 
                        OF PENNSYLVANIA

    Senator Specter. I do have an opening statement.
    I think there is a great deal to be said for leaving the 
Federal Government out of professional football.
    Senator Thurmond. I have got another appointment and have 
got to leave. Take charge.
    Senator Specter. OK. Senator Thurmond said I should take 
charge. I will take charge.
    Senator Thurmond. I have another appointment and I have got 
to go.
    Senator Specter. I would be willing to leave the Federal 
Government out of any dealings with the National Football 
League, and that is, in effect, what my bill says, Senate bill 
952, that the National Football League would not be the 
beneficiary of the antitrust exemption which enables the NFL to 
share television receipts which has produced a multi-year $17.6 
billion television contract.
    If the NFL wants to function like any other business in 
America and be subject to the antitrust laws, I think that 
would be a perfectly good arrangement. But the point that 
Senate bill 952 makes is that if the National Football League 
is to be the beneficiary of this antitrust exemption that the 
NFL ought to help pay for the football stadiums which are being 
constructed across America.
    The bill is constructed to require the NFL to establish a 
fund to pay for 50 percent of stadium construction, 25 percent 
by the Governmental entities and 25 percent by the teams. And 
it may be that the NFL in this bill is being asked for too 
little, considering what the NFL is getting by way of 
television revenues.
    This is a problem for America, but it is a special problem 
for Pennsylvania, where we have four new stadiums going up at a 
cost of about $1 billion, with two-thirds of them being paid 
for by the State and by local governments, at a time when we 
are very hard-pressed on education and health care and highway 
construction and the whole panoply of what government has to 
do.
    So it seems to me that where professional sports--and this 
includes baseball as well--has a total antitrust exemption, and 
football has the limited antitrust exemption which I have 
mentioned, the taxpayers ought not to be asked to pay for these 
stadiums.
    When you take a look at the stadium construction costs 
across America, they are astronomical. Cincinnati projects a 
new stadium in the year 2000 at a total cost of $240 million, 
and the public contribution is $190 million. Baltimore has a 
total stadium construction cost of $224 million, $200 million 
paid by the public contribution. It goes on and on and on, 
without reading the entire chart.
     I think that Baltimore ought to have a football team; it 
ought to be the Colts. They had a great football team. Mr. 
Richardson was a player on that team. Mr. Tagliabue points out 
that Mr. Richardson is the first owner to have played 
professional football since George Halas, and Carolina has 
great potential. I really enjoyed their season the year before 
last, and I think he may duplicate what George Halas has done 
or hasn't done, or may exceed it. But the Colts should have 
been in Baltimore.
    I just said to Mr. Richardson privately that I think that 
Federal Government ought to put a prohibition on teams moving 
between midnight and 5 a.m. Maybe Senator Thurmond wouldn't 
object to that limited Federal intervention, just those 5 
hours. Any other time, they can move out if they want to, if 
they can avoid the sheriff. But between midnight and 5 a.m., 
they ought to be prohibited from moving out.
    Last week, we heard about the fandango in New England, with 
Hartford putting up $375 million to steal the Patriots, and 
Massachusetts worked it out to the contrary. And I haven't 
minced any words. I think it is legalized extortion for 
football teams to threaten to move and get these giant public 
contributions. And I compliment Mr. Richardson, who is the only 
team on this list which the NFL graciously provided--when it 
comes to public contribution, there is a zero as to what 
Carolina did. Maybe Miami was in that category as well.
    But I compliment you, Mr. Richardson, for doing that. I 
don't want any of your money for the Eagles and the Steelers or 
the Pirates and the Phillies from baseball. If you can pay for 
it yourself, that is fine, but that is not the pattern as to 
what goes on in America. And it is a very complicated picture 
and I know it.
    I have been a sports fan forever. I bought my first season 
tickets to the Eagles in 1958, and studied the box scores when 
I was a kid growing up in Wichita, and lamented the move of the 
Dodgers to Los Angeles and the Giants to San Francisco. With 
all due respect to Senator Feinstein, San Francisco and Los 
Angeles should have had teams; they just shouldn't have had New 
York's and Brooklyn's teams, in my opinion.
    [Senator Schumer applauds.]
    Senator Specter. Senator Schumer hasn't been around too 
long. That is the first he has agreed with me on anything. 
[Laughter.]
    It is tied up with free agency and with salary caps and 
revenue-sharing in baseball and a lot of things. I just said to 
Mr. Upshaw, whom I have enjoyed as a witness, not as much as I 
enjoyed him as a football player, that the Eagles have a 
terrific bunch of players. The problem is too many of them are 
playing for Green Bay and Miami and every other team in the 
league.
    I love professional sports, and I am just one of millions 
of Americans who do. Americans have a love affair with football 
and baseball and I would like to help preserve the game, and I 
would like to help preserve education and health care in 
Pennsylvania and America as well.
    That is not all I have to say, but that is a starter.
    Senator Feinstein, your turn.

  STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM THE 
                      STATE OF CALIFORNIA

    Senator Feinstein. Well, I thank you very much, Mr. 
Chairman. This bill, I must say, presents a kind of Hobson's 
choice for me because I do believe that all professional sports 
should have an antitrust exemption to prevent franchise 
relocation. And I say this as a former mayor with a 
professional baseball team and a professional football team, 
and particularly the world champion, some of the time, 49ers.
    I have been through the stadium wars and have watched them 
evolve throughout many places in the country. My own view on 
that part of the bill is that the people are going to take care 
of the issue themselves without Federal legislation. The reason 
I say this is because most local jurisdictions finance new 
stadiums by bond issues, and increasingly voters are reluctant 
to pass these bond issues, with the belief that it really is 
the franchisee's responsibility.
    I watched this happen in my own city, San Francisco. I 
watched it happen in San Jose. San Francisco barely eked 
through a stadium bond issue recently for the 49ers, connected 
with a mall which may or may not be built. I don't know. But I 
think the people themselves in each community can make the 
decision with respect to the passage of a stadium bond that 
really can decide this.
    I feel a little differently. I think there is a tremendous 
public desire, receptiveness, for professional sports in their 
communities. I have seen them put a ``there'' there. I saw what 
happened when the San Francisco 49ers won the Super Bowl in 
1981. I was a new mayor and there were over a million people on 
the streets and it was one of the greatest bringing together of 
a city I have ever seen. So, I have been a staunch proponent of 
professional sports and of the nexus between the sports and the 
communities in which they reside.
    This bill has a couple of troubling effects. I see Mr. 
Upshaw here. I am delighted to welcome him. I suspect he is 
going to talk on the effect on collective bargaining. As a 
matter of fact, my staff did call specifically Dean Spanos, who 
is the son of the owner of the San Diego Padres, and he 
mentioned that his two biggest concerns with the bill were, No. 
1, the effect on collective bargaining, and that under the 
league's collective bargaining agreement with the players, the 
players now get a set percentage, approximately 63 percent of 
the league's designated gross revenues.
    By removing 10 percent of the league's national TV 
revenues, Mr. Spanos was concerned that the bill would lead to 
the collective bargaining agreement having to be renegotiated, 
and that that would certainly undermine the stability that has 
been gained and the labor peace and the continuity that has 
been gained since the negotiation of that latest collective 
bargaining agreement.
    The second point that was mentioned was that this bill 
would disadvantage small-market teams, in that the league's 
national television revenue is shared equally among each of the 
NFL teams. So teams in smaller markets like San Diego are 
dependent on this revenue, as it represents a much greater 
share of their income than it does for larger-market teams. By 
tabbing this shared revenue to fund the proposed stadium 
construction fund, the burden imposed would be felt 
disproportionately by small-market teams and would be a 
consequential disadvantage for them. These are two very real 
points, the effect on collective bargaining and the 
disadvantage to small-market teams, that I hope these panelists 
will speak to.
    By and large, though, just to summarize, I think each 
community really has to settle for itself the degree to which 
it wants to become the funding mechanism for new stadiums. As I 
said, the bond issue is generally the source of public funding, 
and here the people themselves make a decision. I think if the 
people of the local jurisdiction want to support a stadium 
bond, they should have that right and ability to do. If they 
don't, they speak at the polls and so state.
    So, I am very interested to hear the testimony before us 
today and I would like to welcome the distinguished panel.
    Thanks, Mr. Chairman.
    Senator Specter. Thank you very much, Senator Feinstein.
    In order of appearance under the early bird rule, Senator 
Schumer.

 STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE 
                       STATE OF NEW YORK

    Senator Schumer. Well, thank you, Senator Specter, and I 
want to thank you for holding this hearing, and particularly 
thank you for bringing the issue of sports stadium financing 
once more to our attention. I believe that my colleague from 
Pennsylvania is asking some questions that really need to be 
asked in this era of sports as mega business first, and 
everything else seems to be second.
    The simple question is this: what about the fan? What about 
the taxpayer given the choice of anteing up for a new stadium 
or watching his or her favorite team depart for greener--and I 
underline greener--pastures? That question has to be asked and 
I think this hearing is a salutary way to do that.
    You know, I have seen over my years five major professional 
sports teams leave my State--the baseball Giants, the Dodgers, 
the football Giants, the Jets and the Nets, with particular 
affection for me with the Dodgers. I am one who believes in 
what Pete Hamill has written that the three most evil men of 
the 20th century were Hitler, Stalin and Walter O'Malley, Sr. 
He moved the Dodgers, and my father almost lost his job as a 
result of it, too. And I think even Mets fans would, at least 
in the confines of their own homes, shudder at the thought of 
the Bronx Bombers becoming the Meadowland Monsters. So this is 
a real question.
    You know, we have seen this in other areas as well. This is 
not just over sports franchises. Our States go into competition 
for businesses and the lowest common denominator prevails. 
First, they say any business can come that pays no taxes. Then 
they say we will give you lots of money to do this, and it is 
sort of a bidding war that has no bottom and hurts the citizens 
throughout the country.
    We frankly have not come up with a good way to deal with 
this issue in the macro sense, not just with sports teams but 
with all businesses. And every one of our States engages in it; 
we have no choice. My State of New York watched hundreds and 
thousands of businesses be lured with these huge packages. And 
at first we said this is wrong, this not free-market enterprise 
when States, public entities, are forced to just bid and bid 
and bid, but then we had no choice and we joined in and now our 
package of incentives, we brag, equals any other.
    And we have no choice and it is a good package, but I wish 
that none of that happened to begin with and people made their 
moves on purely economic grounds, not political economic 
grounds, such as which community could give the best incentives 
to any ongoing business.
    And so I know what Senator Specter is trying to do here. He 
is simply trying to require sports leagues to do something for 
the fan, to repay years of fan loyalty, the goodwill of this 
business by contributing to the costs of keeping a franchise in 
its current home. And I know that the NFL accepts that it has 
some responsibility in this regard, and I commend the league 
for doing so.
    What we are really debating here is how to ensure that a 
sports league's obligation to its fans--and, again, an 
obligation that we all concede exists--will be fulfilled. To 
leave it up to each State again gets us into that horrible 
bidding war that nobody likes, and we just saw between Boston 
and Hartford didn't have good effects, no matter what the 
outcome was going to be.
    So, Senator Specter, you have offered a creative and 
thoughtful proposal to this effect and I am studying it 
carefully. I look forward to learning more about this issue 
from today's witnesses, and look forward to working with my 
colleague from Pennsylvania to try and move something that will 
deal with this problem through the legislative process because 
I think if you look at what our constituents feel, it is too 
important an issue to ignore.
    Senator Specter. Thank you very much, Senator Schumer.
    Under the early bird rule, Senator Feingold.

STATEMENT OF HON. RUSSELL D. FEINGOLD, A U.S. SENATOR FROM THE 
                       STATE OF WISCONSIN

    Senator Feingold. Thank you, Mr. Chairman. As I did at the 
subcommittee hearing, I reiterate my support of your effort to 
deal with the issue of stadium financing and franchise 
relocation in a creative way. I also want to commend you for 
including witnesses from all sides on the issue. It is 
absolutely vital that we hear from everyone--the communities, 
the sports leagues, and the players--and I want to thank all 
the witnesses for agreeing to be here today.
    As I stated last week, I agree with the goal of Senator 
Specter's bill, but I disagree with the means to the end. I 
believe that the burden and responsibility of constructing 
stadiums should rest predominantly with the professional sports 
leagues and the particular team involved. But at the same time, 
we need to be careful with how we attempt to legislate greater 
team responsibility for stadium construction.
    I am particularly concerned with how this legislation would 
impact small media market teams like the Green Bay Packers. It 
is a little known historical fact, but I know it to be true, 
that one member of this committee was actually recruited by the 
Green Bay Packers. I will not identify him unless he wants to 
be identified, but there are even connections to that.
    The NFL was wise to enter into a television revenue-sharing 
agreement years ago. That revenue-sharing agreement has allowed 
the Packers to survive over the years and has allowed small 
media markets like Green Bay to develop world champions. And, 
of course, this is terribly serious business to us in 
Wisconsin, and to illustrate it I actually have a piece of the 
Green Bay stadium, Lambeau Field, with me today.
    Lambeau Field is a special place. I keep a little piece of 
it right in my office. And if you look at this jar of Green Bay 
Packer dirt from Lambeau Field, you will see a picture of our 
old stadium filled with a sea of devoted Packer fans. What you 
won't see, Mr. Chairman, is a lot of revenue-generating luxury 
boxes. Without that luxury box revenue, the Packers have to 
rely on TV revenue.
    So, I think the goals are admirable, but we do need a 
different approach, and I do thank Senator Specter for his 
leadership on this issue.
    The Chairman. Senator Kennedy.

 STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE 
                     STATE OF MASSACHUSETTS

    Senator Kennedy. Thank you, Mr. Chairman, and I want to 
also join in thanking Senator Specter for raising this issue in 
terms of football. We have also reviewed antitrust issues with 
regard to baseball.
    I have always felt that with regard to football that this 
whole system has really worked, worked very effectively with 
the shared revenues. All we have to do is look at the 
competitive aspects in the leagues and see how they have 
shifted and altered and changed, and seen where some teams are 
on top and able to stay on top for a period of time, but other 
teams are able to come through a kind of process. And this has 
worked and worked very effectively, I think, for the fans. It 
has really worked very well for the fans.
    I think there is always the issue of the movement of the 
various teams, and it is being done really for the sole issue 
and question, where teams have had lifelong associations with 
different communities--and as pointed out earlier, they move 
for reasons totally financial in terms of those that are the 
owners. And I suppose a case can be made in terms of we are a 
free country; they put the resources up and they ought to be 
able to move.
    But I am also mindful that the league on this issue has 
taken steps to indicate that they would have to be able to get 
three-quarters of the owners of the league in order to be able 
to move. And I think that this is a very, very strong 
indication of the desire to try and make sure that in different 
parts of the country, representing an urban area where the 
numbers are there and where the sports fans are there, people 
are going to have some kind of assurance of continuity. 
Representing an area where there has been speculation that the 
team would be moving in any year, at any time, it has had an 
enormous impact, unfortunately, in terms of the kind of morale 
generally of the community on this issue.
    I have been enormously impressed, Mr. Chairman, by the 
actions that have been taken in terms of the league with regard 
to their willingness to support the proposal for the Patriots 
situation. That, I think, has been something that, as I 
understand it, is going to be a part of that whole league 
policy, and it seems to me to represent a balance in terms of 
both the league and the owners. And I think it has been a very 
encouraging action, and I think it is something that should be 
supported.
    So, I am enormously interested in the proposal that is 
before the committee, but I am also impressed by what has 
happened in the past in the league and the determination of the 
league now in terms of these issues and the leadership that is 
being provided in the league to address these questions in 
terms of the construction, as well as in terms of the movement.
    I think the final issue is the difficulty that we all see 
in terms of the accessibility and the availability of access to 
the games. On the one hand, you have the sale of the super 
boxes, and on the other hand we have seen the continued 
escalation in terms of the cost for the average family to be 
able to go to these games.
    I welcome the fact that the sky boxes and others are going 
to be picking up the heavy lifting in terms of the financing, 
and am always interested in what is being done to continue to 
assure the availability and the accessibility of families to 
take their kids to football games, which is certainly a part of 
the whole tradition in terms of the sport of football and 
American athletics generally. This is an area that is of very 
considerable interest to me.
    I thank the Chair for having these hearings and look 
forward to the witnesses.

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE 
                            OF UTAH

    The Chairman. Well, thank you, Senator Kennedy.
    Good morning, and we are happy to welcome all of you to 
today's hearing on the Stadium Financing and Franchise 
Relocation Act of 1999. I want to thank Senator Specter for his 
leadership in this area and hard work on this important issue. 
I know this is a matter of great interest to Senator Specter 
and others on this committee.
    I would also like to recognize that today is Senator 
Feingold's birthday. I won't mention how many years, but it is 
46, I believe.
    Congratulations. You have made it through this far.
    Senator Feingold. Regrettably, it was March 2.
    The Chairman. I thought it was today.
    Senator Feingold. No.
    Senator Feinstein. It is my birthday.
    The Chairman. It is your birthday?
    Senator Feinstein. Yes.
    The Chairman. Oh, I am not going to touch that. [Laughter.]
    Senator Kennedy. These presidential aspirations sometimes 
affect one's judgment. [Laughter.]
    I can tell you that from practical experience.
    The Chairman. It shows how it discombobulates your mind. I 
have recognized that many years in Senator Kennedy, let me tell 
you. [Laughter.]
    Is it really your birthday, Senator Feinstein?
    Senator Feinstein. Yes.
    The Chairman. Well, happy birthday.
    Senator Feinstein. I am 46. [Laughter.]
    Why is everybody laughing?
    The Chairman. I thought you were going to be mad at me for 
saying 46. In any event, happy birthday.
    Senator Schumer. And to anyone else.
    The Chairman. Yes, and anybody else in the room.
    Let me just say that this is an important issue to all the 
sports communities because how this turns out, I think, could 
have a dramatic impact. I am just concerned about whether we 
should be legislating in this area. On the other hand, I am 
looking at it very carefully.
    As I noted in my statement last week, I have been 
interested in the public financing of stadiums and, of course, 
its impact on local communities and their respective economies. 
Professional sports play an ever-increasing role in our society 
today and in communities across the Nation, whether through 
direct involvement in local charities or their economic impact 
on revitalization of the immediate communities.
    Also, more and more professional athletes serve as possible 
role models for our young people. So it is very important, and 
I recognize that. I look at Gene Upshaw here and he has been a 
role model for me for many years. I don't think you knew that 
and you may not want to own up to that, but the fact is that I 
have admired you for many years.
    And when Tagliabue played basketball here--and that was a 
long time ago----
    Mr. Tagliabue. Too long.
    The Chairman. But I kind of admired you. The way you played 
ball was very good. It is good to see you still in professional 
athletics after doing all those important legal things that you 
did all those years.
    We are going to examine in this the impact of professional 
sports, and specifically professional football on local 
economies. Last week's hearing shed some light on this matter. 
I was interested in what the distinguished panel had to say. We 
heard mostly from public officials and economists who generally 
supported the underlying objectives of Senator Specter's 
legislation. For instance, Speaker Thomas M. Finneran, of the 
Massachusetts House of Representatives, referring to the NFL, 
asked, ``Why are taxpayers expected to subsidize already 
profitable businesses?'' It is a question that has to be 
answered.
    As far as I am concerned, we could not have a more 
distinguished panel than we have today. I welcome each of you, 
and I think you, for the most part, should provide us with 
another point of view and we should listen to you very 
carefully. We want to come to the best possible resolution, and 
it is important to have the benefit of all views on this 
particular issue.
    We all need to work together with the local communities, 
the mayors, the sports leagues, and most importantly the sports 
fans in arriving at a mutually beneficial and fair solution. So 
I look forward to working with Senator Specter and others on 
this committee and others in the Senate to carefully and 
thoroughly examine the issue of stadium financing and franchise 
relocation.
    I particularly am looking forward to the testimony today. I 
won't be able to stay, but I am going to read each of your 
statements today. And I am following this very, very closely 
and we will try to do what is best under the circumstances. I 
think you can count on that. So I just want to welcome you all 
here and tell you we are very honored to have you here.
    So I am going to turn the hearing over to Senator Specter, 
and I know that that may be of some worry to you, but he will 
handle it very well. Thanks for being here.
    Senator Specter [presiding]. Thank you very much, Senator 
Hatch, and thank you for scheduling the hearing and for 
cosponsoring the bill.
    We turn now to the witness list. We have a very 
distinguished panel. Our first witness is Mr. Jerry Richardson, 
the owner and founder of the Carolina Panthers, the 29th 
franchise to enter the NFL. Ericsson Stadium in Charlotte, 
where the Panthers play, was privately funded and opened in 
1996. The stadium featured the innovation of permanent seat 
licenses as a way of financing stadium construction.
    Mr. Richardson is also the chairman of the NFL's Stadium 
Committee. Mr. Richardson, as noted before, played with the 
Baltimore Colts as a wide receiver, receiving passes from 
Johnny Unitas at that time. In May 1995, Mr. Richardson retired 
as chairman of the Flagstar Company, which is one of the 
largest food service companies in the United States, to shift 
his emphasis to another goal, to bring the people of the 
Carolinas a Super Bowl championship within the next 10 years.
    We welcome you here, Mr. Richardson, and look forward to 
your testimony. All statements will be made a part of the 
record, and the committee procedure is to put a green light up 
for 5 minutes, with the yellow going on at 1 minute and the red 
at the conclusion.
    Mr. Richardson, the floor is yours.

   PANEL CONSISTING OF JERRY RICHARDSON, OWNER AND FOUNDER, 
CAROLINA PANTHERS, CHARLOTTE, NC; BENJAMIN KLEIN, PROFESSOR OF 
    ECONOMICS, UNIVERSITY OF CALIFORNIA AT LOS ANGELES, LOS 
ANGELES, CA; GENE UPSHAW, EXECUTIVE DIRECTOR, NATIONAL FOOTBALL 
  LEAGUE PLAYERS ASSOCIATION, WASHINGTON, DC; PAUL TAGLIABUE, 
   COMMISSIONER, NATIONAL FOOTBALL LEAGUE, NEW YORK, NY; AND 
  RICHARD HORROW, PRESIDENT, HORROW SPORTS VENTURES, MIAMI, FL

                 STATEMENT OF JERRY RICHARDSON

    Mr. Richardson. Thank you. Mr. Chairman and members of the 
committee, as has been stated, my name is Jerry Richardson and 
I am the owner and founder of the Carolina Panthers. I do have 
a written statement that has been submitted for the record, but 
I would like to briefly make a few more remarks, if I could.
    It was also stated earlier that we operate our team out of 
Charlotte, NC, even though we call our team the Carolina 
Panthers and we represent both States with great pleasure and 
enthusiasm.
    In addition to my role with the Panthers, I am also 
chairman of the Stadium Committee, as you stated, and in that 
role I have been involved in stadium projects throughout the 
country and have worked with team owners, State and local 
governments, lenders, and the Commissioner and his staff. Our 
goal has been to promote sensible stadium alternatives that 
serve the interests of our teams, their fans, and their 
communities, and promote franchise stability.
    I am here today, Mr. Chairman, in response to the request 
that you and Senator Hatch made of me, but also would like to 
make clearly known that I support the position that has been 
submitted to you by the Commissioner in regard to the bill that 
you propose.
    If my work with the Stadium Committee has taught me any one 
thing, it is that there are as many different solutions to 
stadium issues as there are communities in the country. Cities 
use stadiums to facilitate and accomplish a wide variety of 
purposes beyond simply securing or maintaining a professional 
franchise. In many cases, stadiums will serve as the 
centerpiece of a broader urban renovation plan, and play an 
important role in enhancing local communities and their 
economies.
    Communities and teams have recognized that benefit, and 
that the burden of construction is properly shared between the 
teams and the communities. As a result of this, a number of 
creative public-private financial partnerships have been 
developed which, in turn, have served the league in the 
building of some 23 new stadiums in the NFL. There are many 
different ways to pay for these products, and each community 
and team must weigh the alternatives available and select or 
create the one that works the best for that particular 
community.
    I have also learned that stadium products are among the 
most hotly contested and closely scrutinized issues that come 
before local governments. In each case, stadium proposals face 
a great deal of publicity and spirited public debate, 
particularly when bonds or taxes are involved. And it is both 
wrong and unfair to suggest that voters throughout America will 
just leave their good senses at the door and give the NFL 
whatever it is that we ask for. Given these realities, I don't 
see any reason why Congress should take on the responsibility 
of trying to determine for communities what the communities 
themselves think is best for them.
    I am happy to be here today and I would be happy to answer 
any questions that you may have at a later date or now.
    Senator Specter. Thank you very much. Mr. Richardson. We 
will complete the testimony of all the witnesses and then go to 
the rounds of questions.
    [The prepared statement of Mr. Richardson follows:]
                 Prepared Statement of Jerry Richardson
    Mr. Chairman and members of the Committee, good morning.
    My name is Jerry Richardson, and I am the owner and founder of the 
Carolina Panthers. Although we play our home games in Charlotte, North 
Carolina, we call ourselves the ``Carolina Panthers'' because we serve 
the fans of the entire region, and we're proud to say that our home 
includes both North and South Carolina. Indeed, when the Panthers 
joined the NFL in 1995, we played our first season at Clemson 
University in Clemson, South Carolina, before opening our new stadium 
in Charlotte.
    In addition to my role with the Panthers, I am also the Chairman of 
the NFL's Stadium Committee. In that role, I have been involved in 
stadium projects throughout the country and have worked with team 
owners, state and local government officials, lenders, and the 
Commissioner and his staff. Our goal has been to promote sensible 
stadium alternatives that serve the interests of our teams, their fans, 
and their home communities, that are sound economic investments, and 
that promote franchise stability. I am here today, Mr. Chairman, both 
in response to the invitations from Senators Hatch and Specter, but 
also to make clear that I fully endorse the views expressed by the 
Commissioner in his testimony and that I, too, urge the Committee not 
to proceed further with this bill.
    If my work on the Stadium Committee has taught me anything, it is 
that there are as many different solutions to stadium issues as there 
are communities in this country. Cities use stadium facilities to 
accomplish a wide variety of purposes beyond simply securing or 
maintaining a professional franchise. In many cases, stadiums serve as 
the centerpiece of a broader urban renovation plan, and play an 
important role in enhancing the local economy. Communities and teams 
have recognized that the benefit and burden of stadium construction is 
properly a shared one. As a result, a number of creative public-private 
financial partnerships have been developed, which have in turn resulted 
in the successful new construction or significant renovation of 
stadiums in twenty-one NFL communities. There are many different ways 
to pay for stadium projects, and each community and team must weigh the 
alternatives available and select--or create--the one that works best.
    I have also learned that stadium projects are among the most hotly 
contested and closely scrutinized issues that come before local 
governments. In each case, stadium proposals face a great deal of 
publicity and spirited public debate, particularly where bonds or taxes 
are involved. And it is both wrong and unfair to suggest that voters 
leave their good sense at the door and give NFL teams a blank check 
when it comes to stadiums. Just last month, the voters in Arizona 
rejected a proposal that would have included a new stadium for the 
Arizona Cardinals. Voters in Pittsburgh rejected a stadium proposal for 
the Steelers, and required the team and government to come up with a 
new proposal that was less costly to the taxpayers. Voters in 
Minneapolis did the same in respect to the Minnesota Twins.
    Given these realities, I cannot understand why the members of this 
Committee would feel they need to impose a uniform federal approach on 
what is so clearly a local issue. I do not understand what national 
problem requires a Congressional act to override the carefully 
considered judgments of state and local governments, many of which have 
been the subject of direct action by the voters themselves. In effect, 
this bill tells mayors, city and county councils, and even voters that 
they do not know what they are doing, they cannot be trusted to decide 
for themselves how to spend their money, and that Washington must make 
those decisions for them.
    I have previously expressed my views on this bill in a letter to 
Senator Thurmond, dated June 9, 1999. I have attached a copy of that 
letter to my statement and respectfully request that it be included as 
part of the hearing record.
    Because I know that our time here today is limited, let me 
summarize briefly a few other points.
    First, focusing on the 1961 statute is, in my opinion, precisely 
the wrong approach. That statute is not the problem and it should be 
left alone. Indeed, if it were not for the 1961 statute and the 
television revenues that we share equally in the NFL, I do not believe 
that a team based in our part of the country could effectively compete 
in the NFL. Although we have received superb fan support in the 
Carolinas, Charlotte is still only the twenty-eighth largest television 
market in the country, and it is of great significance to us that the 
Panthers share television revenues equally with teams located in far 
larger communities.
    Second, taxing away 10 percent of our television revenues every 
year would be a very substantial economic blow to a team like the 
Panthers. We would experience no reduction in our player costs, in any 
other operating expense, or in our debt service costs. But millions of 
dollars would be taxed away from one of the smaller markets in the 
League, and it would be virtually impossible for us even to come close 
to making up that lost revenue. Such a tax would impose a very 
significant threat to our team's well being.
    Third, as written, the bill would apply retroactively to any 
stadium project not yet completed. I can see no justification for 
undoing settled financing arrangements, many of which were specifically 
approved by voters. As I understand it, one premise for this 
legislation is the new set of television contracts entered into by the 
NFL in 1998. But the bill purports to use that money to refinance 
stadium projects that had been approved and had been underway well 
before a single dollar of those television revenues were received. That 
does not seem appropriate and I hope, if nothing else, the Committee 
rejects that approach.
    Fourth, I am gravely concerned about the effect that this 
legislation may have on our collective bargaining arrangements. As a 
smaller market club, the Panthers benefit considerably from stable 
labor relations and a bargaining agreement that gives all teams an 
opportunity to be competitive. I know that you will hear directly from 
Mr. Upshaw, but I can only assume that the union would oppose an effort 
to rewrite our collective bargaining agreement without its consent. If 
this bill becomes law, it would be the NFL teams, and our fans, who 
would pay the price in future labor unrest.
    Finally, I want to comment briefly on Ericsson Stadium in 
Charlotte, where the Panthers play. It is true that the stadium 
itself--as opposed to related costs, such as land and infrastructure--
was privately financed. Whether that model can work in other 
communities is very much an open question. One reason why it worked in 
the Carolinas is because that was a new market and we were able to sell 
substantial amounts of personal seat licenses, or PSL's, to finance the 
stadium construction. But there is often significant resistance to 
PSL's in established communities, where fans have held season tickets 
for many years and do not believe that they should have to purchase 
PSL's to come to the stadium. I think there are some communities where 
PSL's can be marketed successfully, at least to a limited extent. 
Cleveland and Pittsburgh are examples. I believe there may be others 
where PSL's could not be marketed successfully. For that reason, the 
experience in Charlotte is of limited use in trying to formulate a 
national policy. Indeed, the experience in Charlotte no more means that 
stadiums should be fully financed by the private sector than the 
experience in Baltimore or Nashville means that they should be fully 
financed by the public sector.
    Mr. Chairman, and members of the Committee, I appreciate the 
opportunity to speak with you today. I hope that my comments have been 
helpful and I look forward to responding to your questions.
                                 ______
                                 
                                         Carolina Panthers,
                                       Charlotte, NC, June 9, 1999.
Hon. Strom Thurmond,
Russell Senate Office Building,
Washington, DC.
    Dear Senator Thurmond: On behalf of the Carolina Panthers, I write 
to express my strong opposition to S. 952, which was recently 
introduced by Senator Specter. This bill addresses the financing of 
baseball and football stadiums, and would impose a federal ``solution'' 
on what is a particularly local ``problem.'' I urge you to take 
whatever steps you can to prevent this unnecessary and negative 
proposal from proceeding past a planned June 22 hearing.
    In addition to being the principal owner of the Panthers, I also 
serve as Chairman of the NFL Stadium Committee. In that capacity, I 
have worked with clubs throughout the League, and with state and local 
officials throughout the country, on issues relating to the 
construction and renovation of stadiums. It is apparent to me that the 
issues surrounding a stadium project will almost inevitably differ from 
one community to the next and that each community must have the Freedom 
to address these issues in its own way.
    I also know that stadium projects face the most thorough 
evaluations from local and state authorities. Often, these projects do 
not go forward without direct approval from the voters themselves. In 
every case, there is a great deal of publicity and spirited public 
debate on all aspects of the proposal, particularly where bonds or 
taxes are involved. Voters have shown they know how to protect their 
interests when they believe a project is unwarranted. Just last month, 
the voters in three Phoenix-area communities rejected a proposal that 
would have included a new stadium for the Arizona Cardinals.
    In an effort to foster public-private partnerships to address 
stadium issues, the League and its member clubs have collectively 
invested hundreds of millions of dollars in projects throughout the 
country. Recently, the clubs approved a resolution expanding the 
League's contribution to stadium projects. Under the new resolution 
(copy enclosed), the League will provide a loan at the onset of a 
stadium project that will cover between 34 and 50 percent of the 
private contribution toward a stadium. Last month, in keeping with this 
resolution, the League's members approved new financial commitments of 
well over $300 million toward stadiums in Denver, New England, and 
Philadelphia. We strongly supported this stadium proposal because it 
represents a League investment in our communities and benefits all 
involved in the NFL.
    Charlotte, the nation's 28th ranked television market, is one of 
the smaller markets in the NFL. However, under the NFL television plan, 
the Panthers receive the same amount of money from network television 
as do teams located in far larger communities. While we have 
extraordinary support from fans in both South Carolina and the Greater 
Charlotte area, the Panthers depend on national television revenues for 
the resources needed to field a competitive team. It would be a very 
substantial blow if we were to lose 10 percent of our television 
revenues every year (as prescribed by the Specter bill), particularly 
since there would be no corresponding reduction in player salaries or 
other operating costs.
    We also strongly object to the approach taken by S. 952, which 
would condition the League's rights under the 1961 Sports Broadcasting 
Act on the creation of a stadium fund. But the 1961 Act is not the 
problem and limiting its applicability is not the solution. Under the 
1961 Act, the NFL has created the most pro-consumer television plan in 
sports today. As you may know, every regular season and playoff game is 
televised on free over-the-air television. (Even the Sunday night cable 
games, televised nationally on ESPN, are shown on over-the-air stations 
in the home communities of the participating teams.) No other league 
provides this level of service to its fans. The revenues generated from 
those contracts are, in turn, equally shared and assist teams in 
communities of widely varying size and circumstances in competing 
successfully on the field. The Sports Broadcasting Act has worked in 
the manner intended when you and other members of Congress passed it in 
1961. There is no justification for tampering with it.
    Two aspects of S. 952 are deserving of consideration and would 
advance our shared interest in promoting team stability and competitive 
balance throughout the League:
     Congress should confirm that the antitrust laws do not 
prohibit leagues from making decisions on where member clubs will be 
located. The abuse of the antitrust laws first precipitated in the 
early 1980s, through the Raiders litigation, remains the root cause of 
franchise instability.
     Congress should confirm that the 1961 broadcasting statute 
extends to all forms of television, other than pay-per-view, so long as 
the revenues are equally shared among the League's member clubs.
    Both of these provisions are constructive, and we would strongly 
support them being enacted into law.
    I appreciate your consideration of these views. I hope that, once 
the June 22 hearing concludes, you will oppose any further action on 
this bill. Should you have any questions, please feel free to call me.
            Sincerely,
                                          Jerry Richardson.
                                                     Owner/Founder.
                                 ______
                                 

                    1999 Resolution G-3--As Amended

    Whereas, it is appropriate to improve the League's current policies 
to support new stadium construction through club seat sharing 
exemptions, as reflected in the club seat sharing exemption guidelines 
adopted by the League in 1994 (the ``Guidelines''), and through PSL 
sharing exemptions;
    Whereas, a revised policy can facilitate new stadium construction 
projects by (1) making upfront League loans in support of Clubs' 
private contributions to such projects (rather than annually exempting 
from sharing the visiting team share (``VTS'') of club seat premiums 
over a period up to 15 years), and (2) assuring that League loans will 
amount to at least 34 percent of an affected Club's private 
contributions to a project;
    Whereas, such League loans should be subject to member club 
approval on a case-by-case basis;

    Be it Resolved:

    (1) That for any stadium construction project involving a private 
investment for which an affected Club makes a binding commitment from 
now through the 2002 NFL season (through March 31, 2003), the League 
shall make a loan to the affected Club to support such project based on 
the amount that the affected Club has committed to such project as a 
private contribution (the ``Private Contribution'');
    (2) That the amount of such League loan shall range from 34 percent 
to 50 percent of the Private Contribution, determined on a case-by-case 
basis based on the size of the Private Contribution, with incremental 
League loans in excess of 34 percent generally to be made available to 
facilitate stadium construction projects in the largest markets that 
are home to an NFL Club, and with the League loans in smaller markets 
generally limited to 34 percent of the Private Contribution;
    (3) That the Commissioner is authorized to make arrangements for 
the League to borrow from commercial or institutional lenders funds to 
make such League loans, with the funds to be repaid to such lenders 
over an appropriate time period (10 years or such other period as may 
be determined by the Finance Committee);
    (4) That the specific borrowings from commercial or institutional 
lenders related to any stadium construction project must be approved as 
part of the League's approval of a League loan to such project, with 
the borrowings to be repaid principally from the VTS of club seat 
premiums generated by such project, and, to the extent that the VTS of 
club seat premiums is insufficient to repay such loans, with any 
incremental funds needed for repayment to be assessed against the 
League's network television revenues;
    Further Resolved:
    (1) That if PSL's are sold with respect to a particular stadium 
construction project, such PSL's shall be eligible for an exemption 
from sharing in accordance with current policies;
    (2) That the amount of VTS exempted in respect of PSL's sold shall 
be offset against the principal amount of League loans available for 
the project; and
    (3) That for purposes of determining whether a project is eligible 
for incremental League loans, only the first $75 million of PSL 
proceeds shall be treated as a portion of the Private Contribution;
    Further Resolved:
    (1) That any League loan under the League policy adopted by this 
resolution, as between an affected Club and the League, shall be 
forgiven over the term of the aforementioned League borrowing on an 
equal annual basis; and
    (2) That, if an affected Club that receives a League loan under the 
League policy adopted by this resolution (or a controlling interest 
therein) is subsequently sold other than to a member or members of an 
owner's immediate family (as defined in the NFL Constitution and 
Bylaws) before the final maturity date of the League loan, then the 
selling party shall repay to the League from the sale proceeds at 
closing an amount equal to the outstanding principal balance on the 
League loan; and
    Further Resolved, that in order for a stadium construction project 
involving a Private Contribution to qualify for a League loan, the 
conditions set forth in Attachment A to this resolution must be 
satisfied.
          submitted by finance committee and stadium committee
    Reason and Effect: To modify and simplify the League's policies 
with respect to stadium construction projects to provide for, among 
other things, (1) a standard 34 percent League loan towards the private 
contribution to such projects, (2) such League loan to be made upfront 
at the beginning of such projects from funds to be borrowed by the 
League, and (3) an incremental League loan (in excess of 34 percent) in 
respect of such projects in the largest markets.

 
------------------------------------------------------------------------
                   VOTE                             DISPOSITION
------------------------------------------------------------------------
For  29  ................................  Adopted
Against  2...............................
Abstain  0...............................
------------------------------------------------------------------------

    Senator Specter. Our next witness is Professor Benjamin 
Klein, Professor of Economics at UCLA, a position he has held 
since 1968, and president of Economics Analysis LLC, an 
economics consulting firm located in Los Angeles. He has had 
extensive consulting and litigation experience, made numerous 
presentations to various governmental agencies, is widely 
published on stadium financing, and has been a consultant to 
the U.S. Federal Trade Commission and the Antitrust Division of 
the Department of Justice.
    Welcome, Professor Klein, and the floor is yours.

                  STATEMENT OF BENJAMIN KLEIN

    Mr. Klein. Thank you, Senator and members of the committee, 
for this opportunity to address you. I have covered in my 
submitted written testimony a number of reasons why S. 952 is 
defective from an economic point of view, but I would like to 
make here just three points.
    First, I want to correct the mistaken impression that 
stadium projects should be looked at primarily as jobs-creating 
programs. This is much too narrow a perspective. One must take 
into account what economist call the public good consumption 
benefits of these projects. In particular, citizens of a 
community get benefits from a team even if they don't attend 
the games, as Senator Feinstein was mentioning.
    They listen to the games on radio. They talk to their 
friends about the team. They read about the team in the 
newspaper. They identify with the success or failure of the 
team. And these benefits that consumers receive without paying 
directly for the product is what economists refer to as public 
goods, and economists generally recognize that it is legitimate 
for local governments to support the provision of such public 
goods. It is analytically similar to deciding to have park land 
or an opera house or waterfront development. These are quality-
of-life type public goods, and the expenditures that localities 
make on these goods should not be judged solely on their job-
creation benefits.
    Second, this proposed legislation is not market-driven and, 
in fact, it creates significant economic distortions. In 
particular, more stadiums will be built and these stadiums will 
not be economic; that is, they will not be in the league's and 
the community's joint interest to build.
    Now, the basic economics here is relatively simple. From 
the individual team's point of view, this legislation would 
lower the cost of stadiums 50 percent, paid for by the other 
team owners, so that every individual team will find it in its 
own narrow interest to get the city to ask for the funds for 
the largest and most elaborate stadium renovation or 
construction, even in cases where city and team benefits 
together don't exceed the costs. And there is no mechanism in 
the legislation for the league to allocate projects in terms of 
overall priorities; for example, an important project to keep a 
team in an existing relatively large media market.
    Third, and finally, it is not clear that local communities 
will be made better off by the proposed legislation. In my 
written testimony, I go through a number of cases where 
basically from an economist's point of view, what is likely to 
happen is that the league contribution is just going to offset 
or substitute for the private contribution and not augment the 
total contribution.
    And I guess the basic economics--I see I still have the 
green light--the basic economics is that the city is willing to 
pay a certain amount for the stadium project, and they don't 
really care where the rest of the money is coming from. And 
that willingness to pay will remain the same and the team will 
just get the money from the league, and it is not clear in most 
cases that there will be any decrease in the public 
contribution because of this legislation.
    In conclusion, S. 952 would provide few benefits to local 
taxpayers, while creating significant economic distortions.
    Thank you.
    Senator Specter. Thank you very much, Mr. Klein.
    [The prepared statement of Mr. Klein follows:]
            Prepared Statement of Professor Benjamin Klein *
    Thank you for the opportunity to address the Committee on Senate 
Bill 952, the Stadium Financing and Franchise Relocation Act of 1999.
---------------------------------------------------------------------------
    * Benjamin Klein is a Professor of Economics at UCLA and President 
of Economic Analysis LLC, an economic consulting firm. He has written a 
wide range of articles in the areas of antitrust economics and 
industrial organization and recently has published research on stadium 
financing. He has served as a consultant to various government 
agencies, including the Antitrust Division of the U.S. Department of 
Justice, the Federal Reserve Board of Governors, the New Zealand 
Treasury and the U.S. Federal Trade Commission Bureau of Competition 
and Bureau of Consumer Protection, and to numerous business firms, 
including several sports leagues.
---------------------------------------------------------------------------
    I would like to begin by noting that sports teams provide 
substantial benefits to citizens of local communities, including the 
ability of local residents to follow and enjoy a home team. To an 
economist it is important to recognize that these valuable benefits 
also are enjoyed by individuals who do not attend the teams' games. 
Local citizens identify with the success of the team, follow the team 
on television and radio, read about the team in the newspapers, and 
talk with their friends about the success or failure of the team. 
Indeed, there are few activities that appeal to such a wide cross 
section of demographic and socio-economic groups as do professional 
sports. Most analysts of stadium projects today agree that professional 
sports teams can confer significant economic value on a community in 
terms of such consumption benefits.\1\
---------------------------------------------------------------------------
    \1\ For example, Roger Noll and Andrew Zimbalist discuss these 
consumption benefits as a classic ``externality'' arising from a major 
league sports event. See Roger G. Noll and Andrew Zimbalist, ``Economic 
Impact of Sports Teams and Facilities,'' in ``Sports, Jobs & Taxes: The 
Real Connection,'' in Sports, Jobs, & Taxes: The Economic Impact of 
Sports Teams and Stadiums at 58.
---------------------------------------------------------------------------
    The type of consumption benefits that many people in the local 
community and surrounding region receive from the presence of a 
professional sports team are frequently termed ``public good'' benefits 
by economists. When private providers of a product can only charge 
consumers directly for a portion of the total benefits the consumers 
receive from the product, it is widely recognized in the economics 
literature that it may well make economic sense for citizens, via their 
government, to contribute to the provision of the product. Hence, there 
is a strong economic rationale for local public support of sports 
teams. Efficient local subsidization does not require that the activity 
provide economic development benefits, as would roads or bridges. In 
this regard, stadium contributions from the public sector are analogous 
to public contributions toward other consumption goods, such as parks, 
golf courses, swimming pools, zoos, concert halls, and museums.
    Many critics claim that stadium projects are poor public 
investments because they do not create many jobs per dollar of 
expenditure. However, while sports stadiums do provide economic 
benefits to local communities in the form of increased local 
employment, taxes, regional development and the potential to re-
invigorate a downtown or other deteriorated area, they are not 
primarily development or jobs programs and should not be judged solely 
on that basis. The primary economic purpose of sports teams is to 
provide consumption benefits to the community.
    There is an extensive political process by which local communities 
make decisions about which activities provide the greatest net benefits 
to their citizens. Within this political process citizens and their 
elected representatives decide how to allocate public funds among many 
alternative uses, such as parks, museums and golf courses. In fact, new 
stadium proposals that involve significant public funding today 
typically face substantial scrutiny and often must pass a voter 
referendum. There is no reason to believe that this political process 
is less effective in evaluating stadium projects than other public 
investments.\2\
---------------------------------------------------------------------------
    \2\ This is particularly true after the Tax Reform Act of 1986, 
which has ensured that issuance of federally tax exempt bonds is only 
available for projects that have significant value to many of the 
residents of a local community by requiring that repayment of such 
bonds be funded at least 90 percent by general as opposed to stadium 
specific revenue sources. Therefore, the Tax Reform Act of 1986 has 
generated a substantial increase in the frequency with which stadium 
proposals must be tested by voter referenda and has resulted in 
significant increases in private funding and decreases in public 
contributions of sport facility construction. In fact, several recent 
stadiums are now being financed primarily with private funds, such as 
those in Carolina, Washington and Philadelphia.
---------------------------------------------------------------------------
    Many of the largest and most visible of the recent stadium projects 
have been associated with actual or proposed relocations of teams. One 
part of S. 952 would reduce the ability of teams to unilaterally 
relocate in order to extract large stadium contributions. The proposed 
legislation would give the league the ability to prevent such team 
relocations that were not in the league's interest. This feature of the 
legislation is economically desirable. Economic analysis implies that 
the incentive for an individual team to relocate is much greater for 
the team than for the league as a whole. From the team's perspective, 
the economics of the relocation decision involves a relatively 
straightforward comparison of the expected income from operating in one 
location versus another. If the new location is offering a new stadium 
with substantially more lucrative revenue opportunities, such as luxury 
boxes and club seats, naming rights, pouring rights, and so forth, it 
will frequently be in the team's interest to move.\3\
---------------------------------------------------------------------------
    \3\ The fact that many of these revenue streams are not shared 
among teams, as are gate receipts and television revenues, increases 
the attractiveness of such deals to an individual team.
---------------------------------------------------------------------------
    In contrast, even though such moves may raise the moving team's 
income, they are often not in the league's interest. The effect of a 
team relocation on league income depends on a variety of other factors 
that the team generally will not take into account. For example, team 
relocations frequently anger many fans in the original city, thereby 
damaging the public image of the league and reducing the total demand 
for the sport. Some relocations may also disrupt the leagues' optimal 
geographic coverage for broadcasting and other purposes. For example, 
while the relocation of the Los Angeles Rams to St. Louis made 
financial sense for the team because of the attractive financial 
package offered by St. Louis, the NFL as a whole was left without a 
team (and with many disgruntled fans) in the nation's second largest 
media market.
    From an economic perspective, sports leagues attempt to internalize 
these adverse effects of team relocations to a far greater extent than 
individual team owners do. Consequently, many recent team relocations 
would not have occurred if sports leagues had the unambiguous legal 
authority provided under S. 952 to prevent relocations by individual 
teams that are contrary to league interest. For example, the NFL 
engaged in costly and protracted litigation to prevent the Raiders move 
from Oakland to Los Angeles. After the Raiders decision, the NFL was 
largely helpless to prevent the Colts move from Baltimore to 
Indianapolis, the Rams move from Los Angeles to St. Louis, and the 
Browns move from Cleveland to Baltimore.\4\
---------------------------------------------------------------------------
    \4\ In his testimony before this Committee last week, Professor 
Rosentraub argued that the NFL ``reneged'' on an agreement with 
Congress to prevent team relocations. He ignores the fact that the 
courts effectively eliminated the league's ability to control team 
relocations after the Raiders' decision.
---------------------------------------------------------------------------
    The proposed legislation recognizes the divergence between team and 
league interests and would implement a constructive change by giving 
the leagues an antitrust exemption for preventing franchise relocations 
that are contrary to the league's interest. This legislation would have 
a substantial positive effect in reducing relocations and would 
mitigate some of the perceived problems with the current stadium 
financing situation.
    The legislation also would take the productive step of expanding 
the leagues' antitrust exemption for negotiating national broadcast 
contracts to include cable and satellite (non-pay per view) television. 
This action would expand the availability of sports programming and 
provide additional options to consumers. The NFL's ``Sunday Ticket'' 
package for satellite television, for example, allows football fans in 
any city to choose from the games of all NFL franchises, in addition to 
those of their local team. As with network television broadcasts, the 
antitrust exemption would allow the league to negotiate these contracts 
without the risk of potentially disruptive and inefficient conflicts 
between team and league interests. Since these television revenues are 
shared equally among all of the league's teams, the legislation would 
also benefit small market teams and promote the goal of competitive 
balance. The legislation achieves these procompetitive benefits without 
risking anticompetitive effects, since this programming clearly 
competes in a broad and highly competitive market for television 
programming.
    While the proposed legislation recognizes the differences between 
team and league interests and would take productive steps to ameliorate 
these distortions by granting the antitrust exemptions discussed above, 
the stadium financing proposal included in the legislation would create 
new economic distortions. First of all, since S. 952 would require the 
league to provide an automatic contribution of up to 50 percent for all 
stadium projects, it would lower by as much as 50 percent the cost of 
stadium projects that must be borne by the individual team and state 
and local governments collectively. By thus lowering the cost of 
stadium construction to local decision-makers, both public and private, 
the proposed legislation would substantially increase the incentives 
for individual teams and state and local governments to build and/or 
renovate stadiums. This is basic economics. Rather than reducing the 
incentives to build new stadiums, as many stadium critics have 
advocated, the legislation would substantially increase the incentives 
to build more and more costly stadiums by creating an incentive for 
individual teams and for state and local governments to use the 
league's money for their own purposes.
    This distortion of economic incentives would lead to significant 
economic inefficiencies. For example, consider a hypothetical new 
stadium project that is only expected to generate benefits to the team 
and the local community equal to 60 percent of its construction costs. 
If the team and the city were bearing 100 percent of the costs, such a 
project would not be built. However, since they can collectively demand 
that the league finance 50 percent of the project, it will be in each 
team's and community's narrow interest to build the new stadium, even 
though it is not a project that is in the league's, or the economy's, 
interest to build.
    As a result, total public spending on stadium projects would likely 
increase under S. 952. From an economic perspective the proposed 
legislation is equivalent to a large reduction to teams and local 
governments taken together in the price of building stadiums. When the 
price of any product falls, the ultimate effect on total spending 
depends on how strongly consumers respond to the price decline. If 
there is an elastic demand for stadiums, total public spending on 
stadium projects will increase, even if localities end up paying a 
smaller share of the costs, which they very well may not.
    While it will clearly increase the overall level of spending on 
stadiums, economic analysis indicates that S. 952 is likely to have 
little or no effect on reducing the contributions of state and local 
taxpayers to the costs of stadium projects. First of all, consider 
cases where the local governments would have provided less than 25 
percent of the financing without the legislation. In such cases, public 
spending on stadium construction would be likely to increase because 
the legislation requires public authorities to provide a minimum of 
half of the league's contribution. Any increase in the public 
contribution up to 25 percent would automatically trigger an increase 
in the league contribution equal to twice the public contribution. 
Accordingly, the gain to an individual team from convincing its city or 
state government to support the project up to at least 25 percent would 
become very large. Therefore, individual teams would have increased 
incentives to negotiate for at least the 25 percent public contribution 
that would guarantee the maximum league funding of 50 percent.
    For stadium projects where the public contribution would have been 
between 25 and 50 percent absent the legislation, we could expect the 
locality to continue to make that contribution if S. 952 were in 
effect. There is nothing in the proposed legislation, nor should there 
be, that would limit the local contribution to 25 percent. And there is 
no economic reason for the stadium financing proposals in the 
legislation to affect the bargaining positions of the locality and the 
team. In particular, the communities' underlying benefits from having 
the team would not be reduced by the proposed legislation and, 
therefore, individual teams would likely receive the same state and 
local government contributions they would have received in the absence 
of the legislation. For example, if a city were willing to provide a 
contribution of 50 percent to a stadium project before the legislation 
(with the team paying the other 50 percent), the city would still be 
willing to do so after. All that would happen is that the league would 
replace the team as the source of the private contribution. But the 
city would not care where the team obtains its funds. Of course, as 
noted above, the team would not be indifferent to whether it or the 
league pays the private contribution and would always seek league 
financing for the largest and most elaborate stadium, regardless of 
economic efficiency.
    Even for stadium projects where the public contribution would have 
been greater than 50 percent in the absence of the legislation, say 60 
percent of the project, and therefore the league's 50 percent 
contribution would more than replace what would have been the team's 40 
percent contribution in the absence of S. 952, it is not clear that the 
local contribution to the project would be reduced by the proposed 
legislation. This is because individual teams would seek alternative 
ways to get state and local governments to continue to make the same 
dollar contributions they were willing to provide in the absence of the 
legislation, but in a different form. Since the communities' underlying 
benefits from having the team have not been reduced by the proposed 
legislation, there would always be strong economic forces leading teams 
and cities to ``undo'' any reductions on public contributions to 
stadiums by providing the benefits to teams in other ways. For example, 
teams and local governments could respond to the reduction in the 
public's up front contribution to stadium costs by reducing or 
eliminating the team's rent, by allowing the team to retain a larger 
portion of stadium related revenues, or by increasing the size and cost 
of the stadium project and infrastructure investments, such as, parking 
facilities or road improvements. Hence, even in those cases where it 
appears that the proposed legislation will provide significant cost 
savings to taxpayers, the magnitude of these benefits may very well be 
non-existent.
    The only stadium projects for which S. 952 would have the effect of 
significantly reducing the public contribution would be previously 
negotiated projects under construction. This is because the 
retroactivity provisions in the proposed legislation would effectively 
re-write many of these agreements after the fact, without permitting 
any market offsets. But such retroactivity alters the financial terms 
agreed to by the parties after extended periods of negotiation, 
including in many cases direct voter approval and other extensive 
political processes.
    S. 952 would also undermine the relationship between the leagues 
and their players. The NFL currently operates under a Collective 
Bargaining Agreement with the NFL Players Association under which 
approximately 63 percent of the league's ``Defined Gross Revenues'' 
(which includes network television revenues) are shared with the 
players. This agreement was reached after years of intense bargaining 
and litigation and has been credited with reducing labor conflicts 
between the league and its players. The proposed legislation 
inappropriately inserts the federal government into this collective 
bargaining relationship and allows state and local governments to 
implement large wealth transfers from the league as a whole, and from 
the players, to individual teams.\5\
---------------------------------------------------------------------------
    \5\ In his testimony before this Committee, Professor Zimbalist 
agreed that this is an inappropriate role for the federal government.
---------------------------------------------------------------------------
    S. 952 also lacks any mechanism by which monies from the proposed 
trust fund would be allocated across different stadium projects. Some 
process would be required to evaluate each proposal and determine 
funding priorities among the many competing projects. Obviously, such a 
process could lead to expanded federal intrusion into the industry and 
additional inefficiencies. In contrast to this expanded governmental 
role, the NFL has recently adopted a new resolution that provides 
substantial league-wide contributions to stadium projects, while 
avoiding the adverse incentive effects and other inefficiencies of the 
inflexible government mandate in the proposed legislation. Under the 
NFL's new ``G-3'' plan, the league has the ability to evaluate all 
proposed projects from the perspective of the league as a whole (taking 
into account the potential differences between team and league 
interests discussed above) and can withhold funding for inefficient 
projects.\6\
---------------------------------------------------------------------------
    \6\ The G-3 plan builds on and extends existing cooperative efforts 
between the league and the players to assist individual teams to 
finance new stadium facilities. The league has contributed hundreds of 
millions of dollars to date under these plans and, based on current 
commitments, this amount will grow by an additional hundred million 
dollars each year.
---------------------------------------------------------------------------
    Yet another distortion of S. 952 is that it would put at risk the 
league's ability to negotiate national broadcast contracts. Since 
national broadcasting represents a very large source of shared revenue 
(particularly in the NFL where it exceeds gate receipts for many 
teams), the loss of these revenues would greatly exacerbate revenue 
disparities across teams and would be particularly adverse for small 
market teams. Competitive balance and fan demand for the league would 
suffer.\7\
---------------------------------------------------------------------------
    \7\ In his testimony Professor Zimbalist agreed that the 
elimination of the broadcast exemption would have adverse consequences, 
and he advocated as an alternative ``sanction'' the elimination of tax-
exempt financing for stadium projects. As I have discussed in detail 
elsewhere, there is no convincing economic basis for the elimination of 
tax-exempt financing for stadium projects. Doing so would discriminate 
against states and local communities that legitimately choose to 
support professional sports as opposed to other locally valued 
consumption activities. See K. Green, B. Klein and B. Lebowitz, ``Using 
Tax-Exempt Bonds to Finance Professional Sports Stadiums,'' Tax Notes, 
March 30, 1998, pp. 1663-1687.
---------------------------------------------------------------------------
    Finally, I must correct the frequent but mistaken assertions that 
sports leagues are monopolies and that, by limiting the number of 
teams, they enable teams to extract stadium contributions from 
localities. First of all, unless one insists that a particular sport 
constitutes an industry, all sports leagues compete for consumers in 
the increasingly competitive entertainment industry. Clearly, one 
league's television programming competes with all other sports 
programming and, more generally, entertainment programming. Moreover, 
from the viewpoint of competing for local public contributions, sports 
leagues compete both with one another and with other forms of publicly 
provided consumption goods.
    The fact that localities are willing to contribute to stadium 
construction costs does not mean that the sports league is a monopoly 
and has restricted the number of teams. Manufacturing facilities, for 
example, are not in arbitrarily restricted supply, yet cities and 
states pay significant amounts to induce the location of such 
facilities within their jurisdiction. For example, recent cases of 
privately owned and operated facilities that have received large local 
subsidies include Indiana's provision of tax and other incentives 
valued at $300 million to lure a new United Airlines maintenance 
facility, Kentucky's issuance of $140 million in tax credits to attract 
a steel plant and $125 million to attract a Toyota plant, and Alabama's 
1993 agreement to provide $253 million in subsidies to Mercedes 
Benz.\8\ No one would claim that there has been a monopolistic supply 
restriction in these cases.
---------------------------------------------------------------------------
    \8\ Federal Reserve Bank of San Francisco Weekly Letter, August 4, 
1995 and Time Magazine, November 9, 1998.
---------------------------------------------------------------------------
    A locality that did not have a team or a Mercedes-Benz factory and 
wanted one for the benefits its local citizens would derive would have 
to either induce a team or a factory to relocate from another locale or 
to induce a new team or factory to locate in the community. One cannot 
infer an exercise of ``monopoly power'' from the fact that significant 
franchise fees and public funds are used to purchase teams and 
construct stadiums. Although some cities without teams may be willing 
to pay the ``operating cost'' of fielding a team, this is not the 
appropriate standard to determine if supply has been restricted. 
Franchise fees must compensate existing owners for the dilution in the 
shared revenue streams, most importantly shared TV revenues, and also 
pay for the established brand name of the league, created by past 
investments and success.
    Moreover, even if one thought the leagues were monopolies, S. 952 
would not ameliorate any monopoly problem. And the distortions caused 
by S. 952 in terms of increased construction of inefficient stadiums 
will be present regardless of whether the leagues are monopolies or 
not.
    In conclusion, S. 952 recognizes the divergence between team and 
league interests and would take the productive step of giving the 
leagues an antitrust exemption for franchise relocation issues. This 
proposal would reduce relocations and mitigate many of the perceived 
problems with the current stadium financing situation. However, while 
the antitrust exemption for relocation issues would eliminate one 
economic distortion, the proposed stadium financing scheme would create 
several others. It would substantially increase the incentives to build 
new stadiums, even when such projects are not economic. In addition, 
the magnitude of any ultimate reduction of public funding would be 
small or non-existent as individual teams would undoubtedly find 
alternative ways for local governments to continue to provide 
comparable contributions. The stadium financing proposals also would 
undermine many previously negotiated stadium packages as well as the 
leagues' collective bargaining relationships with their players. In 
sum, the proposed legislation would provide few benefits to local 
taxpayers while creating significant economic distortions.

    Senator Specter. Senator Leahy has provided a statement 
which will be made part of the record, in accordance with his 
request.
    [The prepared statement of Senator Leahy follows:]
             Prepared Statement of Senator Patrick J. Leahy
    Today, the Committee resumes hearings into a proposal to help 
remedy the dilemma facing many communities. The problem of scarce 
public resources being diverted to pay tribute to the owners of 
professional sports teams to build or refurbish stadiums for profitable 
professional sports teams places many in a no-win situation. The 
allocation of public funds and funding opportunities to the 
construction of a stadium for sports may result in less funding being 
available for education, infrastructure improvements and other much-
needed public expenditures.
    While none of us can be certain of the profit a professional sports 
franchise generates, the recent sale of the Washington Redskins for 
$800 million supports the view that these enterprises remain highly 
profitable. Many of the witnesses at last week's hearing were highly 
supportive of Senator Specter's legislation based on their own local 
experience.
    Senator Feingold raised an important concern, that requiring 10 
percent of the revenue derived by broadcast agreements to fund stadiums 
would adversely affect small market teams like his beloved Packers. It 
would be ironic if, in our efforts to help small market communities 
retain their teams, Congress chose a method that had a negative impact 
on the competitiveness of those teams. The purpose of this proposed 
legislation and of our inquiry is not disproportionately or negatively 
to affect small market teams.
    I am glad to see Commissioner Tagliabue and other representatives 
from the NFL today and I look forward to their testimony regarding the 
changes already made in NFL policies regarding loans to owners to 
finance stadiums improvements and construction. I think Senator Specter 
should be commended for making serious proposals that have had the 
effect of encouraging the NFL to invest more than ever before in this 
effort.
    Although I recognize that the NFL and the owners of the respective 
teams are taking a constructive step forward, my initial feeling is 
that resolution G-3 falls substantially short of solving the dilemma. 
It appears that the motivating factor in enacting this resolution was 
the league's desire to locate teams in the largest media areas. 
Commissioner Tagliabue was quoted in the Boston Globe as saying ``we 
are much better off with our teams centered in large metropolitan 
areas.'' While I understand owners' desires to be located in the most 
profitable areas of the country, I searched in vain through resolution 
G-3 for some recognition of the interests of loyal fans, the community 
or the public interest being considered a factor by the team owners. 
The resolution and NFL policy are premised on contribution by the 
community and the owner with the NFL serving as a financing agent for 
the owners' share of the project. It is hard to see how the policy 
increases the public's leverage. Communities are not likely to benefit 
significantly. So, as I have asked with respect to the proposed 
antitrust exemption, I must ask what guarantee we have that the 
enactment of resolution G-3 will prevent league owners from continuing 
to act simply in their own rather than in the public's best interest?
    Last week I suggested an alternative approach to discourage team 
movement. I noted that a change in the way professional sports 
franchises that relocate for economic gain are treated for federal tax 
purposes might prove a more effective solution. If a relocation were 
treated as a sale, the owner could be taxed on the gain, measured by 
the market value of the franchise at the time of the move compared to 
the original cost paid by that owner. This would discourage owners from 
moving teams unless the situation they are leaving is extremely 
undesirable and unprofitable. There may be other approaches that can be 
explored, as well.
    With the Federal Government insisting that states do more with less 
federal assistance, the allocation of state resources to stadium 
financing is creating immense pressure on important social programs. 
The league argues that the question of funding of sports stadiums is a 
local concern and that state and local governments have repeatedly 
shown they can address stadium issues in a way that best suits them. 
Citizens in Hartford on both sides of the stadium issue may disagree. 
According to Connecticut State Senator Edith Prague, Hartford is the 
tenth poorest city in America. She questioned whether spending $374 
million on a team that plays in the city eight times a year is in the 
best interest of the 35.2 percent of Hartford's residents and one out 
of every five of their children who live in poverty.
    I commend Senator Specter for taking up this challenge and I look 
forward to working with him to forge a legal framework in which the 
public will be better served.

    Senator Specter. We turn now to Mr. Gene Upshaw, executive 
director of the NFL Players Association since June 1983, after 
a successful, really spectacular 16-year career as a 
professional player. Since then, Mr. Upshaw has worked on 
defending players' rights.
    He was an offensive guard for the Oakland Raiders from 1967 
to 1981, elected to the Pro Football Hall of Fame in 1987, 
played 217 league games, 6 Pro Bowls, the only player in NFL 
history to play in three Super Bowls in three different 
decades--the 1960s, 1970s, 1980s. He played against the Eagles 
in the Super Bowl in 1981.
    Mr. Upshaw, welcome.

                    STATEMENT OF GENE UPSHAW

    Mr. Upshaw. Thank you, Senator Specter and the committee. 
Thanks for having me here. I guess the main reason that I am 
opposed to this legislation is that it is unprecedented 
intrusion by Congress on both an existing collective bargaining 
agreement and on antitrust settlement from a case that we filed 
in 1990.
    We resolved with a collective bargaining agreement and with 
the antitrust settlement many years of strife in the National 
Football League. It was a very complicated settlement. It was a 
very complicated set of rules that we agreed upon that 
guaranteed that the players would get 63 percent of the 
revenues. As part of that resolution, we also were assured that 
the NFL owners would continue to share a large amount of their 
revenues.
    Since 1992, and before that, Commissioner Tagliabue and the 
players, through me, have worked on many ways to try to address 
the problems that confront both the players, the owners, and 
the fans. And I think over a course of history--and history 
will prove that we have addressed this in the right manner.
    I am glad that we have this bill before us. I don't think 
that there is a need for congressional intervention here 
because we already are doing things. We are already way ahead 
of this bill. I think what this bill does give us an 
opportunity to do, in many ways, is to let the public know and 
give us credit for what we are doing.
    I don't particularly like the way that we are being singled 
out in this bill because we are not the only ones that use 
arenas and stadiums in our communities. I believe that we 
should clarify the Broadcasting Act to include the new 
technology that is now on board, but I am opposed to franchise 
relocation measures that this bill seems to touch on. So in 
many ways, I support a lot of the things in the bill, but some 
things that are in the bill I don't support.
    One of the problems that I really have is that, as players 
and as owners, we looked at the landscape around us and we 
tried to come up with a set of rules and procedures that would 
govern the revenues that we had, and it was very, very 
difficult to come up with a system that has worked tremendously 
well for us.
    Since we first instituted this agreement in 1992, we have 
extended it. We have another date in the year 2000 that we will 
have an opportunity to decide if we want to extend it again. 
And the only way that I am willing to go to the players and ask 
for a continuation of our labor peace and the growth that we 
have had in the National Football League is that we keep the 
same principles in place that have guaranteed labor peace for 
us over the last 10 years.
    Now, having said that, I do recognize that we have a 
responsibility to our communities, and I think we are 
fulfilling those responsibilities. But on the other hand, when 
you are representing workers, even though they are football 
players and wear helmets and they are out on the field and 
taking a tremendous amount of risk, when we negotiate a 
collective bargaining agreement, I expect that collective 
bargaining agreement to be in place and to work for us.
    We have already taken the steps that are necessary to 
guarantee that cities are protected, the fans are protected, 
and the owners and players are protected. And I feel very 
strongly about opposing this legislation because I don't think 
that it is necessary. I also believe--and I heard Senator 
Specter say he is not asking for money from Carolina. But he 
is. In this legislation, you would be taking money from 
Carolina because of the revenue-sharing that already exists in 
the National Football League. You will be destroying cities 
like Green Bay and Cincinnati because all of the revenue-
sharing is so dependent on what makes the fiber of the National 
Football League work.
    And that was the main reason that we agreed to the system 
we have in place, is because of the revenue-sharing that now 
currently exists. So from that standpoint, I oppose the bill 
and I am willing to accept any questions that you might have.
    Thank you very much.
    Senator Specter. Thank you very much, Mr. Upshaw. We will 
come to the questions when we finish all of the testimony.
    [The prepared statement of Mr. Upshaw follows:]
                   Prepared statement of Gene Upshaw
    Good afternoon. I want to start by thanking the Committee and 
Senator Specter for having me here today.
    I am the Executive Director of the National Football League Players 
Association, and have held that position since June 1983. Before then, 
I was an offensive lineman in the NFL and the AFL, for sixteen years, 
with the Oakland Raiders. I am also a member of the NFL's Hall of Fame. 
As Executive Director of the NFLPA, I represent all of the players in 
the NFL, who have worked very hard for decades to achieve a labor peace 
which benefits football fans all across America. The legislation that 
the committee is considering would put this hard fought labor peace at 
serious risk. I therefore strongly oppose S. 952.
    The main reason I am opposed to the legislation is that it is an 
unprecedented intrusion by Congress into both an existing collective 
bargaining agreement between labor and management, and a judicially 
approved and monitored settlement of antitrust litigation, each of 
which resolved years of strife between players and owners in the NFL. 
The legislation would require the NFL to fund up to 50 percent of the 
cost of stadium projects out of network television revenues, 
retroactively for all stadium projects that were not completed when the 
legislation was introduced on May 4th of this year. Moreover, the 
legislation would effectively undo the terms of the antitrust 
settlement agreement and collective bargaining agreement in the NFL, by 
excluding ten percent of network television revenues--which are 
hundreds of millions of dollars--from the revenues upon which the 
amount of the NFL's player salary cap is based.
    I think it would help the Committee's deliberations for me to 
briefly review what labor relations were like in the NFL before the 
current agreements between the players and owners were finally reached. 
In 1982, there was a strike that lasted 57 days--with nearly half of 
the NFL season canceled--before a new CBA was agreed to late that year. 
When that agreement expired in 1987, there was another labor dispute in 
which the owners resorted to the farce of hiring replacement players. 
That farce lasted for a quarter of the season before the players 
decided their only recourse was to return to work and seek relief under 
the antitrust laws.
    In 1989, the players decided they had to decertify their union and 
end all collective bargaining in order to pursue their antitrust 
rights. It then took another two years, until September 10, 1992, for 
the players to win free agency in the Freeman McNeil antitrust case. 
Following the verdict in McNeil, the players and owners were finally 
able to reach a class action settlement in February 1993 in what is now 
known as the Reggie White antitrust case. It was in that settlement--
which was judicially approved by the court--that the current free 
agency/salary cap system was established in the NFL. Following the 
execution of the White settlement agreement, the players--at the urging 
and the insistence of the owners--reformed a union. A new collective 
bargaining agreement was then entered into that mirrored the free 
agency/salary cap terms of the White antitrust settlement.
    The White settlement agreement and its companion CBA have proven to 
be remarkably successful. Because of these agreements, the NFL--unlike 
every other major league professional team sport in America--has 
enjoyed a period of complete labor peace since February 1993. There 
have been no strikes, no lockouts, and no work stoppages of any kind 
during this period. Indeed, the agreements have now been twice 
extended, with judicial approval, so that NFL fans can count on 
uninterrupted labor peace in the NFL through at least the 2003 season.
    The agreements that the players and owners reached to achieve this 
unprecedented labor peace are extremely complicated and delicately 
balanced, totaling more than 200 pages each. As Judge David Doty--the 
federal judge who approved and monitors the antitrust settlement 
agreement--said, ``it is a carefully crafted document that contains 
numerous compromises, trade-offs and intricate rules.'' Under the 
agreements, the players accepted a very complicated salary cap system, 
but also had a guarantee that the owners would have to share a 
specified percentage of their revenues--today, 63 percent--with the 
players through the salary cap system. The negotiation of this 
percentage, as well as the specific categories of revenues that are 
included or excluded from the calculation, involved hundreds of hours 
of negotiations and numerous tradeoffs too countless to recite. 
Significantly, the most important and largest source of revenues 
included in the salary cap are the network television agreements 
entered into by the NFL and its teams.
    The legislation the Committee is considering would undermine and 
threaten the parties' agreements, by rewriting them to exclude ten 
percent of the NFL's network TV contracts, which is hundreds of 
millions of dollars, from the revenues the players share through the 
salary cap system, and directing that money to a trust fund to pay for 
up to one-half the cost of new or improved stadiums. In principle, it's 
the same thing as taking a collective bargaining agreement that auto 
workers spent decades to achieve, and having Congress decide that the 
hourly wage agreed to between labor and management should be reduced so 
that the money can go to a local government that just granted Ford a 
tax abatement to help build a plant. Such an intrusion into the 
collective bargaining process would be a terrible precedent and is 
contrary to the policy of the National Labor Relations Act to let labor 
and management compromise their differences in bargaining between them 
without government interference. Moreover, the legislation would 
improperly and retroactively interfere in a judicially approved class 
action settlement, in violation of fundamental principles of due 
process and separation of powers between Congress and the courts. If 
this legislation were enacted, there would be a serious risk that the 
entire settlement agreement and collective bargaining agreement between 
the owners and the players could collapse, because the players and the 
owners would have to start all over again to reconstruct the 
fundamental economic compromises that formed the foundation of their 
agreements. This would jeopardize the many years of labor peace that 
has benefited all NFL fans.
    At the same time, NFL players are already supportive of Senator 
Specter's idea that teams and players should collectively make private 
contributions to help localities build new or improved stadiums. Such 
stadiums benefit both local communities and the NFL and its players, 
making a public/private partnership the fair way to provide funding. 
That is why the first time the White settlement agreement and CBA were 
extended in 1996, the NFL players agreed to exclude from the salary cap 
revenues certain money from personal seat licenses, and premium charges 
on ``club'' seats, in order to help fund stadium construction and 
improvements. Importantly, however, these funding agreements by the 
players were made in bargaining as part of complex trade-offs of 
numerous issues. These agreements have already resulted in hundreds of 
millions of dollars being made available and used to help build new or 
improved stadiums all around America. Further, the NFL and the players 
are currently discussing new ways to jointly contribute even more money 
to these projects under the terms of the White settlement agreement and 
the collective bargaining agreement. These private sector agreements 
are a far better vehicle than new government regulation as a means of 
providing the public/private partnerships required to fund new stadium 
projects.
    In fact, I don't understand why the NFL and its players are being 
singled out in this legislation, since I believe we have done far more 
than any other sport to contribute to the building of new or improved 
facilities, and we have had more labor peace than any other 
professional team sport in the 1990's. I think the Committee will find 
out that the NFL players and the owners are doing a pretty good job of 
meeting our responsibilities in this area, and I believe we will 
continue to do so in the future.
    Apart from the stadium financing aspect of the legislation, S. 952 
also would give NFL owners a new antitrust exemption on franchise 
relocations. I think this would be a mistake. Under current law, the 
antitrust laws apply to the NFL's restrictions on franchise relocation, 
but, under the ``rule of reason,'' any restrictions that the NFL 
imposes that are reasonable and procompetitive are legal. On the other 
hand, if the NFL owners were to act arbitrarily in an anticompetitive 
way, they would be subject to antitrust consequences just like any 
other business. The NFL is not a regulatory agency. It is a private 
association of competing businessmen who sometimes act reasonably, but 
who also have been repeatedly found to have violated the antitrust laws 
in a wide variety of areas, including franchise relocation. I don't see 
any reason to grant the NFL owners a new antitrust exemption in this 
area, which is unnecessary, and which can only lead to mischief.
    Finally, while the players do not object to updating the Sports 
Broadcasting Act to make it clear that it applies to new technology, 
such as satellite television, we do think it is very dangerous to 
condition the grant of this limited antitrust exemption on the NFL 
making a specified level of contributions for stadium financing. The 
very limited antitrust exemption provided by the Sports Broadcasting 
Act has generally worked well, because it has made every NFL game 
available on over-the-air television and enabled the NFL to equally 
share television revenues, which has provided the economic foundation 
for the current free agency/salary cap system. If this exemption were 
suddenly ended, chaos in the broadcasting of America's favorite team 
sport would result, and the agreements between players and owners--
which have brought labor peace--would be jeopardized.
    I thank the committee for its time, and I'd be happy to answer any 
questions you have.

    Senator Specter. We turn now to Commissioner Paul 
Tagliabue. He has been there for 9 years, took over in November 
1989, succeeding Commissioner Rozelle. At the time of his 
election, Commissioner Tagliabue was a partner in the Covington 
and Burling law firm, which was the NFL's principal counsel, 
and appeared before the committee on many occasions as counsel. 
Earlier, he served as defense policy analyst in European and 
North Atlantic Affairs at the Department of Defense. There has 
been substantial expansion during his tenure and he has 
provided very vigorous leadership.
    Commissioner Tagliabue, thank you for joining us and the 
floor is yours.

                  STATEMENT OF PAUL TAGLIABUE

    Mr. Tagliabue. Mr. Chairman and members of the committee, 
thank you for inviting me to appear today on behalf of the 
league to testify in respect of Senate bill 952.
    The core element of S. 952 is its proposed requirement that 
each NFL club and each club from Major League Baseball, alone 
among professional sports teams, contribute 10 percent of its 
national television revenues each year to a fund that would 
finance 50 percent of the cost of any new or renovated stadium. 
Indeed, the bill would impose such a requirement retroactively 
to all stadium projects that had not been completed on the day 
the bill was introduced.
    We strongly oppose these provisions. The provisions are 
unnecessary, in our judgment, and would have significant 
negative, unintended effects. They unfairly ignore the very 
substantial contributions that NFL clubs today make toward 
stadium construction. They would improperly interfere with 
State and local decisionmaking on sports facilities, and by 
decreasing the amount of equally shared revenue received by 
each NFL team, they would threaten lower-revenue clubs. 
Finally, if enacted into law, these provisions would risk 
undoing what is currently the most successful labor-management 
partnership in professional sports.
    Needless to say, it is both prudent and common for soundly-
managed businesses to use increased current revenues which may 
or may not be recurring over the long term to invest in new 
facilities that will help to secure the business' success for 
the long term. The NFL and its clubs, together with the NFL 
Players Association, have been doing just that with respect to 
the investment of current revenues into new stadiums.
    We have been working in numerous communities with State and 
local governments and business leaders to resolve stadium 
issues on a win-win basis. The league and its teams, together 
with the Players Association, have implemented programs for 
league-wide financial support to individual clubs seeking to 
construct new stadiums or make major improvements in existing 
stadiums.
    In this decade alone, NFL club and league representatives 
have worked with State, county and city governments in 17 
different States on 23 successful projects for the 
construction, renovation or improvement of stadiums used 
principally by NFL teams. Each of these projects involved in 
one measure or another public and private sector cost-sharing 
and financing partnerships.
    These 23 successful projects involve not only a wide range 
of types of stadiums, but also a wide variety of arrangements 
for allocating stadium and related infrastructure costs among 
public and private parties. Each tailored to the specific needs 
of the involved community, they range from the largely 
privately financed Washington Redskins stadium and the Carolina 
Panthers stadium, to the largely publicly financed multi-
purpose domed facilities used by the Atlanta Falcons and the 
St. Louis Rams. And they include new or renovated stadiums in 
communities as diverse as Denver, Detroit, Jacksonville, 
Nashville, New York, Oakland, Pittsburgh, Seattle, Tampa, and 
elsewhere that involve public-private sector sharing of 
construction and financing costs.
    The success of these efforts and the diversity of cost-
sharing and financing arrangements involved in these projects 
demonstrate, in our judgment, why the rigid stadium financing 
features of S. 952 would not serve any necessary purpose and 
should not be enacted.
    Second, by forcing all NFL clubs annually to contribute 10 
percent of their equally shared national television revenues to 
a stadium fund, the bill would seriously disadvantage the 
lower-revenue clubs that are already struggling to make their 
revenues meet their expenses. The bill would exacerbate 
existing pressures on teams whose revenues in 1998 were 
anywhere from $10 to $20 million below the league-wide average.
    These clubs, which would experience no corresponding 
decrease in their fixed operating costs, depend on equally 
shared revenues to remain competitive. Far from promoting 
stability and competitive balance, the bill would therefore 
sacrifice the interests of the weaker teams and communities, 
and undermine the NFL's longstanding and successful revenue-
sharing policies.
    Indeed, by reducing the equally shared television revenue 
of all teams, the bill would sharply magnify a serious problem 
for the league--the substantial disparity in overall revenues 
between the league's higher-revenue and lower-revenue clubs. 
Despite our revenue-sharing efforts, these disparities result 
from a variety of factors, including differences in market size 
and market demographics, adequacy of stadiums, team 
performance, and the extent of other competitive sports and 
entertainment offerings.
    League-wide efforts to address this issue include a 
supplemental revenue-sharing pool by which the league 
distributes revenue to the lower-revenue teams in order to 
assist them in dealing with player and other costs. There 
nonetheless continues to be a very substantial gap between the 
unshared revenues of the better-situated and performing teams 
and the bottom quarter of the league which this bill would 
seriously aggravate.
    In contrast to S. 952, the league's program for 
contributing financial assistance to individual teams for 
stadium construction directly ties the largest portion of the 
contributed assistance to revenues generated in the new stadium 
itself. Thus, the focus of our current program has been to use 
revenues that are not equally shared as a source of private 
funding for stadiums and to avoid undermining the effectiveness 
of the league's television revenue-sharing arrangements.
    I think Mr. Richardson and Mr. Upshaw have both spoken 
about the local governmental prerogatives and the labor 
relations aspects of this. On the local government point, I 
would simply mention that we have worked for several years with 
the U.S. Conference of Mayors and come to an understanding on 
issues of franchise movement.
    Mr. Chairman, I ask to insert in the hearing record a 
recent exchange of correspondence between the league and the 
Conference of Mayors that reflects this working relationship.
    Senator Specter. Without objection, it will be made part of 
the record.
    [The information referred to follows:]

                                  National Football League,
                Communications & Government Affairs, June 11, 1999.
Hon. Marc Morial,
Mayor of New Orleans,
New Orleans, LA.
    Dear Mayor Morial: The National Football League and the United 
States Conference of Mayors both wish to maintain the stability of 
economically viable franchises and to ensure a fair process to consider 
requests for franchise relocations. The NFL and the Conference have 
worked for many months to develop an approach to address these common 
concerns. A draft Statement of Principles was written to set forth our 
understanding.
    Consistent with those discussions, and grounded in sound business 
policies, the NFL has amended its franchise movement guidelines. The 
amendments bring to reality our mutual ideas on these issues, and are 
the direct result of our discussions.
    The amended guidelines balance and protect the interest of the 
cities, the League and individual teams. They establish an orderly 
process, ensuring municipal interests will be heard and addressed, and 
that franchise moves occur only after exhausting all reasonable options 
in a team's existing home territory. They assert an active and 
appropriate role for the League in managing possible relocations. They 
affirm the League's commitment that all obligations under stadium 
leases be fully honored.
    We highly value our relationships with the Conference and with the 
communities that host NFL football. The amended guidelines, and the 
cooperative discussions that preceded them, reflect the strengthened 
partnership between our two organizations.
    Apart from addressing franchise movement, the draft Statement of 
Principles also discussed stadium financing. It provided:

         To reflect their commitment to public-private partnerships in 
        stadium development, the USCM and the League will build upon 
        existing financing mechanisms and will work together to seek 
        financing avenues as feasible and appropriate, including 
        through negotiated arrangements with the National Football 
        League Players Association.

    In addition to honoring our understanding on franchise movement, 
the NFL has also acted to redeem our agreement on stadium financing. I 
am pleased to report that at its League meeting in March, and following 
discussions with the NFLPA, the NFL passed Resolution G3 to enhance 
League contributions to stadium construction. Under the resolution, the 
League will support up to 50 percent of the private portion of stadium 
construction costs, and will do so with upfront money that will reduce 
financing costs associated with stadium projects. A copy of Resolution 
G3 is attached. As recommended in the draft statement of Principles, 
our new policy builds upon existing financing mechanisms. It 
strengthens the NFL's commitment to partnership with public entities on 
stadium construction.
    The draft Statement of Principles concludes:

         Both parties commit themselves to implementing a structure of 
        communications that will facilitate and build upon the 
        cooperation that underlies this Statement of Principles.

    Amended franchise movement guidelines and a new stadium financing 
policy are among the fruits of our regular and cooperative 
communications. The NFL will continue to work closely with the 
Conference on matters of mutual interest.
            Sincerely,
                                                Joe Browne.
                                 ______
                                 
                                       City of New Orleans,
                                                     June 21, 1999.
Paul Tagliabue, Commissioner,
National Football League,
New York, NY.
    Dear Commissioner: The United States Conference of Mayors has 
worked closely with the National Football League to develop mutual 
positions on matters such as franchise movement and stadium financing. 
Our discussions led to a draft Statement of Principles on these and 
related subjects. Underlying these discussions was the idea that both 
cities and the League would be well served by open, frequent, and 
cooperative communications.
    Accordingly, we are pleased to receive the news that the League has 
amended its franchise movement guidelines in a fashion consistent with 
our discussions. We believe these amendments improve upon past policies 
and should give city interests a greater measure of recognition and 
protection.
    Similarly, we are gratified that the League has adopted stadium 
financing mechanisms that will lead to increased private contributions 
to stadium construction. The draft Statement of Principles acknowledged 
the importance of a public-private partnership in stadium financing. It 
called for exploring new funding mechanisms upon which to expand that 
partnership. The League's new stadium financing program is helpful to 
taxpayers and consistent with our mutual discussions and 
understandings.
    We appreciate the League's good faith response to municipal and 
taxpayer concerns. We look forward to a continuation of this very 
constructive atmosphere as we work together on matters of common 
interest.
    With best regards, I remain.
            Yours very truly,
                                            Marc H. Morial,
                                                             Mayor.
                                 ______
                                 

    Mr. Tagliabue. I will be prepared to take any questions 
that committee members may have. Thank you very much.
    Senator Specter. Thank you, Commissioner.
    [The prepared statement of Mr. Tagliabue follows:]
                  Prepared Statement of Paul Tagliabue
    Mr. Chairman, and members of the Committee, thank you for the 
opportunity to appear today to offer the views of the National Football 
League on Senate Bill 952. This bill addresses two very different 
matters that, in my judgment, warrant very different responses from 
Congress. On the one hand, the bill proposes sensible provisions to 
clarify the application of the federal antitrust laws to decisions on 
the location and relocation of teams in professional sports leagues. 
These antitrust issues have, over the past two decades, been the 
subject of considerable study by this Committee, by other Senate 
Committees, and by committees in the House of Representatives.
    On the other hand, S. 952 also would impose requirements as to how 
stadium facilities used by professional football and baseball teams are 
to be financed. In our judgment, the bill would establish a rigid and 
misguided federal approach to a particularly local issue. For reasons 
that I will explain, we believe that this is inappropriate and that the 
``solution'' imposed by the bill is not only unnecessary, but would 
have serious and negative consequences for local communities, for state 
and local governments, for sports fans, and for sports teams 
themselves.
    I last appeared before this Committee in January of 1996, almost 
3\1/2\ years ago. At that time, the Committee was focused primarily on 
a series of team relocations that had occurred over the preceding 12 
months, culminating in the November, 1995, announcement that the 
Cleveland Browns would move to Baltimore. In commenting on those moves, 
I told the Antitrust Subcommittee:

         Today, there is a widespread perception--and sometimes deep 
        concern--that professional sports involve unprecedented levels 
        of financial stress and conflict, often reflected in 
        complicated court battles or other dizzying legal disputes. The 
        controversies include impasses as to planned or proposed new 
        stadiums; concerns about ``bidding wars'' pitting community 
        against community or ``franchise hopping'' in the location and 
        relocation of teams; prolonged conflicts (including work 
        stoppages) between leagues and their players' unions; and a 
        steady diet of sports, business, and legal debate on related 
        issues. * * *

    Since I offered that testimony, the National Football League has 
seen many positive developments in those areas, particularly with 
regard to its relationships with its fans and with the communities in 
which NFL member clubs are located. For example, our last two expansion 
teams, the Carolina Panthers and Jacksonville Jaguars, have continued 
their progress both on the field and in their communities. The Panthers 
owner, Mr. Jerry Richardson, has accompanied me here today. As another 
example, we returned the NFL to Cleveland, where the new Cleveland 
Browns franchise--the NFL's 31st--will take the field this summer. And 
we will decide this fall whether to add another new team, to be located 
in either Los Angeles or Houston.
    We have extended our Collective Bargaining Agreement on two 
occasions, thus ensuring labor peace well into the next decade. And we 
have expanded the range of community and charitable programs that 
benefit our fans and the public, including a new $100 million effort to 
support youth football programs in communities throughout the country.
    Finally, we have addressed issues of team stability in a number of 
ways, including by working with state and local governments and 
business leaders to resolve stadium issues on a win-win basis in a 
number of communities.
    Specifically, the League and its teams, together with the NFL 
Players Association, have implemented programs for League-wide 
financial support and assistance to individual teams seeking to 
construct new stadiums or to make major improvements in existing 
stadiums. Thus, in this decade, NFL team and League representatives 
have worked with state, county and city governments in 17 different 
states on 23 successful projects for the construction of new stadiums 
principally though not exclusively for the use of NFL teams \1\ or for 
major renovations and improvement of stadiums used by NFL teams.\2\ 
Each of these projects involved, in one measure or another, public and 
private sector cost sharing and financing partnerships.
---------------------------------------------------------------------------
    \1\ Specifically, 17 new stadiums (in 12 different states), with 10 
already completed or in advanced stages of construction and another 6 
stadiums committed to be built.
    \2\ Specifically, 6 stadium renovation or improvement projects at 
various stages of completion (in 5 different states).
---------------------------------------------------------------------------
    These 23 successful projects involve a wide range of different 
types of stadiums and a variety of arrangements for allocating both 
stadium and related infrastructure costs among public and private 
parties, with each project tailored to local team and/or community 
needs, expected patterns of usage, and cost factors. These range from 
the largely privately financed Washington Redskins' and Carolina 
Panthers' stadiums (in Prince George's County, Maryland, and Charlotte, 
North Carolina, respectively); through the largely publicly financed, 
multi-purpose domed stadium/convention facilities used by the Atlanta 
Falcons and St. Louis Rams; to a variety of other renovated (e.g., in 
Buffalo, New York, and Oakland, California) or new stadiums in 
communities as diverse as Denver, Detroit, Jacksonville, Nashville, 
Pittsburgh, Seattle, Tampa and elsewhere that involve public-private 
sector sharing of construction and financing costs.
    In our judgment, both the success of these efforts and the 
diversity of cost-sharing and financing arrangements involved in these 
projects demonstrate why the stadium financing features of S. 952 would 
not serve any necessary purpose and should not be enacted.
                      The Nature of NFL Operations
    A professional sports league is a unique business entity because it 
creates and markets a single, jointly produced entertainment product. 
The NFL, for example, produces athletic competition among its 31 member 
clubs, none of which can produce and present that product on its own. 
The NFL's sports entertainment product competes in the marketplace with 
the jointly produced entertainment products of other sports leagues, 
and with other entertainment products of all kinds. In the context of 
Major League Baseball, George Will recently said that even championship 
baseball teams would hold little appeal for fans if they simply played 
162 intra-squad games. The same of course is true in football or any 
other league sport.
    NFL clubs operate in a broad and highly competitive entertainment 
market. In the current decade alone, the four major professional 
leagues have added a total of 16 new teams, with more scheduled to 
begin play in the next few years. Several new leagues have been 
started, including Major League Soccer and two women's basketball 
leagues, while numerous other sports have grown substantially in 
popularity. Some cities, like Denver, Miami, Phoenix, and Tampa-St. 
Petersburg, now are home to three or four major league teams, in 
contrast to the only one or two that were located there in the 1980s. 
All of this has led to vigorous competition for the interest and 
spending of consumers on sports entertainment, a competition that is 
often intensified in particular communities by the construction of new 
facilities with attractive fan amenities.
    Apart from this competition, sports teams compete in a broader 
entertainment marketplace. This Committee has examined closely the 
explosion in entertainment options over the past ten to fifteen years 
and what those extraordinary changes have meant for national 
communication and competition policies. Consumers now have as many as 
four or five dedicated sports channels on television, along with an 
array of choices on network, cable and satellite television that grows 
by the day. Add to this mix movies, video rental, other live 
entertainment and the Internet, and it should be apparent to any 
observer that sports teams can no longer simply open the ticket window 
and expect to fill the house. We must earn the attention and loyalty of 
our fans, both in the stadium and on television. We must do that by 
providing exciting games in attractive, readily-accessed stadiums, 
well-designed and constructed for football, by providing outstanding 
stadium services in fan-friendly settings, by reciprocating loyalty 
shown to us by fans and communities, by becoming broadly involved in 
community affairs, and by actively addressing both fan interests and 
the issues that alienate fans.
                    Stadium Construction in the NFL
    Over the past ten years, we as a nation have seen a generally 
strong economy and a boom in the construction of facilities for both 
college and professional sports teams throughout the country. By no 
means has this program of building stadiums and arenas been confined to 
football. Nor are NFL teams alone in seeking to join with the public 
sector in public-private partnerships to support stadium construction.
    The number of stadium and arena projects sought or undertaken is 
directly related to several factors. One is the competitive environment 
that I discussed earlier. Fans want cleaner, more comfortable 
facilities with greater amenities. An NFL team is clearly disadvantaged 
if it must operate in an obsolete, decades old stadium when other teams 
that directly compete with the NFL team in the same community play in 
modern, comfortable, fan-friendly venues.
    Second, many of the stadiums in which NFL teams have played were 
constructed as dual purpose stadiums--for both football and baseball--
during the 1960s and early 1970s, when the nation experienced an 
explosion of interest in professional sports. Many of those facilities 
are now near the end of their useful lives and in need of extensive 
renovation or replacement.
    Third, many local and state governments have been investing in 
infrastructure and facilities for a wide range of public purposes, and 
this investment has included arenas and stadiums financed in a variety 
of different ways.
    Finally, for better or worse, sports leagues live in an era of 
player free agency, forced upon the NFL by an antitrust court, and the 
League and its member clubs have been required to cope with the 
economic consequences of a drastically changed player selection, 
allocation and contracting environment. Without question, this new 
economic reality has caused clubs to seek to upgrade their stadium 
facilities and enhance their local revenues so that they can have the 
means to provide high-quality entertainment and retain the support of 
their fans.
    As both the need for and the cost of stadium construction has 
increased, NFL clubs and local and state governments have sought to 
develop public-private partnerships to meet the challenges of providing 
proper facilities. These partnerships have been based on the 
recognition that an NFL team, and a modern stadium facility, generates 
substantial benefits for the team, the fans, and the community at 
large.
    Detractors of these efforts have suggested to this Committee and 
elsewhere that there is something nefarious or unlawful about the 
circumstances leading to the growth of public-private partnerships to 
fund stadium construction. One example is Professor Andrew Zimbalist, 
whose testimony against the NFL in one recent lawsuit was rejected by 
both the federal district judge and the Court of Appeals as without 
foundation and contrary to the antitrust laws. He has also argued to 
this Committee that it is the NFL's ``monopoly power'' that allows it 
to ``extort'' publicly financed facilities from communities. The facts 
and the marketplace realities are quite to the contrary.
    In the 1960s, the NFL faced competition in a variety of areas from 
the American Football League. Yet I know of no instance during that 
period--and Professor Zimbalist identifies none--where a stadium built 
for either an NFL or an AFL team was financed through means other than 
public funding. That period of inter-league competition thus suggests 
that a variety of factors--and not simply whether there is one or more 
than one league in a particular sport--influences both public and 
private decisions to finance and construct new stadiums. Moreover, in 
the decades since 1970 when the NFL has often operated as the sole 
major professional football league in the United States, there has been 
a steady growth in private investment in NFL stadiums, by individual 
NFL owners, NFL teams, and the League itself. In the 1990s alone, over 
a billion dollars in private capital has been committed to NFL stadium 
projects, and the NFL has revised its revenue sharing policies to 
support the private portion of the financing of stadiums.
    Others have argued that the operations of NFL teams in new stadiums 
do not generate economic activity or enhance local economies, a 
conclusory academic argument rejected by any city official who has 
experienced first hand the benefits of having an NFL team. For example, 
Jacksonville Mayor John Delaney credits the Jaguars with an annual 
contribution to his community of over $130 million, and with great 
positive influence in attracting jobs to the Jacksonville area. In St. 
Louis, the new Trans World Dome is not only the home of the Rams, but 
is used virtually daily for other events as well. It will host the NCAA 
Final Four in 2005, an event projected to generate over $90 million in 
total economic impact for the community, but which would not be 
possible if the stadium had not been built with the goal of obtaining 
an NFL team. And in Baltimore, even skeptical analysts have credited 
the new Ravens stadium with an annual economic impact in excess of $60 
million. A number of other studies similarly confirm that team and 
related stadium operations can have a major positive economic impact on 
a community.
    As I will describe in more detail shortly, the League has in recent 
years successfully identified means of enhancing private contributions 
to stadium projects and implemented a program to do so.
                 Antitrust Law and the Relocation Issue
    I have previously testified about the inappropriateness of treating 
the member teams of a league as independent business competitors whose 
joint decisions represent a ``contract, combination or conspiracy'' 
under Section 1 of the Sherman Act. Such an approach to the antitrust 
laws clearly ignores the fundamental, unique structure of sports league 
operations, because an individual team in a league cannot produce or 
sell anything of value and therefore does not represent a separate 
source of economic power, and also because NFL operations reinforce in 
every respect the partnership aspects of the business enterprise.
    Approximately 60 percent of the revenues of the average NFL club 
today come from the joint presentation of NFL games on national 
television networks. These revenues are shared equally among all clubs 
without regard to any club's market size or revenue potential. As a 
result of the sharing of these and other revenues (including, for 
example, gate receipts that are divided between the home and visiting 
teams), the economic advantages of the clubs in the better-situated 
markets are balanced, albeit not always fully offset, by revenue 
sharing with the clubs in smaller less well situated communities, such 
as Buffalo, Cincinnati, Green Bay, Indianapolis, Kansas City, or New 
Orleans. We have also instituted supplemental revenue sharing policies 
to give additional direct financial support to clubs whose revenues may 
otherwise be insufficient to field a competitive team. This kind of 
revenue sharing is inconsistent with the manner in which independent 
economic competitors conduct themselves. It is the way business 
partners conduct themselves, seeking to compete not with each other, 
but with other outside independent competitors in the marketplace, 
including other sports leagues and other sports and non-sports 
entertainment.
    In recent years, the NFL member clubs have twice modified and 
focused their revenue-sharing policies to support new stadium 
construction and renovation. I will describe those policies, and 
particularly the program of direct financial support approved earlier 
this year, later in my testimony. By agreeing to waive a portion of the 
game receipts that would otherwise be shared with visiting teams, and 
by taking the further step of directly subsidizing construction costs 
through assessments against television revenue, all League clubs are 
now contributing to the costs of stadium construction or renovation. 
Ordinary business competitors do not subsidize the construction of 
another company's manufacturing facilities or retail stores. In such a 
league context, to say that an internal decision of a sports league--
whether it relates to funding stadium construction or determining where 
to present the members' joint product and locate teams--somehow 
resembles a ``contract, combination or conspiracy'' among independent 
economic competitors simply ignores economic realities and elevates 
business form over business substance.
    Under the NFL's Constitution and By-Laws, the relocation of a team 
requires a three-fourth's vote of the League's membership. This 
reflects the formal commitment of each League franchise to all other 
member clubs to operate in a particular home location, defined as ``the 
city in which such club is located and for which it holds a franchise 
and plays its home games. * * * ''
    The Judiciary Committee's consideration of this issue in the 1980s 
was prompted by the Raiders litigation against the NFL, in which a 
federal court determined that Section 1 of the Sherman Act should apply 
to an internal league decision that a team should remain in its 
existing, League-franchised home market. In that case, a Los Angeles 
jury eventually found that the NFL had acted ``unreasonably'' in 
reciprocating the loyalty of Oakland fans (reflected in twelve 
consecutive sell-out seasons) and denying the Raiders permission to 
move the NFL's Oakland franchise to Los Angeles. As a result of that 
decision, the Raiders were allowed, over the NFL's objection, to 
abandon Oakland and a new weapon --``antitrust brinkmanship''--was 
given to sports teams that wished to act independently of their leagues 
in determining where to operate.
    Prior to the Raiders litigation, a sports league franchise was 
viewed as a license to serve the league's fans and to play league games 
in a prescribed geographical area. A franchise was the means by which 
the league created a stable, continuous relationship with a community, 
subject to change only by league decision, ordinarily through a supra-
majority vote.
    The place of the Raiders' litigation in sports antitrust matters 
has, however, been thoroughly misdescribed in the prior hearings before 
this Committee. Perhaps no testimony was more striking for its 
disregard of this history than that of Professor Rosentraub last week. 
He referred to Commissioner Rozelle's pledge, at the time of the merger 
of the NFL and the AFL, to retain teams in their current locations and 
not to relocate teams as a result of the Congressionally-approved 
consolidation of the two leagues. The NFL lived up to that pledge in 
implementing the merger in the 1960s and 1970s. And in seeking to have 
the Raiders continue their operations in Oakland, the NFL paid a heavy 
price by litigating with the Raiders in the 1980s. Indeed, Commissioner 
Rozelle testified in the Los Angeles court that his pledge to Congress 
with respect to team stability was an important reason for his 
opposition to the Raiders' proposed move. In these circumstances, for 
Professor Rosentraub to testify that the NFL ``reneged'' on Pete 
Rozelle's commitment is both a serious misapprehension of the rulings 
in the Raiders' case and the kind of half-truth that does not form the 
basis for sensible legislative action.
    The concept that sports leagues can properly determine the 
locations of their member teams prior to the Raiders' case reflected 
the recognition that, in determining the location of a league's 
franchises, league members ``are not competitors in the economic sense. 
* * * They are, in fact, all members of a single unit competing as such 
with other similar professional leagues.'' \3\ Not coincidentally, 
prior to the Raiders decision, NFL clubs had been committed to and 
stable in their home territories for decades.
---------------------------------------------------------------------------
    \3\ San Francisco Seals, Ltd. v. National Hockey League, 379 F. 
Supp. 966, 969-70 (C.D. Cal. 1974) (rejecting on summary judgement 
antitrust challenge to the NHL's denial of the Seal's request to move 
its NHL franchise from San Francisco to Vancouver).
---------------------------------------------------------------------------
    Since the Raiders decision, federal courts, applying the Raiders 
precedent, have often failed to recognize (and potential litigants have 
elected to ignore) the economic reality of a sports league--that league 
members are co-producers of a joint product and thus together 
constitute a single league enterprise in competition with other 
entertainment providers. Instead, certain courts have tended to raise 
form over substance, viewing each team franchise as an independent 
business competitor that is portable and transient without regard to 
its commitments as a member of the league enterprise, the needs and 
preferences of the league, or the interests of the league's fans or 
their communities.
    As a result, some clubs--all of which had agreed by contract to be 
bound by the league's internal procedures for determining franchise 
location--have been persuaded to abandon their commitments to the 
league and their fans, and unilaterally to move the club, and thereby 
move the league's operations, to a new location. If a league (other 
than Major League Baseball) seeks to enforce its contractual rights 
against such moves, it faces substantial antitrust risks.
    The antitrust weapon has been claimed not only by clubs that seek 
greener pastures elsewhere; it has also been brandished by governmental 
agencies (including state attorneys general), stadium landlords (who 
assert that they compete in a ``market'' for club tenants), and former 
club owners as well. All such parties purport to find a basis in the 
Raiders experience to threaten antitrust litigation to influence or 
prevent the League's exercise of its business judgment--for or 
against--a proposed franchise move.
    These risks and antitrust uncertainties have necessarily had a 
negative effect on League decisionmaking with respect to potential team 
moves. Regardless of its merit, each such threat raises the specter of 
burdensome, divisive, and costly litigation, similar to the Raiders 
case in the 1980s, that inevitably takes years to resolve. If claims 
that teams are entitled to move irrespective of league decisions are 
sustained--a possibility that exists especially when the issues are 
litigated before a ``home-town'' jury (as in the Raiders case)--
plaintiffs automatically receive punitive treble damages, three times 
the ``injury'' that a fact-finder may believe has been experienced.
    The National Football League has faced such threats numerous times 
over the last two decades, and it has paid the price, in litigation 
expenses and/or settlements, on several occasions. In an effort to keep 
the Raiders in Oakland, during the 1980s the NFL spent almost $50 
million in legal fees and in ultimate settlement of the antitrust 
judgment.
    In 1995, the Rams and the City of St. Louis used the threat of 
antitrust litigation in seeking to secure NFL acquiescence in the Rams' 
move from Southern California to St. Louis, even though the League's 
member clubs had originally determined that the proposed move did not 
satisfy the specific criteria of the League's guidelines for franchise 
relocation. That initial League decision was immediately met with 
public and private threats from both the Rams and the State's Attorney 
General. Faced with such threats of very large (``billions'' of 
dollars) in antitrust damages in suits to be filed in St. Louis, the 
membership reversed its initial decision and voted to permit the Rams 
to move.
    Even though we believed that we should have prevailed in any 
lawsuit, the League's judgment was understandably influenced by a 
preference for antitrust peace rather than war. And once the Rams were 
permitted to move from Los Angeles to St. Louis, St. Louis interests 
nonetheless filed suit in Federal Court, asserting that the terms of 
the League-approved move violated the antitrust laws. After years of 
litigation, the federal district court and a unanimous federal appeals 
court confirmed that the NFL had done nothing wrong.
    In 1984, reviewing the trial court decision favoring the Raiders, a 
federal court of appeals suggested changes intended to enable the NFL's 
rules and procedures governing franchise relocation--and the NFL's 
reliance upon those rules--to pass muster under the antitrust ``rule of 
reason.'' The NFL adopted the court's suggestions, as well as a set of 
objective, business criteria for evaluating proposed franchise moves in 
the future. The League, in short, has followed the court's advice and 
developed such procedures, but those have been attacked under the 
antitrust laws as well.\4\
---------------------------------------------------------------------------
    \4\ More recently, in conjunction with the U.S. Conference of 
Mayors, we have developed a ``Statement of Principles'' relating to 
relocations of NFL teams. Last week, I issued an updated set of 
relocation policies and procedures that incorporates the terms of that 
Statement of Principles and reflects the procedural framework sought by 
the Conference of Mayors. A copy of those updated relocation procedures 
is attached at Tab 1.
---------------------------------------------------------------------------
    Despite these provisions, and despite the fact that they have been 
updated to reflect the specific concerns expressed by the U.S. 
Conference of Mayors, misguided treatment of League members as 
independent economic competitors continues to confuse the antitrust 
analysis and to make any League decision susceptible to being 
characterized as an unreasonable restraint on ``competition.'' Thus, we 
know that if we rely on those criteria to bar a proposed franchise 
move, the NFL can be involved for years in expensive and internally 
divisive antitrust litigation. The dispute would likely be litigated in 
an interested forum, as was the Raiders' case; and the potential damage 
exposure associated with a court or jury's second-guessing of the 
League's internal decision can be prohibitive.
    One further point that is often overlooked in the antitrust debate 
is of special import here. If the antitrust laws are to be applied to 
strip leagues of their ability to decide about team location, they will 
necessarily give that authority to individual teams. Not only leagues 
but communities as well have been prejudiced by the misapplication of 
the Sherman Act.
              A Statutory Approach to the Relocation Issue
    My predecessor Pete Rozelle coined the phrase ``franchise free 
agency'' in the early 1980s in predicting the long-term consequences of 
the Raiders decision. He was only one of many observers who recognized 
at an early stage the inappropriateness of treating internal league 
decisions on franchise relocation as ``contracts, combinations, or 
conspiracies'' subject to the restrictions and penalties of the 
antitrust laws.
    In August 1982, for example, Senator Heflin addressed the Judiciary 
Committee on this subject. He began by recognizing that the NFL ``is 
not composed of economic competitors. They are engaged in a common 
business operation.'' He made clear that ``[a]ntitrust policies which 
permit individual team owners to ignore the leagues relationship and 
act as if they were sole proprietors do not reflect free enterprise 
principles, and they do not serve the public interest.'' Senator Heflin 
concluded, ``league agreements voluntarily entered into by league 
members should be enforced according to their terms'' and not subjected 
to the antitrust laws.
    In June 1985, the Antitrust Division of the Department of Justice 
presented its views before this Committee on the same subject. 
Supporting ``an antitrust exemption for league decisions to block 
franchise relocations,'' the Department of Justice urged that ``a 
league's franchise relocation rule should be deemed per se lawful 
unless if adversely affects competition with other leagues or is merely 
a subterfuge to disguise some other egregious anticompetitive 
conduct.'' A copy of that testimony is attached to my statement at Tab 
2.
    Today there is an ample record demonstrating that uncertainty over 
this narrow antitrust issue has had a substantial and deleterious 
effect. Congress now has an opportunity--and an ample record--to 
address this problem and to end the antitrust brinkmanship that (1) 
impedes a professional sports league's ability to make rational 
internal decisions and reasonable business judgments about its own 
affairs and (2) subjects communities to the vagaries of individual team 
decisions on the next best stadium offer without regard to a league's 
enforceable evaluation and decision on the proposed move.
    Such legislation--to treat sports leagues as a single enterprise 
for internal decisions on such matters as franchise relocation--would 
not freeze the status quo. It simply would allow a sports league to 
exercise its reasonable business judgment without the threat of treble 
damage litigation and, in doing so, to take appropriate account of 
community interests and fan loyalties.
                      S. 952 and Stadium Financing
    The core element of S. 952 is its requirement that the clubs in the 
NFL and Major League Baseball--alone among professional sports teams--
contribute ten percent of their national television revenues each year 
to a stadium construction fund, with those revenues being used to 
finance 50 percent of the cost of any new or renovated stadium. Indeed, 
the bill goes further and imposes that requirement on a retroactive 
basis for all stadium projects that have not been completed as of the 
day that S. 952 was introduced.
    We strongly oppose these provisions of S. 952. We believe that 
these provisions are unnecessary and would have negative, unintended 
effects; that the provisions unfairly ignore the very substantial 
contributions that NFL clubs make today toward stadium construction; 
that mandatory use of television revenues in this manner would unwisely 
decrease the amount of equally shared revenue received by each of the 
teams in the League and thereby threaten smaller market clubs; that the 
provisions improperly interfere with state and local decision making on 
sports facilities; and that they risk undoing what is currently the 
most successful labor partnership in professional sports.
    First, the bill is unnecessary. Needless to say, it is both prudent 
and common in most soundly-managed businesses to use increased current 
revenues--which may or may not be recurring over the long term--to 
invest in new facilities that will help to secure a business's success 
for the long term. And the NFL and its teams, together with the NFL 
Players Association through collective bargaining, have been doing just 
that with respect to the investment of current revenues into new 
stadiums.
    In his introductory statement, Senator Specter noted the growth in 
television revenues and said that ``[o]ne would think some of that 
giant revenue windfall might trickle down and be used to help finance 
new ballparks and stadiums. * * * '' The terms ``windfall,'' and 
``trickle down'' are both inappropriate here. The fact is that in the 
past 10 years, the NFL and its member clubs have directly contributed 
over $1.5 billion to the construction and renovation of stadiums 
throughout the country. And we have recently put into place an enhanced 
program that increases the common funding of stadium projects, 
especially in major markets. A copy of that resolution is attached to 
this testimony at Tab 3.\5\
---------------------------------------------------------------------------
    \5\ At our League meeting last month, we approved loans for three 
specific projects in Denver, New England and Philadelphia. Those will 
directly fund construction of the stadiums in those three communities, 
and will enhance the already-substantial private contributions to those 
projects.
---------------------------------------------------------------------------
    Second, by forcing all NFL clubs to contribute 10 percent of their 
national television revenues each year to a stadium fund, S. 952 would 
seriously disadvantage the lower revenue NFL clubs that are already 
struggling to make their revenues meet their expenses. The bill would, 
in short, exacerbate the existing pressures on teams whose revenues are 
anywhere from $6-$8 million below the League-wide average and who 
depend on equally shared revenues to remain competitive. Those teams 
would experience no corresponding decrease in their fixed operating 
costs, but would have substantially less ability to make up the revenue 
taxed away by S. 952. Far from promoting stability and competitive 
balance, this bill would sacrifice the interests of the weaker 
communities and undermine the NFL's longstanding and successful revenue 
sharing policies.
    Indeed, by reducing the equally shared television revenue of all 
NFL clubs and leaving the unshared revenues of every club untouched and 
unchanged, S. 952 sharply magnifies one of the most difficult problems 
faced by a number of NFL clubs--namely, the substantial disparity in 
overall revenues between the League's higher revenue and lower revenue 
clubs. Despite league-wide efforts to address this issue, these 
disparities result from a variety of factors, including differences in 
market size (e.g., New York with 6.8 million households vs. New Orleans 
with 628,000 or Green Bay with 385,000 and market demographics, 
adequacy of stadiums, team performance, and other competitive sports 
and entertainment offerings. In this light, the NFL today operates with 
a supplemental revenue sharing ``pool'' by which the League 
redistributes revenue to the lower revenue teams in order to assist 
them in dealing with player and other costs--with the lowest revenue 
team eligible to receive as much as $4 million annually from this 
League source.
    Yet, there continues to be a very substantial gap between the 
unshared revenues of the better-situated and performing teams, with the 
top quarter of the high revenue teams having unshared revenues (e.g., 
from certain stadium sources, advertising, and marketing opportunities) 
averaging more than $55 million in 1998 and the bottom quarter of the 
lower revenue teams averaging some $45 million from those sources. 
Further, because of the financial pressures created by player free 
agency and other player costs under the League's Collective Bargaining 
Agreement with the NFL players union, some lower revenue teams have in 
recent seasons been forced to spend 75 percent or more of their total 
revenues on player contracts and other player expenses. Obviously, this 
puts such teams under great financial and on-field competitive 
pressures--and is one of the prices being paid by NFL clubs for ``labor 
peace,'' but S. 952 would simply increase these financial instabilities 
rather than take account of them.
    In contrast to S. 952, the League's program for contributing 
financial assistance to individual teams for stadium construction 
directly ties the largest portion of the contributed assistance to 
those revenues (such as the premiums paid by ticketholders for 
preferred seating) that are generated in the new stadium itself. Thus, 
the focus of the current League program has been to use those unshared 
revenues as a source of private funding, and avoid undermining the 
effectiveness of the League's revenue sharing arrangements.
    Third, the bill would impose a uniform national standard in 
derogation of local public decisions about how to use community 
resources. As mentioned at the outset, we have worked very closely in 
recent years with state and local authorities throughout the country to 
seek to ensure win-win solutions to the problem of obsolete stadium 
facilities, which solutions in turn promote franchise stability. 
Stadium projects have received the most searching evaluations and have 
often been the subject of specific referenda. We have sought to develop 
public-private partnerships that fairly apportion the costs of stadium-
related projects and that distribute the benefits of those projects 
throughout the community. In each of these cases, city and state 
officials made exactly the kind of decision they were elected to make--
namely, how to allocate public resources. There is no reason for 
Congress to step in and second-guess either the decisions themselves, 
or the ability of state and local officials to make them.
    Fourth, S. 952 would seriously threaten the League's collective 
bargaining agreement, a point that I know Gene Upshaw will discuss in 
more detail. Our current labor agreement, which includes substantial 
court-ordered free agency, is based on a sharing of revenues, including 
television, between clubs and players, and required spending in certain 
amounts. This structure was reached only after work stoppages, lengthy 
antitrust litigation, and intensive bargaining. As noted above, it has 
created some significant economic challenges for the League, which we 
have worked hard to address. But it has largely worked for both the 
clubs and the players and has been extended on two occasions. As a 
result, the NFL is the only major sports league not to have a strike or 
lockout during the 1990s. If key premises of this collective bargaining 
agreement are negated, as S. 952 would do, this carefully negotiated 
economic balance will be upset, and labor strife will be much more 
likely in the future.
    The players recognize that they benefit from new and improved 
stadium facilities and the Union has worked with us in a constructive 
way to assist in funding individual projects. The Union has properly 
agreed to exclude certain amounts from the sharing formula to assist in 
funding stadiums and I am confident that we can continue successfully 
to negotiate such arrangements in the future. But those arrangements 
should be reached through negotiation between the parties and within 
the framework of the overall collective agreement.
                 Television Policy and the 1961 Statute
    S. 952 would amend federal law in two respects insofar as it bears 
on NFL television policy. First, it would condition the continued 
effectiveness of the 1961 statute on establishing a fund for stadium 
construction out of national television revenues. Second, it would 
ensure that the provisions of the 1961 Act apply to forms of television 
such as cable and satellite telecasts, but not including pay-per-view 
telecasts. We believe that the latter provision is constructive, 
consistent with changes in technology and viewing patterns over the 
past 40 years, as well as the original intent of the Act, and that such 
a clarification of Federal law would serve the public interest.
    The 1961 Act was passed because Congress recognized that without 
it, many teams and their fans would be unable to make effective use of 
television. Under that Act, the NFL has created the most pro-consumer 
television plan in sports today. Every regular season and playoff game 
is televised on free over-the-air television. Even the League's Sunday 
night game televised nationally each week on the cable network ESPN, 
are shown on over-the-air stations in the home communities of the 
participating teams. The NFL has maintained this strong commitment to 
broadcast television even while it has grown from 12 teams in 1960 to 
31 teams today and even though network television has experienced 
dramatic changes as a result of competition from cable, satellite, and 
other options. No other professional league is today similarly 
committed to broadcast television.
    Earlier this decade, Congress directed the Federal Communications 
Commission to study, among other matters, the NFL's operations under 
the 1961 statute. The FCC's final report in 1994 found that the NFL's 
television policies were consistent with the public interest and 
recommended no amendments to limit the application of the 1961 Act.
    It is of course true that the NFL clubs will earn very substantial 
revenues from our network television contracts. These revenues, a 
substantial portion of which must be paid to NFL players, are equally 
shared among the member clubs and enable teams in communities varying 
widely in size and circumstances to compete successfully on the playing 
field. In addition, they represent a substantial infusion of new funds 
into NFL communities and contribute directly to the economic well being 
of those cities and their residents. Over the life of the current 
contracts, each NFL team will receive over $500 million in television 
revenues. That money is spent directly in the home community in the 
form of taxes, salaries paid to employees (who in turn buy homes, pay 
taxes, and the like) and purchases of goods and local services. The 
economic impact of the League's television contracts extends well 
beyond the team itself.
    Simply put, the Sports Broadcasting Act has worked precisely the 
way Congress intended, and there is no justification for tampering with 
it.
          * * * * *
    Thank you for the opportunity to appear today and I look forward to 
responding to any questions.
                                 ______
                                 

                                 TAB 1

        Policy and Procedures for Proposed Franchise Relocations
    Article 8.5 of the NFL Constitution and Bylaws vests in the 
Commissioner the authority to ``interpret and from time to time 
establish policy and procedure in respect to the provisions of the 
Constitution and Bylaws and any enforcement thereof.'' Set forth below 
are policy and procedures to apply to future League consideration, 
pursuant to Section 4.3 of the Constitution and Bylaws, of any proposed 
transfer of a club's home territory.
    Article 4.3 requires prior approval by the affirmative vote of 
three-fourths of the member clubs before a club may transfer its 
franchise or playing site to a different city either within or outside 
its existing home territory. Article 4.3 confirms that each club's 
primary obligation to the League and to all other member clubs is to 
advance the interests of the League in its home territory. This primary 
obligation includes, but is not limited to, maximizing fan support, 
including attendance, in its home territory. Article 4.3 also confirms 
that no club has an ``entitlement'' to relocate simply because it 
perceives an opportunity for enhanced club revenues in another 
location. Indeed, League traditions disfavor relocations if a club has 
been well-supported and financially successful and is expected to 
remain so. Relocation pursuant to Article 4.3 may be available, 
however, if a club's viability in its home territory is threatened by 
circumstances that cannot be remedied by diligent efforts of the club 
working, as appropriate, in conjunction with the League Office, or if 
compelling League interests warrant a franchise relocation.
    Article 4.3 also reflects the League's collective judgment that 
unassigned franchise opportunities (including ``second franchise'' 
opportunities in the home territory of a member club) are owned by the 
League's members as a collective whole and, by definition, that no club 
has rights to more than a single ``home territory.'' Such collective 
League opportunities may be acquired by an individual club only by an 
assignment reflecting the consent of the League and subject to its 
generally applicable voting requirements.
             a. negotiations prior to league consideration
    1. Because League policy favors stable team-community relations, 
clubs are obligated to work diligently and in good faith to obtain and 
to maintain suitable stadium facilities in their home territories, and 
to operate in a manner that maximizes fan support in their current home 
community. A club may not, however, grant exclusive negotiating rights 
to a community or potential stadium landlord other than one in its 
current home territory.
    2. All clubs, at any time during their stadium negotiations, are 
free to seek the assistance of the League Office and the Stadium 
Committee, on either a formal or informal basis. If, having diligently 
engaged in good faith efforts, a club concludes that it cannot obtain a 
satisfactory resolution of its stadium needs, it may inform the League 
Office and the stadium landlord or other relevant public authorities 
that it has reached a stalemate in those negotiations. Upon such a 
declaration, the League may elect to become directly involved in the 
negotiations.
    3. The League's policy and procedures on franchise relocation do 
not restrict any club's ability to discuss a possible relocation, or to 
negotiate a proposed lease or other arrangements, with a community 
outside its home territory. Nor do they restrict the ability of 
multiple clubs to negotiate terms of a proposed relocation with a 
single community.
    In evaluating a proposed franchise relocation and making the 
business judgment inherent in such consideration, the membership is 
entitled to consider a wide range of appropriate factors. Each club 
should consider whether the League's collective interests (which 
include, for example, the League's television interests, the League's 
interest in strong and geographically distributed franchises, the 
League's interest in securing attractive stadium facilities in which to 
play its games, and the League's interest in having financially viable 
franchises) would be advanced or harmed by allowing a club to leave its 
assigned home territory to assume a League owned opportunity in another 
community. These collective interests generally include having clubs in 
the country's most populous areas, taking into account competitive 
entertainment alternatives, stadium options, and other factors.
    Like proposed transfers to a different home territory, a transfer 
of a club's playing site to a different location within its home 
territory may also raise issues of League-wide significance. 
Accordingly, while these procedures apply to any proposed move to a new 
home territory, the Commissioner may also require that some or all of 
these procedures be followed with respect to a proposed move within a 
club's existing home territory.
    b. procedures relating to notice and evaluation of the proposed 
                                transfer
    Before any club may transfer its franchise or playing site outside 
its current home territory, the club must submit a proposal for such 
transfer to the League on the following basis:
    1. The club must give the Commissioner written notice of the 
proposed transfer, including the date on which the proposed relocation 
is to become effective, and publish the notice in newspapers of general 
circulation within the incumbent community. The notice must be filed no 
later than February 15 of the year in which the move is scheduled to 
occur. The League will provide copies of the notice to governmental and 
business representatives of both the incumbent community and the 
community to which the team proposes to move, as well as the stadium 
authority (if any) in the incumbent community (the ``interested 
parties'').
    2. The notice must be accompanied by a ``statement of reasons'' in 
support of the proposed transfer. The statement must address each of 
the factors outlined in Part C below, and may also identify and discuss 
any other relevant business factors that the club believes support its 
request to move. The Statement must also include all of the material 
noted in Appendix One.
    3. With the assistance of appropriate League committees, the 
Commissioner will evaluate the proposed transfer and report to the 
membership. The Commissioner may also convene a special committee to 
perform factfinding or other functions with respect to any such 
proposed transfer.
    4. Interested parties will have an opportunity to provide oral and/
or written comments regarding the proposed transfer, including at a 
public hearing conducted by the League in the community from which the 
team seeks to relocate; written comments may be submitted within 15 
days of the conclusion of such hearing.
    5. Following the Commissioner's report on the proposed transfer, 
the proposal will be presented to the membership for action in 
accordance with the Constitution and Bylaws, either at a Special 
Meeting of the League held for that purpose or at the Annual Meeting.
    6. After any League vote on a proposed relocation, the League will:
    i. Publish, within 30 days of any relocation decision, a written 
statement of reasons in newspapers of general circulation within the 
incumbent community setting forth the basis of its decision in light of 
the League's rules and procedures for evaluating franchise relocation; 
and
    ii. Deliver copies of its written statement of reasons to the local 
governments of the community from which the club seeks to relocate and 
any sports authority or similar entity with jurisdiction over the 
stadium or facility from which the club seeks to relocate.
 c. factors that may be considered in evaluating the proposed transfer
    The League has analyzed many factors in making prior business 
judgments concerning proposed franchise relocations. Such business 
judgments may be informed through consideration of the factors listed 
below, as well as other appropriate factors that are considered 
relevant by the Commissioner or the membership.\1\
---------------------------------------------------------------------------
    \1\ Most of the factors were contained in a bill reported by a 
Senate committee in 1984; they essentially restate matters that the 
League has considered important in connection with team location 
decisions in the past. Certain factors included in the Senate bill have 
been modified, and certain new factors have been added, to reflect 
changed circumstances and the League's historical experience since 
1984. These factors are also contained in a ``Statement of Principles'' 
relating to franchise location developed by the League in consultation 
with the U.S. Conference of Mayors.
---------------------------------------------------------------------------
    Any club proposing to transfer should, in its submission to the 
Commissioner, present the club's position as to the bearing of these 
factors on its proposed transfer, stating specifically why such a move 
would be justified with reference to these considerations. In reporting 
to the membership, the Commissioner will also address these factors.
    In considering a proposed relocation, the Member Clubs are making a 
business judgment concerning how best to advance their collective 
interests. Guidelines and factors such as those identified below are 
useful ways to organize data and to inform that business judgment. They 
are intended to assist the clubs in making a decision based on their 
judgment and experience, and taking into account those factors deemed 
relevant to and appropriate with regard to each proposed move. Those 
factors include:
    1. The extent to which the club has satisfied, particularly in the 
last 4 years, its principal obligation of effectively representing the 
NFL and serving the fans in its current community; whether the club has 
previously relocated and the circumstances of such prior relocation;
    2. The extent to which fan loyalty to and support for the club has 
been demonstrated during the team's tenure in the current community;
    3. The adequacy of the stadium in which the club played its home 
games in the previous season; the willingness of the stadium authority 
or the community to remedy any deficiencies in or to replace such 
facility, including whether there are legislative or referenda 
proposals pending to address these issues; and the characteristics of 
the stadium in the proposed new community;
    4. The extent to which the club, directly or indirectly, received 
public financial support by means of any publicly financed playing 
facility, special tax treatment, or any other form of public financial 
support and the views of the stadium authority (if public) in the 
current community;
    5. The club's financial performance, particularly whether the club 
has incurred net operating losses (on an accrual basis of accounting), 
exclusive of depreciation and amortization, sufficient to threaten the 
continued financial viability of the club, as well as the club's 
financial prospects in its current community;
    6. The degree to which the club has engaged in good faith 
negotiations (and enlisted the League office to assist in such 
negotiations) with appropriate persons concerning terms and conditions 
under which the club would remain in its current home territory and 
afforded that community a reasonable amount of time to address 
pertinent proposals;
    7. The degree to which the owners or managers of the club have 
contributed to circumstances which might demonstrate the need for such 
relocation;
    8. Whether any other member club of the League is located in the 
community in which the club is currently located;
    9. Whether the club proposes to relocate to a community or region 
in which no other member club of the League is located; and the 
demographics of the community to which the team proposes to move;
    10. The degree to which the interests reflected in the League's 
collectively negotiated contracts and obligations (e.g., labor 
agreements, broadcast agreements) might be advanced or adversely 
affected by the proposed relocation, either standing alone or 
considered on a cumulative basis with other completed or proposed 
relocations;
    11. The effect of the proposed relocation on NFL scheduling 
patterns, travel requirements, divisional alignments, traditional 
rivalries, and fan and public perceptions of the NFL and its member 
clubs; and
    12. Whether the proposed relocation, for example, from a larger to 
a smaller television market, would adversely affect a current or 
anticipated League revenue or expense stream (for example, network 
television) and, if so, the extent to which the club proposing to 
transfer is prepared to remedy that adverse effect.
                           d. existing leases
    1. No request to relocate shall be unconditionally approved, nor 
shall a relocation be allowed to take effect, if it would result in a 
breach of the club's current stadium lease. This provision shall not 
apply if the club and its landlord agree to terminate the lease or if 
there is a final court order terminating the lease or concluding that 
the lease does not preclude a relocation.
    2. A decision by the league conditionally or unconditionally 
authorizing a member club to relocate shall not affect the 
enforceability under state law of a stadium lease to which that member 
club is a party.
            e. payments associated with an approved transfer
    If a club's proposal to relocate to a new home territory is 
approved, the relocating club will ordinarily be expected to pay a 
transfer fee to the League. The transfer fee will compensate other 
member clubs of the League for the loss of the opportunity appropriated 
by the relocating club and/or the enhancement (if any) in the value of 
the franchise resulting from the move.
    The Commissioner may recommend a transfer fee to the membership and 
Finance Committee for consideration in connection with any proposed 
transfer that he recommends be approved. Among the factors to be 
considered in the recommendation of such fee will be:
    1. The income streams available to the club in its new location and 
the likelihood that they will be realized (which may be affected by 
community or business guarantees or similar undertakings);
    2. The income streams historically available to the club in its 
previous location, and the incremental income streams (if any) that 
could reasonably be expected to be made available to the club in its 
old location;
    3. The expenses to be borne by the club in its current and proposed 
locations;
    4. The expenses that could reasonably be expected to be assumed by 
parties other than the club if the relocation does not take place;
    5. The desirability of the club's current and proposed stadia as 
locations for professional football games;
    6. The club's current status under any revenue sharing plans then 
in effect and its anticipated status if the move were approved;
    7. The effect of the proposed relocation on current or anticipated 
League-level revenue and expense streams; and
    8. The demographics of the club's old and new markets.
    The Commissioner's recommendation of a transfer fee will not be 
based on any effect that the proposed move would have on any salary cap 
or similar player-employment arrangements.
    The membership will determine the transfer fee (or, in the 
alternative, a recommended, binding method for determining the transfer 
fee), if any, at the time it approves any proposed club relocation. The 
terms on which the transfer fee will be paid will be set forth in the 
resolution itself, and will be reflected in appropriate documentation 
acceptable to the commissioner and the Finance Committee.
    In addition, in certain circumstances, the League's collective 
interests may depend upon the maintenance of quality franchises in 
specific geographic areas. If a team proposes to relocate into, or to 
relocate from, such an area, in evaluating the proposed relocation, the 
Commissioner will and the membership may take into account, in 
determining the appropriate transfer fee (if any), the League's 
interest in encouraging the proposed relocation, discouraging the 
proposed relocation, or permitting the relocation on terms that would 
permit the League to restore a meaningful presence in the area being 
vacated by the relocating club.
    Finally, if League-level revenue or expense streams or visiting 
team shares are projected to be adversely affected by a proposed 
relocation, on either a short-term or long-term basis, based upon a 
recommendation by the Commissioner and Finance Committee the relocating 
club will be required to indemnify other members of the League for 
adverse effects that could result from the proposed relocation. If such 
recommendation is included by the membership in the resolution 
authorizing the move, the Commissioner will, in consultation with the 
Finance Committee, negotiate with the relocating club appropriate 
indemnification arrangements, including the extent to which the 
relocating club may participate in League revenue sharing pools, to be 
reflected in documentation acceptable to the Commissioner and the 
Finance Committee.

    [Editor's note: Tab 2 referred to in the text appears in S. Hrg. 
99-496, ``Professional Sports Antitrust Immunity,'' Committee on the 
Judiciary, dates February 6, March 6, and June 12, 1985.]
                                 ______
                                 

                                 TAB 3

                    1999 Resolution G-3.--As Amended
    Whereas, it is appropriate to improve the League's current policies 
to support new stadium construction through club seat sharing 
exemptions, as reflected in the club seat sharing exemption guidelines 
adopted by the League in 1994 (the ``Guidelines''), and through PSL 
sharing exemptions;
    Whereas, a revised policy can facilitate new stadium construction 
projects by (1) making upfront League loans in support of Clubs' 
private contributions to such projects (rather than annually exempting 
from sharing the visiting team share (``VTS'') of club seat premiums 
over a period up to 15 years), and (2) assuring that League loans will 
amount to at least 34 percent of an affected Club's private 
contribution to a project;
    Whereas, such League loans should be subject to member club 
approval on a case-by-case basis;

    Be it Resolved:

    (1) That for any stadium construction project involving a private 
investment for which an affected Club makes a binding commitment from 
now through the 2002 NFL season (through March 31, 2003), the League 
shall make a loan to the affected Club to support such project based on 
the amount that the affected Club has committed to such project as a 
private contribution (the ``Private Contribution'');
    (2) That the amount of such League loan shall range from 34 percent 
to 50 percent of the Private Contribution, determined on a case-by-case 
basis based on the size of the Private Contribution, with incremental 
League loans in excess of 34 percent generally to be made available to 
facilitate stadium construction projects in the largest markets that 
are home to an NFL Club, and with the League loans in smaller markets 
generally limited to 34 percent of the Private Contribution;
    (3) That the Commissioner is authorized to make arrangements for 
the League to borrow from commercial or institutional lenders funds to 
make such League loans, with the funds to be repaid to such lenders 
over an appropriate time period (10 years or such other period as may 
be determined by the Finance Committee):
    (4) That the specific borrowings from commercial or institutional 
lenders related to any stadium construction project must be approved as 
part of the League's approval of a League loan to such project, with 
the borrowings to be repaid principally from the VTS of club seat 
premiums generated by such project, and, to the extent that the VTS of 
club seat premiums is insufficient to repay such loans, with any 
incremental funds needed for repayment to be assessed against the 
League's network television revenues:

    Further Resolved:

    (1) That if PSL's are sold with respect to a particular stadium 
construction project, such PSL's shall be eligible for an exemption 
from sharing in accordance with current policies;
    (2) That the amount of VTS exempted in respect of PSL's sold shall 
be offset against the principal amount of League loans available for 
the project; and
    (3) That for purposes of determining whether a project is eligible 
for incremental League loans, only the first $75 million of PSL 
proceeds shall be treated as a portion of the Private Contribution;

    Further Resolved:

    (1) That any League loan under the League policy adopted by this 
resolution, as between an affected Club and the League, shall be 
forgiven over the term of the aforementioned League borrowing on an 
equal annual basis; and
    (2) That, if an affected Club that receives a League loan under the 
League policy adopted by this resolution (or a controlling interest 
therein) is subsequently sold other than to a member or members of an 
owner's immediate family (as defined in the NFL Constitution and 
Bylaws) before the final maturity date of the League loan, then the 
selling party shall repay to the League from the sale proceeds at 
closing an amount equal to the outstanding principal balance on the 
League loan; and

    Further Resolved, that in order for a stadium construction project 
involving a Private Contribution to qualify for a League loan, the 
conditions set forth in Attachment A to this resolution must be 
satisfied.
          submitted by finance committee and stadium committee
    Reason and Effect: To modify and simplify the League's policies 
with respect to stadium construction projects to provide for, among 
other things, (1) a standard 34 percent League loan towards the private 
contribution to such projects, (2) such League loan to be made upfront 
at the beginning of such projects from funds to be borrowed by the 
League, and (3) an incremental League loan (in excess of 34 percent) in 
respect of such projects in the largest markets.

 
------------------------------------------------------------------------
                   VOTE                             DISPOSITION
------------------------------------------------------------------------
For  29  ................................  Adopted
Against  2 (Cincinnati, Oakland).........  .............................
Abstain  0...............................  .............................
------------------------------------------------------------------------

Attachment A

    (a) The League must approve a resolution specifically directing the 
making of a loan in respect of a particular stadium construction 
project, following an evaluation of (1) the necessity of a new or 
renovated stadium in a market in terms of the suitability, economic 
competitiveness, and physical condition of the existing facility, the 
stadium's importance to League franchise stability, the League's 
concerns regarding its national image and presence, the importance of 
an affected market to the League's national television ratings, and 
other League business priorities, and (2) the specific attributes of 
the project, including the scope and cost of the project relative to 
the economics in a market and the League as a whole, the balance of 
projected shareable and non-shareable revenue streams and the 
construction costs associated with each, whether a renovation project 
is a ``qualifying'' project (as defined in the Guidelines), and similar 
factors:
    (b) Such resolution must be adopted and the stadium construction 
project must be committed to by both public and private parties, from 
now through the 2002 NFL season (through March 31, 2003);
    (c) The stadium construction project must be a ``public-private 
partnership'' to which public authorities and an affected Club each 
have committed funds;
    (d) The project must not involve any relocation of or change in an 
affected Club's ``home territory'' (as defined in the Constitution and 
By-laws);
    (e) Increases in the visiting team share generated by the new or 
renovated stadium must meet the standards set forth in the Guidelines; 
and
    (f) The NFL Players Association must agree to exclude from DGR, 
over a reasonable period of time on a straight-line amortization basis, 
the entire amount of the Private Contribution, together with an amount 
equal to the imputed interest on the Private Contribution at a 
commercially reasonable interest rate.

    Senator Specter. Our final witness is Mr. Rick Horrow, 
president of Horrow Sports Ventures, a Miami-based sports 
consulting firm. He coordinated the creation of the Miami 
Sports Authority and the NBA expansion Miami Heat, as well as 
the early stages of Joe Robbie Stadium. He has been involved in 
facility development in many cities, is a contributing author 
to the book  The Law of Professional and Amateur Sports, and 
hosts a weekly TV show, ``Sports Report.''
    Thank you for joining us, Mr. Horrow, and the floor is 
yours.

                  STATEMENT OF RICHARD HORROW

    Mr. Horrow. Thank you, Senator, and thank you for the 
opportunity to address the committee on this bill. I would also 
like to take the opportunity to provide a general overview of 
the facility development industry based on my experience of 
putting together public-private partnerships.
    The decade of the 1990s has produced unprecedented 
development of entertainment infrastructure, both nationally 
and internationally--all told, 79 major league stadiums and 
arenas modernized or developed. This is in addition to 70 minor 
league facilities; 12 motor sports facilities; 30 convention 
centers; as the Commissioner has mentioned, 23 NFL facilities; 
and 18 Major League Baseball facilities; overall, 256 sports, 
arts, convention and entertainment facilities developed in the 
United States this decade at a total cost of over $19.4 
billion.
    Very importantly, though, there have been 25 public 
facility referenda submitted for voter approval since 1993. Of 
those, 21 have been successfully approved by the voters, 
including the largest single-issue public development facility 
referendum, a nine-facility package in Oklahoma City. Clearly, 
regional leaders now understand that the development of 
stadiums, arenas, motor sports facilities, convention 
facilities, performing arts centers and other entertainment 
infrastructure is a critical component of the ongoing 
maturation of any region. And in all cases, creative, flexible 
and locally-based public-private partnerships are absolutely 
necessary in developing these types of facilities.
    The public financing components are primarily focused on 
bonds, supported by multiple public tourist and user-oriented 
revenue streams directly and indirectly linked to economic 
development, job creation and long-term community growth, just 
like local business financial formulas for other types of 
industrial relocation competitions. And examples of this model 
abound.
    The State of Florida pioneered the passage of a sales tax 
rebate legislation in the mid-1980s, diverting nearly $2 
million annually per project from sales taxes generated from 
the economic impact of stadiums, arenas and other Florida 
infrastructure. The legislation has been used to develop 
facilities in Miami, Fort Lauderdale, Tampa, Orlando, 
Jacksonville, and other Florida regions in the last 15 years.
    Texas has created a series of enterprise zones which allow 
for user-oriented revenue streams to assist in the development 
of entertainment infrastructure as well. And Seattle user 
assessments on stadium-related restaurants, car rentals, vanity 
license plates and other sources allowed for facility 
construction in that region.
    Now, while each situation is primarily driven by local and 
State financing, development and legal concerns, it is clear 
that successful public-private partnerships have been viewed as 
long-term community and regional investments consistent with a 
generational obligation to retool and to modernize critical 
infrastructure. There are a number of quantifiable and 
intangible benefits that have been accepted by over 100 regions 
that have successfully implemented major and minor league 
sports and entertainment facilities during this decade.
    First, the facilities have been perceived to generate 
substantial economic impact during construction. The successful 
November 1998 campaign coordinated by the city of San Diego and 
the Padres introduced a Deloitte and Touche study indicating 
that stadium construction alone would result in $1.1 billion in 
spending and create 17,000 jobs.
    Second, successful projects have also generated substantial 
retail, sales and development activities surrounding these 
facilities. As Jacobs Field opened in Cleveland in 1995, more 
than 20 restaurants or retail establishments have opened after 
that. And more than 85 store fronts have been renovated, at a 
cost of $1.2 million. The downtown development-oriented Gateway 
Project has created 6,200 permanent jobs since 1994, generating 
$6.5 million in payroll taxes.
    The third major impact involves the major and special 
events that will occasionally be attracted to a new facility. 
Recent Super Bowls in San Diego, Arizona, New Orleans and Miami 
have each generated over $250 million of new spending to their 
respective local economies.
    Fourth, many communities will identify the intangible 
impact of a sports franchise and corresponding facility on its 
marketability and potential to attract new business. The 
Jacksonville Chamber of Commerce spoke about the Jacksonville 
Jaguars and Alltel Stadium as being indirectly responsible for 
creation of upwards of 50,000 new jobs by virtue of companies 
expanding or relocating to Jacksonville as a consequence of a 
successful marketing campaign.
    And, finally, although more difficult to quantify, many 
community leaders have advocated a franchise facility as a 
critical component of image enhancement and community pride. In 
fact, the Florida Supreme Court, in Poe v. Hillsborough County, 
validated the Raymond James Stadium bond, saying, ``The Court 
finds the Buccaneers instill civic pride and camaraderie in the 
community, and that Buccaneer games and other stadium events 
also serve a commendable public purpose by enhancing the 
community image on a nationwide basis and providing recreation, 
entertainment and cultural activities to its citizens.''
    In conclusion, these types of public-private partnership 
funding of entertainment infrastructure facilities, like any 
visionary public asset, is inherently controversial and 
complex. However, once these facilities are developed, they 
provide substantial economic, tangible and psychological 
benefits for the entire region for years to come.
    Thank you very much.
    Senator Specter. Thank you very much, Mr. Horrow.
    [The prepared statement of Mr. Horrow follows:]
                  Prepared statement of Richard Horrow
    Good morning. Thank you for the opportunity to address the 
Committee on Senate Bill 952, the Stadium Financing and Franchise 
Relocation Act of 1999. I would also like to take the opportunity to 
provide a general overview of the facility development industry based 
on my experience of developing public/private partnerships.
    The decade of the 1990's has produced unprecedented development of 
``entertainment infrastructure'' both nationally and internationally. 
All told, there have been 79 major league stadiums and arenas 
modernized or developed (at a cost of $12 billion). This is in addition 
to 70 minor league facilities, 12 motorsports facilities, and 30 
convention centers. There have been 20 facilities developed or 
modernized for National Football League teams, at a cost of $4.5 
billion. In Major League Baseball, facilities have opened in Chicago, 
Baltimore, Texas, Atlanta, Colorado, Arizona, Tampa Bay, Anaheim, and 
Cleveland. Additionally, as of mid-1999, there are baseball facilities 
under construction in Seattle, Houston, Milwaukee, San Francisco, 
Detroit, Pittsburgh, San Diego, and Cincinnati. As for convention 
facilities, the United States Department of Commerce estimates that by 
2008 there will be 251 million annual convention and trade show 
attendees at 5,970 exhibitions, using 912 million square feet of 
exhibition space. Also, according to the National Golf Foundation, 
there have also been over 2,627 golf courses opened and developed this 
decade, most of which included public and private participation.
    Overall, there have been 256 sports, arts, convention, and 
entertainment facilities developed in the United States this decade at 
a total cost of over $19.4 billion. While many have been developed in 
large metropolitan areas such as Chicago (Comiskey Park), Atlanta 
(Turner Field), Los Angeles (Staples Center), and otherwise, most have 
been developed in smaller areas such as the Mercer County Arena in 
Trenton, Bi Lo Center in Greenville, and convention facilities in 
Houma, Louisiana and Savannah, Georgia. There have also been 25 public 
facility referenda submitted for voter approval since 1993. Of these, 
21 have been successfully approved by the voters, including the largest 
single issue public facility referendum (a nine-facility five-year 
sales tax initiative) in Oklahoma City.
    Clearly, regional leaders now understand that the development of 
stadiums, arenas, motorsports facilities, convention facilities, 
performing arts centers, public golf centers, and other ``entertainment 
infrastructure'' is a critical component of the ongoing maturation of a 
region. This overview will focus on three components: (i) financial 
characteristics of the public/private partnership model; (ii) community 
impacts and justifications for ``entertainment infrastructure'' 
development; and (iii) overall guidelines and parameters concerning the 
development process.
  i. financial characteristics of the public/private partnership model
    There has been considerable discussion and debate surrounding the 
amount and extent of public participation in ``entertainment 
infrastructure'' facilities. Concerning the National Football League, 
of the 20 facilities developed and modernized since 1992, roughly $3 
billion has been public funding, with approximately $1.5 billion of 
private equity and risk capital. Of the $2.5 billion contributed to 
Major League Baseball facilities since 1992, roughly 84 percent has 
been public investment. With facilities that have not been driven by 
major league or minor league sports tenants (arenas in Oklahoma City, 
New Orleans, and Grand Rapids, for example) the amount of public 
contribution is substantially greater. In all cases, however, creative 
and flexible public/private partnerships are absolutely necessary in 
developing these types of facilities.
    The most recent models are characterized by a number of elements. 
First, the facilities are designed with as much flexibility for as many 
different types of events as architecturally and aesthetically 
possible. Second, negotiations with anchor tenants have included at 
least the long-term lease commitment parallel to the length of the 
financing, coupled with an appropriate allocation of risks and rewards 
based on predictable revenue streams such as PSL's, skyboxes, club 
seats, naming rights, and the like. Third, facility development 
initiatives have attempted to ``bundle'' as many infrastructure needs 
as possible in respective comprehensive initiatives. Fourth, facility 
financing structures have involved the private business sector, coupled 
with multi-level governmental cooperation from the city, county, and 
state. Fifth, the public financing components have primarily focused on 
bonds supported by multiple public tourist and user-oriented revenue 
streams directly and indirectly linked to economic development, job 
creation, and long-term community growth.
    Examples of this new model abound. Oklahoma City packaged nine 
facilities in a ``MAPSN (Metropolitan Area Projects Strategies) 
referendum, raising $262 million from a one cent, five-year, 
``sunsetted'' sales tax. Twice approved by the voters (1993 and 1998), 
this process has also generated nearly $300 million of verifiable 
private investment, as well as over $1.1 billion of economic activity.
    International Speedway Corporation recently broke ground for-a 
major league motorsports facility in Wyandotte County, Kansas. The 
financing model contemplates a public commitment of approximately $147 
million, with the private developer committing $81.5 million of equity 
and risk. The State of Kansas will receive more than $200 million of 
predictable annual benefit over an extended period through the 
promotion and marketing of NASCAR races.
    The State of Florida pioneered the passage of ``sales tax rebate'' 
legislation in the mid-1980's, diverting nearly $2 million annually 
from sales taxes generated from the economic impact of stadiums, 
arenas, and other Florida infrastructure. The legislation has been used 
to develop facilities in Miami, Ft. Lauderdale, Tampa, Orlando, 
Jacksonville, and other Florida regions in the last 15 years.
    Texas has created a series of ``enterprise zones'' which allow for 
``user-oriented'' revenue streams to assist in the development of 
entertainment infrastructure. The Ballpark at Arlington generated $274 
million in construction by 1997; the increase from $122 million five 
years earlier allowed the facility bonds to be retired nearly 10 years 
early.
    Seattle ``user assessments'' on stadium-related restaurants, car 
rentals, vanity license plates, and other sources allowed for facility 
construction in that region. The sales impact has exceeded projections 
by nearly $20 million over a 10-year period, allowing for financial 
restructuring.
    Finally, the Province of Quebec and the City of Montreal have been 
creating a financing plan based on an Ernst & Young study identifying 
C$14-21 million of annual publicity generated by a new baseball 
facility. The public sector has been developing a plan that identifies 
at least $8 million annually for stadium development based on the 
recurring regional and national publicity.
    While each situation is primarily driven by local and state 
financing, development, and legal considerations, it is clear that 
successful public/private partnerships have been viewed as long-term 
community and regional investments consistent with the generational 
obligation to retool and modernize critical infrastructure.
     ii. community impacts and justifications for ``entertainment 
                      infrastructure'' development
    There are a number of quantifiable and intangible benefits that 
have been accepted by the over 100 regions that have successfully 
implemented major and minor league sports and entertainment facilities 
during this decade. First, the facilities have been perceived to 
generate substantial economic impact during construction. The 
successful November 3, 1998 campaign coordinated by the City of San 
Diego and the Padres introduced a study by Deloitte & Touche indicating 
that stadium construction alone would result in $1.1 billion in 
spending and would create 17,000 full-time temporary jobs, as well as 
$1.8 million in new ancillary development revenue per year. The plan 
primarily focused on the complementary spin-off development from the 
adjacent convention center, Gaslamp, and Waterfront Districts. Other 
economic impact studies have been developed along similar lines. An 
analysis prepared for the Maryland Stadium Authority suggests that an 
average Baltimore Orioles season will generate $117 million in gross 
sales, $44 million in earnings, and over 1,500 full-time jobs. Total 
statewide economic impact amounts to $226 million in gross sales, $77 
million in earnings, and 2,340 full-time jobs. The study also suggests 
that 1.6 million out-of-town fans, or 46 percent of all fans, were 
attracted to Baltimore from outside the area. These visitors spend $46 
million in the Baltimore area representing new economic growth in the 
regional economy.
    Second, successful projects have also generated substantial retail, 
sales, and development activity surrounding the facility. As Jacobs 
Field opened in Cleveland in 1995, more than 20 restaurants or retail 
establishments have opened after that; and more than 85 storefronts 
have been renovated at a cost of $1.2 million. The downtown development 
oriented Gateway Project has created 6,269 permanent jobs since 1994, 
generating $6.5 million in payroll taxes. Representative downtown 
Cleveland business organizations have suggested that the facility 
complex has provided over 300 active dates and four million additional 
visitors to Cleveland after the opening of the stadium.
    As a consequence of the 1995 opening of Coors Field in Denver, 
studies point to an increase of over $40 million in taxable sales from 
the previous year; $20 million was spent in new downtown business; and 
more than 25 restaurants have opened. Land adjacent to Coors Field, 
previously assessed at $1.77 per square foot, recently sold for 
approximately $27 per square foot. Many converted old warehouses have 
loft units that are selling for $200,000 to $300,000 per unit. One in 
every three tourists visiting Denver mentioned that they had attended 
or would like to have attended a Rockies game. Further, a report by the 
Phoenix Finance Department demonstrates that fans attracted to Bank One 
Ballpark during its first year of operation helped contribute to a 34.1 
percent increase in City sales tax revenue in the downtown area. Retail 
sales through the Summer of 1998 in the Phoenix downtown core were up 
93.8 percent over the same period in 1997. Restaurants and bars 
downtown saw an increase from $40.3 million to $52.4 million over one 
year. Hotels and motels in the 1-square mile contiguous area 
demonstrated a 6.6 percent increase, compared with a 4.3 percent 
increase city wide.
    The third major impact and justification involves the major and 
special events that will occasionally be attracted to a new facility. 
In 1997, the Greater Cleveland Convention & Visitors Bureau suggested 
that the nine post-season home games and All-Star Game for the 
Cleveland Indians had a direct $121.3 million impact on the economy of 
the region. Similarly, the Office of the New York City Comptroller 
indicating that Games One and Two of the 1998 World Series have added 
$31 million to the New York economy. Additionally, recent Super Bowls 
in San Diego, Arizona, New Orleans, and Miami have each generated over 
$250 million to their respective local economies. A study conducted by 
Sports Management Research Institute suggested the impact of Super Bowl 
XXXIII to the Miami area was $396 million, with 110,700 visitors 
spending an average of $400.03 per day over a 4.52 day average visit. 
Similarly, the Arizona State University College of Business indicated 
that the 1992 Tostitos Fiesta Bowl generated an overall economic impact 
of $133 million for the State of Arizona.
    Fourth, many communities will identify the intangible impact of a 
sports franchise and corresponding facility on its marketability and 
potential to attract business. The Jacksonville Sports Development 
Authority and Chamber of Commerce suggests that the Jacksonville 
Jaguars and Alltel Stadium enrich the local economy by an estimated 
$131 million a year from visitors buying tickets, eating at 
restaurants, and staying at hotels. Additionally, they believe that the 
new team and facility have been indirectly responsible for the creation 
of upwards of 50,000 new jobs by virtue of companies expanding or 
relocating to Jacksonville as a consequence of a successful marketing 
campaign. In 1997, Money magazine ranked it as the ninth best place to 
live in America, and the city grew more than any other city in Florida 
(with its metropolitan area population at only one million residents).
    Finally, while more difficult to quantify, many community leaders 
have advocated a franchise and facility as a critical component of 
image enhancement and community pride. In its May, 1997 report, the 
Economic Analysis Corporation provided a perspective on the 1996 
Congressional Research Service study on facility development. It 
concluded the following:

         ``Sports teams provide valuable consumption benefits to a 
        local community. These benefits include the ability of local 
        residents to follow and enjoy a home team, an increase in 
        community spirit, and a potential means to draw people to 
        downtown areas. In many respects, local government support of 
        new stadium construction is similar to local government 
        subsidization of other valuable local consumption activities, 
        such as concert halls, zoos, parks, and golf courses. * * * 
        Sports teams are a unique type of consumption good in that they 
        provide substantial benefits to many local citizens who do not 
        attend the team's games. These citizens in the local community 
        receive valuable consumption benefits merely from the presence 
        of a professional sports team. Since these citizens cannot be 
        charged directly by the team for the benefits they receive, 
        there is a stronger economic rationale for local government 
        subsidization of professional sports teams than for most other 
        publicly subsidized consumption activity.''

    In fact, the Florida Supreme Court described the public benefits of 
stadium facility construction in Poe v. Hillsborough County, 695 So.2d 
672 (the 1997 case validating the bonds to construct Raymond James 
Stadium in Tampa). The Court explained:

         ``(T)he Court finds that the Buccaneers instill civic pride 
        and camaraderie into the community and that the Buccaneer games 
        and other stadium events also serve a commendable public 
        purpose by enhancing the community image on a nationwide basis 
        and providing recreation, entertainment and cultural activities 
        to its citizens.''
   iii. overall guidelines and parameters concerning the development 
                                process
    As we enter the new millennium, the following four guidelines and 
parameters are critical to successful public/private facility 
development for ``entertainment infrastructure.''
    First, with public/private facility partnerships coming under 
increasing public scrutiny and with local electorates constantly 
reassessing priorities, communities must be creative, flexible, and 
consistent in their facility goals and objectives. Cooperation between 
and among business, political, and civic leadership is an absolute 
necessity. Further, a Master Facility Development Process that is 
inclusive of all tourism, entertainment, development, and community 
constituencies should be undertaken. In short, a consensus building 
process necessarily includes the following interests: business, 
political, private risk capital, city government, county government, 
state government, site entrepreneurs, and technical analysts.
    Second, public facilities of the new millennium will be designed as 
diverse entertainment and activity centers. As such, these facilities 
should be viewed as critical components of long-term regional 
infrastructure development, independent of any desire to attract major 
league franchises.
    Third, all new facilities require development of creative public/
private financing partnerships where the public sector provides 
investment capital to ``jump start'' the project, especially if no 
major league anchor tenant is contemplated. In these cases, the 
tangible linkage between specific public revenue sources and realistic, 
quantifiable return on the public investment is an absolute political 
and economic necessity.
    Finally, these types of ``entertainment infrastructure'' 
facilities--like any visionary public assets--are inherently 
controversial and complex. Therefore, their implementation requires 
significant (and, potentially, unprecedented) regional support from 
respective business, political, and civic leadership. However, once 
these facilities are developed, they provide substantial economic, 
tangible, and psychological benefits for the entire region for years to 
come.
          * * * * *
    Rick Horrow is the Facility Development Consultant for the National 
Football League, working on successful public-private stadium 
referendum partnerships with the Detroit Lions, the Cincinnati Bengals, 
and the San Francisco 49ers. In addition, he has been involved in 
facility development for the Baltimore Orioles, the Cleveland Indians, 
the New York Mets, and a speedway in Kansas City, Kansas. Among 
Horrow's other accomplishments was the coordination of the largest 
single-issue public-facility-development referendum ever--a $250 
million sales tax levy for nine sports and recreational facilities for 
Oklahoma City, Oklahoma. He is coordinating similar initiatives in 
Birmingham, Alabama; Hampton Roads, Virginia; and Richmond, Virginia. A 
sports lawyer, Horrow has worked with the International Speedway 
Corporation, Ladies Professional Golf Association, the Major League 
Baseball Players Association, the Continental Basketball Association, 
and the Canadian Football League. He is Visiting Expert of Sports Law 
at Harvard Law School, and is the Sports Business and Law Expert for 
Fox Sports and ``The Sports Professor'' on CBS SportsLine Internet 
Radio.

    Senator Specter. Beginning the questions with Mr. 
Richardson, when I commended you for financing your own 
stadium, I think that is the way to do it. And when I said I 
wouldn't expect any money from you, I really meant if your 
example were followed. The stadiums which are going up in 
Pennsylvania, four of them for $1 billion, are not being 
subjected to bonds or any referendum.
    When Commissioner Tagliabue talks about interfering with 
State and local decisions by this bill, the State and local 
decisions are driven largely by the threat of the team moving. 
Maryland and Baltimore put up the money to bring the Browns 
from Cleveland. That is why I have been very blunt about what I 
consider to be legalized extortion, where the cities put up a 
lot of money to build the stadiums to keep the teams there.
    But you are very successful businessman; you have proved 
that. Would you object to the removal of the antitrust 
exemption which allows the NFL teams to share TV revenues?
    Mr. Richardson. Well, in our particular case sharing of TV 
revenue is critical in our particular financial formula, so 
that is an important component to us.
    Senator Specter. Well, I agree with you. I think it is, and 
I wouldn't like to see it eliminated because it has provided 
stability and it has provided teams with revenues. But it seems 
to me that it is just the other side of the coin to say that if 
you are the beneficiary of that kind of special governmental 
treatment--listen, if you are a business and you want to 
function in a free enterprise, capitalistic system, let the 
Government keep hands off. Go ahead and do whatever you want to 
do, laissez-faire free enterprise.
    But when you are the beneficiary of this special exemption, 
then I come to the point of why should the Pennsylvania 
taxpayers pay two-thirds of the cost of the construction of the 
Eagles new stadium. Mr. Richardson, why?
    Mr. Richardson. Well, I think it might be helpful if I 
could just talk about the situation in the Carolinas first.
    Senator Specter. First.
    Mr. Richardson. As we have stated, a number of us here 
today, our judgment is that we have seen firsthand, Senator, 
when we go into communities, we talk about what is the right 
blend to deal with the stadium issue. Let's use the Carolinas 
as an example. In our case, we had a unique community in that 
we had a very aggressive business community that was willing to 
buy club seats, boxes, and premium seating that helped offset 
the mortgage payments that we had for building our stadium.
    Second, we had an unusual situation in that our fan base, 
potential fan base, was willing to buy what we call a permanent 
seat license. When you take the combination of the fact that 
the city and the county were willing to provide the land for 
us, which they did on a long-term lease, the business was very 
aggressive in their support of us in the purchasing of tickets 
and advertising, and we had a community that was willing to buy 
an unprecedented amount of PSL's, it would work for us. But if 
the PSL concept and the business community had not worked in 
our particular case, we wouldn't have been able to be 
competitive with the other cities that were interested in an 
NFL team.
    Senator Specter. Well, you have made it work, but come back 
to my question about the Philadelphia Eagles. Why should the 
taxpayers of Pennsylvania pay two-thirds of the cost of the 
Eagles stadium when the Eagles are the beneficiary of a special 
exemption that nobody else enjoys, except for baseball?
    Mr. Richardson. Well, here again, we are talking about, as 
I see it, the community itself has to decide what, in fact, 
they have an appetite for. And it appears to me, based on what 
I know about the Philadelphia situation, that the blending of 
the local and the State and the waivers the NFL is willing to 
give through our ticket revenues--and that is a result of the 
relationship that the Commissioner has with Mr. Upshaw, and the 
union and the players are willing to give up part of their 
revenue to collectively get a stadium built.
    Senator Specter. Well, the people of Pennsylvania and the 
people of Philadelphia are moving to pay two-thirds of the 
stadium construction costs for the Eagles because we do not 
want to lose the Eagles. There was a threat to lose the Eagles 
back in 1984, when there was a move to go to Arizona, and all 
hell broke loose. The owner of the Eagles couldn't go to a 
restaurant, couldn't go out publicly. There was enormous public 
indignation.
    When Mr. Horrow and Professor Klein talk about the benefits 
for a team, they are real. Senator Feinstein talks about the 
city coming together. It is enormous. There is no doubt about 
that. I have long believed that these sports franchises are 
affected with the public interest, that the fans have an 
interest. The fans had an interest in the Dodgers. The fans 
have an interest in the Eagles. It diminishes everybody who is 
an enthusiast--and Professor Klein is right; you don't have to 
go to the game, you can read about it or you talk about it. You 
are a big-league city.
    So there really is no choice when the team comes and 
threatens to move, or you have got this phenomenal bidding war 
between Hartford and Massachusetts over the Patriots, $375 
million, but that is only the starter. The State senator was 
here last week testifying that the aggregate was about $1 
billion. No price is too much to bring the Patriots down. And 
then the league worked out an arrangement. I am going to come 
to that as to what they did to help out a little bit on the 
construction.
    But I come down to this very basic fairness point. If you 
are going to have that public exemption, if you are going to 
have that ability to do what no other business does, why should 
the public subsidize the stadium?
    Do you want to try again, Mr. Richardson?
    Mr. Richardson. Well, as I have stated earlier, what has 
happened, in my judgment, is the public has made the decision 
that they are willing to make the investment to have the most 
popular sports franchise in the country in their community. And 
that is the decision that has been made in a number of cities 
across the country.
    Senator Specter. Well, decisions are made under blackmail 
and extortion. Those are pretty tough terms. I know a little 
bit about that. I don't know much about antitrust law. I really 
practiced a fair amount of it when I was a lawyer, but I used 
to be district attorney and when you hold a gun to the head of 
somebody, it is not a voluntary decision. When you are 
threatening to take the team away, it is not a voluntary 
decision.
    When you are saying we will move there if Baltimore will 
put up $200 million for the stadium, it is extortion. It is 
legalized extortion. There is really no choice that the people 
have in trying to stop the team from moving. But I don't know 
that further discussion will get us too far. That is where I 
come down.
    Let me move to Mr. Upshaw on the players. Mr. Upshaw calls 
this an unprecedented intrusion by Congress. I think it was an 
unprecedented extrusion by Congress to give you the antitrust 
exemption, Mr. Upshaw, to allow you to have revenue-sharing.
    I am prepared to leave football as a free enterprise 
proposition, but I am not prepared, speaking for myself, to let 
you have the antitrust exemption and let you move the teams 
around or have a system in place which results in my State 
paying two-thirds of $1 billion in stadium construction costs.
    I agree with the proposition that the old reserve clauses 
were unfair, that they gave too much power to the ball teams, 
and now we have gone to free agency in a very complex way. And 
when I look at the football salaries, Deion Sanders makes more 
than $7.5 million. And I look at the baseball salaries, and 
Kevin Brown just signed a $105 million contract over 7 years, 
which gives him $15 million. I saw him pitch in Philadelphia a 
couple of weeks ago and I saw him on television pitch in Los 
Angeles.
    I believe in laissez-faire and free enterprise, but I am 
troubled with the fact that when I turned on the Phillies last 
year--I could tell who is at bat this year, but last year I 
couldn't tell who was at bat. The players were all new, whether 
it was the Cubs at bat or the Phillies at bat.
    Is there some middle ground somewhere between free agency--
I was talking to you earlier about the Eagles having some great 
football players, a Super Bowl team--Reggie White and Bill 
Romanowski and Clyde Simmons and Keith Byars. The problem is 
that White is playing for Green Bay and Romanowski is playing 
for Denver and Simmons is playing for Arizona and Byars was 
playing for Miami. I am not sure where he is playing now.
    Is there some middle ground between having all the fan 
interest in their teams affected by this and preserving fair 
compensation for these athletes who are at high risk, at least 
in football?
    Mr. Upshaw. Of course, there is a middle ground. The middle 
ground is already there. The collective bargaining agreement 
specifies the middle ground. What a club owner has--and Mr. 
Richardson faces this every year. When he goes to evaluate his 
roster, he decides who he wants to keep and who he wants to let 
go, and it is based basically on, can the player contribute to 
that team.
    It becomes an economic decision. It becomes a planned 
decision. It becomes a long-range decision on what is in the 
best interests of the team. That is what free agency is. It 
gives the player a choice and it gives the club owner a choice. 
And within the set of rules that we have, a club can keep the 
players that they want.
    If they wanted to keep Reggie White in Philadelphia, they 
could have done that. They had a chance to do that. They could 
have kept Bill Romanowski. They could have kept any player that 
they wanted to have on their roster because the system allows 
them to do it. Now, the club owner then makes the decision 
based on that player's ability to play and what he can 
contribute to that team if he wants to keep him or not. So it 
is there. That is the middle ground.
    Senator Specter. Well, it is a definition as to where you 
are on middle ground. I understand that is the system and I 
understand that is where we are at the present time, but the 
consequence seems to me just extraordinary.
    Commissioner Tagliabue, you and I have been talking about 
this legislation for a long time, and I just introduced it a 
few months ago and I had been tracking what the NFL was doing 
by way of some stadium construction costs. Was the pendency of 
this legislation in any way responsible for the help which you 
extended to, say, the Patriots?
    Mr. Tagliabue. No, I don't think so.
    Senator Specter. Just coincidental?
    Mr. Tagliabue. I believe it was, yes, and I think Mr. 
Upshaw would be able to recite with me the genesis of this 
which goes back 2 years. Two years ago, in October-November, we 
were discussing an extension of our collective bargaining 
agreement, and one of the reasons that Mr. Upshaw and the 
Players Association were willing to consider that extension is 
that we were anticipating at that time a substantial increase 
in television revenue.
    And we agreed at that time, and the provision is reflected 
in our collective bargaining agreement, that we would expand 
our support for stadium construction if there were a good 
television contract or set of contracts. And that was really 
the genesis of this expansion of the program that goes back to 
October and November, I think, of 1997, if I have the----
    Mr. Upshaw. 1996.
    Mr. Tagliabue [continuing]. October and November 1996, when 
we had these extensive discussions about TV and the 
relationship of that to the league support for stadiums.
    Beyond that, the original policy goes back to 1986-87, with 
the league's support for the Miami Dolphins stadium. The league 
supported the construction of the Jack Kent Cooke Stadium here 
in Maryland with moneys that, over the first 15 years of the 
Redskins operation, we will be contributing $90 million to the 
construction of the Jack Kent Cooke Stadium. So all of those 
efforts considerably preceded this specific legislation.
    You know, I think you and I had a conversation maybe back 
at the time of the Browns relocation when we talked about the 
idea of wouldn't it be sensible, if you have got growing 
revenues, to try to invest not just in the present, but in the 
future. And I think that is what is reflected in all of these 
efforts that go back to policies that we adopted in 1986, 1987, 
expanded in the early 1990's and the re-expanded here in the 
mid- and late 1990's.
    Senator Specter. Well, our conversations go back to the 
early 1980s. I believe it was August 1982 when the Rooneys came 
to me. I was the only Senator, aside from Senator Matthias, on 
the Judiciary Committee, and Senator Thurmond agreed to 
hearings. We got you hearings in 10 days. We had one of the 
classic debates of all time with Commissioner Pete Rozelle and 
Al Davis here debating the subject of the franchise moves.
    I have been in favor of giving you an antitrust exemption 
on the franchise; I was until Mr. Upshaw objected to it today. 
I am going to have to rethink that, but I would like to see 
that stability. You and I have talked about the odd-shaped 
stadiums housing both football and baseball and the issue of 
stadium construction costs for a long time.
    How much help will there be by the NFL to the Patriots and 
the stadium construction there?
    Mr. Tagliabue. Well, I believe the latest figures that we 
have which are tied to the total project cost are about a $150 
million contribution from the league, which would match the 
$150 million private contribution by the owner of the team, Mr. 
Kraft.
    Senator Specter. Are you prepared to do that with the 
Eagles?
    Mr. Tagliabue. With the Eagles, I think we did a very 
similar number.
    Senator Specter. $150 million?
    Mr. Tagliabue. The contribution is ultimately scaled to a 
matching of the owner's private sector contribution. The 
stadium cost--
    Senator Specter. So if the owner had to put up more--if 
Pennsylvania and Philadelphia weren't putting up two-thirds and 
the Philadelphia Eagles owner put up more, you would put up 
more? You are about to give us some incentives here, 
Commissioner.
    Mr. Tagliabue. Well, I don't want to renegotiate a deal 
that has already been negotiated by the mayor and Mr. Lurie, 
but one of the differences in Philadelphia was that the 
projected cost of the stadium in Philadelphia was over $400 
million, whereas the cost of the stadium in New England was 
only $300 million. But basically we applied the same set of 
principles to those two projects.
    Senator Specter. Did you do a little better for 
Massachusetts because of the Hartford threat?
    Mr. Tagliabue. No. We applied the same set of principles to 
both projects and--
    Senator Specter. That was irrelevant? You weren't concerned 
about Hartford being the 24th market team compared to the 6th 
market team for the Patriots?
    Mr. Tagliabue. Of course, we were. That is a major part of 
our concern here, is that we keep the teams in the large 
markets where they have had large and supportive fan bases for 
many years and in those markets where we draw the television 
audience that gives us the broad base--you know, the really 
unprecedented broad base of support from the public for our 
game and for our teams.
    Senator Specter. To what extent will the NFL help on the 
construction of the Steelers stadium?
    Mr. Tagliabue. We are making a contribution there. We 
approved that league contribution to the Steelers stadium at 
our meeting last October, and I would have to get that 
resolution and submit that to you. I am not able to recite that 
off the top of my head.
    Senator Specter. But with the Patriots stadium, you say the 
league contribution will be in the range of $150 million?
    Mr. Tagliabue. If that is the owner's contribution, then we 
would basically be matching, yes.
    Senator Specter. Well, I don't know that the Eagles have a 
deal. Certainly, the Phillies don't. They are still talking 
about where the stadium is going to be located, so that perhaps 
if we can get the Eagles owner's contribution up, we can get 
the NFL contribution up. We will take a look at that.
    Mr. Tagliabue. If I could, I would like to speak to the 
television point that you asked Mr. Richardson about because I 
think it is very important, as you suggest. You know, I think 
the 1961 television statute has really served the purposes that 
Congress envisioned at the time.
    One of the key purposes was to keep cities such as Green 
Bay and teams such as the packers and the Steelers, the Chiefs 
and the Bills, which were then in the new league, operating. 
The 1961 statute, the national sale of television, free, 
broadcast television primarily, has given us the basis to keep 
those teams in existence.
    But beyond that, I think there is a direct relationship 
between the statute and the willingness of the public to 
support stadium construction through fairly-based taxes. 
Specifically, the statute has created an unprecedented broad 
base of fans for our sport through our commitment to free, 
broadcast television.
    In my experience, that is one of the reasons why the public 
is willing to accept a broad-based tax, sales taxes and other 
broad-based taxes of the type that Mr. Horrow mentions to 
support a new stadium. And I will give you an example in Denver 
and their tax, which would contrast their situation to what Mr. 
Richardson faced in the Carolinas.
    In the Carolinas, it was a very narrowly-based tax, if you 
will, user fee, on the fans and on the business community to 
build the Panthers stadium. They used these PSL's, which had 
never been used before to any extent in professional sports, 
and $180 million was paid basically by the fans and the 
businesses who would be using the stadium, that narrow group of 
roughly 68,000 people.
    In Denver, in contrast, they considered that approach, but 
there was an unwillingness for the fans to accept the PSL's. 
There wasn't as much willingness in the business community to 
go and make the kind of commitments that NationsBank and Duke 
Power and others made to the Carolina stadium. So they adopted 
the model which had proved successful on Coors Field, and that 
model was a one-tenth of 1 cent incremental sales tax; in other 
words, a dime on $100 of purchases, which the public through 
referendum concluded was a fair and very minimal, incremental 
tax that had paid off Coors Field for baseball in 7 to 8 years. 
And what they did was extend that tax to the Broncos, in 
recognition----
    Senator Specter. How much money was involved in that?
    Mr. Tagliabue. In the Broncos stadium, the tax is projected 
to raise $278 million for the public contribution to the 
stadium. But the key point from the public standpoint is that 
it is a dime on $100 of sales, which the public viewed as a way 
of distributing across a 6-county area with 1.8 million people 
who are supporting the Broncos--and they are getting the 
Broncos through free, broadcast television under the 1961 
statute. All of those people now pay that minimal tax, as 
opposed to having the total cost of the stadium go, as Mr. 
Richardson's costs did, on 68,000 fans.
    Senator Specter. Was there any discussion at all about the 
Broncos leaving if they didn't get the new stadium?
    Mr. Tagliabue. You know, there was inevitably that kind of 
discussion----
    Senator Specter. I know.
    Mr. Tagliabue [continuing]. Which was not promoted by the 
owner. It was promoted by talk radio and other things. The 
critical thing was that the tax had already been used and 
proven successful on Coors Field for baseball. When they 
adopted it for baseball, it was regarded as a minimal tax, a 
dime on $100 of sales, a penny on $10 of sales.
    Senator Specter. Well, you have repeated that three times 
now, and I understand how much it is.
    Mr. Tagliabue. But I want to emphasize why the public 
regards it as fair. And instead of taking 20 years to pay off 
Coors Field, it was paid off in 7 to 8 years. So when the 
choice came between these PSL's and other things which focus on 
a narrowly-based group of fans as opposed to a broad-based 
group of fans that watch and get the Broncos on TV, they made 
the choice through referendum. I think it is very important to 
understand that because it is an explanation in a specific case 
of how the public is viewing these stadium investments.
    Senator Specter. I do understand it and I don't have to 
hear three times as to how much it is, a tenth of a percent, 
but it adds up. It adds up to $270 million, as you point out, 
and that comes out of the taxpayer's pocket. It may come out 
slowly, but it comes out of the taxpayer's pocket. And if it 
comes out as a sales tax, it is a very regressive tax and it is 
a lot of money.
    And if you have the Carolina model where the people who are 
paying for it are the ones who use it going to the stadium, 
that is very different, or the business community which sees a 
direct result. And if you have a referendum, maybe so; maybe we 
will get a referendum on the Eagles stadium. Maybe we will do 
that and we will see if it passes or if the Eagles stay if they 
don't get themselves a new stadium at taxpayer expense.
    Mr. Upshaw, I want to come to Mr. Klein for a question, and 
Mr. Horrow, and then I will come back to you. A vote is in 
process now. We are trying to decide the issue of steel 
consumption in America and steel imports, as well as this 
issue.
    Professor Klein, the suggestion has been made that the 1922 
decision by Oliver Wendell Holmes in the baseball case was 
incorrectly decided, where they worked out that baseball, the 
American League and the National League, could cooperate. And 
the suggestion has been made that we ought to eliminate the 
baseball antitrust exemption.
    You wouldn't object to that, would you, Mr. Upshaw?
    Mr. Upshaw. Well, I am not going to get into what is good 
for baseball. I am interested in what is basically good for 
football, but the antitrust----
    Senator Specter. I am just jesting with you on that 
question.
    Mr. Upshaw. I know, but it gives me a chance to talk to----
    Senator Specter. I am going to ask the baseball people if 
they are willing to give up the players' rights when they are 
here.
    Mr. Upshaw. Oh, no, they are not willing to do that. I can 
guarantee you Don Fehr is not willing to do that.
    Senator Specter. Go ahead. You had a point you wanted to 
make.
    Mr. Upshaw. The point I wanted to make is this, and it is a 
very simple point. I think what we are doing in the NFL with 
the loans and advancement that we are making to owners on 
construction will go a heck of a long way to increase stability 
in the current market. If New England or Boston had the $150 
million, there would not have been an incentive to look 
elsewhere for it. They would have been there. That is what is 
going to happen in Denver. That is what is going to happen in 
Philadelphia. It is already going on in Pittsburgh.
    So what we are already doing is creating stability because 
we have taken away an incentive that an owner would be looking 
for outside of his own community. That is the only point I 
wanted to make.
    Senator Specter. Well, thank you, Mr. Upshaw.
    Professor Klein, the question that I am in the process of 
postulating is if we reverse the 1922 Supreme Court decision 
and Congress does that, then I have heard the economic theory 
advanced that baseball teams will go to the cities which want 
them the most, which will be the free market.
    Now, I worry about that, frankly, for the Pittsburgh 
Pirates as to what will happen to the Pirates if you have the 
elimination of the antitrust exemption. And I thanked baseball 
last week and do again for their help in keeping the Pirates in 
Pittsburgh. They have control over franchise relocation.
    But if you reverse that Supreme Court decision, then you 
wouldn't have a decision made as to where the baseball teams 
were located by a group of men in a back room somewhere, which 
is what we would be getting if we have the franchise relocation 
exemption which Mr. Upshaw doesn't like and a lot of people 
don't like. The players part company with the owners on that.
    But what would be wrong with that? What would happen there 
economically? And, Mr. Horrow, I have the same question for 
you.
    Mr. Klein. Well, the 1922 Supreme Court decision with 
regard to Major League Baseball is a much broader exemption 
than the particular antitrust exemption that you have placed in 
this proposed legislation, and I am very much in favor of it. 
It would permit the league to prevent individual teams to 
decide on the basis of their own narrow financial decisions 
where to locate rather than leaving it up to the league to 
decide what was best for the group and for the communities 
involved. So I am very much in favor of that aspect of the 
legislation.
    Senator Specter. Well, if we took away the baseball--this 
is a different issue now, taking away the baseball antitrust 
exemption, and then you would have the market determining where 
those baseball teams ought to be located. So if the Seattle 
Mariners were--there was a contrary bid from another city, the 
Mariners would go to the other city. That would be the 
economics of the situation, whichever city wanted to build them 
the best stadium, make the best deals. How about that? What 
would you think of that sort of a situation?
    Mr. Klein. I think that it is economically efficient to let 
the league decide whether the individual----
    Senator Specter. As opposed to the market?
    Mr. Klein. Well, the league is making its decisions on the 
basis of the market.
    Senator Specter. Well, maybe yes and maybe no.
    Mr. Klein. Well, but they are putting things into balance, 
for example, the loyalty of the fans, and you don't want to 
destroy the loyalty of the fans because that might decrease the 
demand for the----
    Senator Specter. Well, those are other factors, but that is 
not the market. The market would say whichever city wants to 
get the Mariners, let them get it.
    Mr. Horrow, what do you think about that?
    Mr. Horrow. Well, I think it needs to be put in the context 
of fair competition in normal industrial relocation features, 
as localities do when they compete for industries today, as I 
mentioned before.
    I think I made the point that in a number of ways, these 
facilities, which is what we are really focusing on today, need 
to be treated as important components of public infrastructure, 
regardless of the franchise that plays in it, which is why we 
have 256 of these facilities that have been developed this 
decade and why there have been a number of referendums and a 
number of public-private partnerships that have been put 
together.
    So when you look at the Denver situation, as the 
Commissioner mentioned, one of the reasons why the referendum 
succeeded to continue the financing using that sales tax method 
was the tremendous success in a downtown and urban 
redevelopment context of Coors Field. And, really, it was a 
mandate and a history on whether or not the voters of that 
five-county region saw it as appropriate to do a public-private 
partnership, and it was a good laboratory to test whether or 
not that was an appropriate way to deal with the football 
stadium because the baseball facility had been up and running 
and they could test the impact of it.
    So I am suggesting that ultimately there are a number of 
impacts, and these facilities need to be characterized as 
important investments in public infrastructure that serve other 
purposes beyond just the teams as well.
    Senator Specter. As I said earlier, a vote started and 
there are just a few minutes left, so I have to go to the 
floor. And it would take me 10, 12 minutes to come and go, and 
I don't want to keep you all here. I think we have had a good 
hearing and a good discussion.
    The issue is one which does fester. There is just a lot of 
concern in the Congress about the pressure which a team puts on 
a city to build a new stadium and the consequence of another 
city making a big bid. And you have a wonderful sport, there is 
just no doubt about it, and we all want to see the NFL thrive.
    And I agree with you, Commissioner Tagliabue, that the 
revenue-sharing worked out to provide a competitive league and 
a great sport. I agree with you about that, but as a Senator 
looking at a State with four stadiums going up at $1 billion, 
and about $700 million coming out of the taxpayers, I just 
wonder about it. And I think there is a tremendous break which 
the Congress has given to football with this revenue-sharing on 
TV receipts, and I think just as a matter of basic equities.
    And when you look at what has happened with free agency, it 
is our system and I don't know that there is any way to 
unscramble the egg. I have been talking to a lot of people 
about it and working on it for a long time. And in America, we 
do muddle through somehow, so perhaps we will. And it has to 
get pretty bad before the Congress is going to step in. But if 
there are very many States which face $1 billion in stadium 
construction, with $700 million at the taxpayer's expense, you 
can expect to see more foment down here.
    Well, we appreciate your coming. You are a good group of 
witnesses and I am sorry there is so much else going on. We had 
China espionage competing in another hearing room, and we had 
Mary Tyler Moore and Tony Bennett competing in another hearing 
room, and Y2K competing in a third hearing room. And the steel 
workers are having a big rally and we are about to vote on a 
quota bill. And that is only the start of it.
    So thank you very much.
    [Whereupon, at 12:48 p.m., the committee was adjourned.]

 
          STADIUM FENCING AND FRANCHISE RELOCATION ACT OF 1999

                              ----------                              


                           SEPTEMBER 13, 1999

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                  Philadelphia, PA.
    The committee met, pursuant to notice, at 9:18 a.m., in the 
Ceremonial Courtroom, Federal Courthouse, 6th and Market 
Street, Philadelphia, PA, Hon. Arlen Specter, presiding.

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Senator Specter. Good morning, ladies and gentlemen. The 
starting time having arrived, we will start this hearing on 
legislation which would require the National Football League 
and major league baseball to pay for half of the construction 
cost of new stadiums, with a quarter to be provided by the team 
owners, leaving the balance of only a quarter to be paid for by 
public funding.
    This is an issue of great national importance with special 
concern to the Commonwealth of Pennsylvania, where two stadiums 
are now under construction in Pittsburgh and two more are 
contemplated in the immediate future in Philadelphia, for a 
total cost of $1 billion plus, with about two-thirds of that, 
close to $700 million, to be paid for by the taxpayers.
    The National Football League has a multiyear television 
contract which brings $17.6 billion as a result of special 
antitrust exemption, which the NFL has. This legislation would 
condition the continuation of that antitrust exemption on the 
National Football League contributing to stadium construction 
costs, which we believe is only a matter of very, very basic 
fairness.
    The construction of stadiums across the country is moving 
forward in an unprecedented way. Nearly half of U.S. 
professional sports teams either are playing in a new facility 
or expect to have one in the next few years. During 1999 and 
2000 the National Football League and major league baseball 
teams will move into 11 new stadiums, costing $3\1/2\ billion, 
and a third of that is being paid for by the taxpayers.
    Industry experts estimate that more than $7 billion will be 
spent on new facilities for professional teams before the year 
2006, and most of that $7 billion will come from the taxpayers.
    We have seen teams stolen, the Browns from Cleveland to 
Baltimore, with some $200 million plus being paid by the city 
of Baltimore and State of Maryland. Hartford has offered $375 
million to take the Patriots from a location near Boston to 
Hartford, unsuccessfully, and what we have is legalized 
extortion, legalized blackmail, where cities are forced to pay 
exorbitant sums of money from the taxpayers in order to keep 
their teams, or exorbitant sums in order to lure teams to their 
cities.
    We have a distinguished array of witnesses this morning, 
but before turning to the witnesses, it is a distinct pleasure 
to welcome a close friend and colleague for some almost 20 
years. Of course, he's been in the Senate for 28 years, since 
he was 29, and probably ought to have an explanation of the 
constitutionality of being elected a Senator younger than the 
constitutional age.
    Formerly chairman of the Judiciary Committee, now Ranking 
Member on Foreign Relations, a cosponsor of this legislation 
and a very strong United States Senator, Senator Joseph Biden.

STATEMENT OF HON. JOSEPH R. BIDEN, JR., A U.S. SENATOR FROM THE 
                       STATE OF DELAWARE

    Senator Biden. Thank you, Mr. Chairman. I would be 
delighted to defer to Senator Santorum. I am his guest.
    Senator Santorum. Go right ahead.
    Senator Biden. Thank you. I have a brief statement beyond 
stating that I am obviously pleased to be here with my 
colleagues from Pennsylvania. It is no secret that Senator 
Specter and I have seriously damaged each other's reputations, 
because everyone in the Senate, and I think everyone else, 
knows we are close, close personal friends, and as you probably 
have observed, all of you in this State, that it is just easier 
to say ``yes'' to Specter than ``no'' and have to say ``yes'' 
later, because he never stops.
    He has been extremely concerned about the behavior of 
professional sports teams around our States and cities for not 
just the last years. We have had this discussion as far back as 
10 or 11 years ago, and so when he drafted the legislation that 
we are going to be talking about today, he asked whether I 
would cosponsor it, and my staff and I spent a great deal of 
time looking at it. There were some changes we suggested that 
were made, and I am happy to be here today in Philadelphia to 
begin discussions on this legislation.
    I have never been fully able to get out from under, nor do 
I want to--in Delaware the bad news is they think I spend too 
much time in Pennsylvania. They know that I am from Scranton, 
PA, and there is very seldom anything, I think it is fair to 
say, that Senator Santorum or Senator Specter ask me to do that 
affect Pennsylvania positively that I am not happy to do.
    I consider it my home State. It is my home State, but I am 
going to make it clear that I know very little compared to my 
new colleagues about what is happening in this State, the State 
legislature, as it relates to the stadium financing. I just do 
whatever Mayor Rendell tells me. [Laughter.]
    But I am glad we are here taking this opportunity to 
discuss the Stadium Financing and Franchise Relocation Act of 
1999 and the implications on taxpayers of publicly financed 
stadiums, and in that vein I look forward today to hearing 
comments and suggestions from our distinguished witnesses so 
that we can move forward in accomplishing our primary goal 
here.
    And our primary goal here is to make sure taxpayers are 
treated fairly, because that is what this is about to me, 
making certain that the people who cannot afford to pay do not 
have to pay, and those who can afford to pay, pay, in making 
certain that taxpayer's money is spent on things that--I think 
presumptuous of me to say--that cities need most, like cops and 
teachers and healthcare and a lot of other things.
    Senator Specter I think should be commended for taking this 
issue seriously on behalf of his constituents and making others 
examine carefully the potential impact on taxpayers and the 
leagues alike, yet I do not think that the Federal Government 
has to take an active role all the time on issues like this, 
especially when it comes to issues that local governments and 
the private sector can handle on their own.
    The NFL has gone to great lengths of late to make loans 
available to those teams that need them to help finance stadium 
construction, and I commend the NFL for their efforts, and to 
suggest that we might take a closer look at what the NFL has 
done and see that they are on the right track.
    This legislation, of course, will have no direct effect on 
the State of Delaware. There are no pro football teams or no 
major league baseball teams in Wilmington, although based on 
the Phillies record--and I'm a Phillies fan, but based upon the 
Phillies record and the Wilmington Blue Rocks' record I think 
we might be able to take them this year. [Laughter.]
    We won the Carolina League. At any rate, this legislation 
will not have any direct effect on major league baseball teams 
in this country or in my home State, so it seems to me that, 
though we have to strike a balance here, that this certainly 
goes a long way--the bill in my view goes a long way toward 
striking that balance, but we have to continue this discussion 
and dialog.
    And I want to make sure that the cities and States are able 
to spend taxpayers' dollars, as I said, in their important 
investments, and I am not suggesting these are not important, 
but on more important investments like law enforcement, 
education, and health care, while still maintaining the pride 
their cities have and the States have in their professional 
teams.
    We need to keep cops on the street, put more teachers in 
schools, and we all want our ball teams to stay at home, and I 
believe we can have all of this if we just do it right. I 
believe that my colleagues, Senator Santorum and Senator 
Specter, are on the right track here, thinking about how 
cities' moneys are best to be spent and State moneys, and I 
certainly come down on the side of this legislation at this 
time, and I am open and I am anxious to hear from those who 
would be most affected by the legislation and hear their points 
of view.
    So again I thank my colleagues for inviting me to be here 
today, and I point out that in my experience nothing has 
changed. Federal judges still have not turned on the air 
conditioning, if they do the same thing at home--and my second 
thing I am going to do is go introduce legislation to cut money 
for the Federal judiciary when I get back--[Laughter.]
    Unless they turn on the air conditioning. Are you all hot, 
or is it just me? I do not know what it is.
    But anyway, thank you very much, Senator, for having me 
here. I look forward to hearing the testimony.
    Senator Specter. Thank you very much, Senator Biden.
    The word is that the air conditioning has been turned on. I 
felt a tiny bit of it here, but it is pretty hard, with as much 
hot air as we will be generating.
    I am delighted to introduce now my distinguished colleague, 
Senator Rick Santorum, who has become practically Philadelphia 
with his many trips into the city dealing with a wide variety 
of city problems on replacing the shipyard and mass transit, 
and other projects that deal with vital issues to the city and 
his active participation on the stadium issues, obviously, in 
our State.
    Senator Santorum.

STATEMENT OF HON. RICK SANTORUM, A U.S. SENATOR FROM THE STATE 
                        OF PENNSYLVANIA

    Senator Santorum. Thank you, Mr. Chairman, and I join 
Senator Biden in congratulating you on holding this hearing and 
introducing this legislation, which gets at a very serious 
problem that confronts cities in this country with respect to 
their sports franchises, and we have had to go through this 
whole ordeal of stadiums and stadium construction from really 
interesting perspectives.
    From the way I look at it we have a small market team and 
we have a large market area. Philadelphia is a large market, 
Pittsburgh is a small market, and it puts enormous pressure on 
both, both from a football and baseball perspective, and you 
really address the larger issue, which is the impact of 
professional sports and the pressure they put on taxpayers to 
fund stadiums, to provide other kinds of services, and the 
impact of that decision on the game itself.
    If we look at the NFL, I think they have done it wrong. 
They have done it wrong. They have moved franchises as a result 
of this. They have destroyed, really destroyed communities in 
many respects, in the sense of whether it is the tradition of 
whether it is the Cleveland Browns or the L.A. Rams, or you can 
go on down the list. Had the NFL moved franchises based on 
these kind of economics, in some cases artificial economics, it 
is not good for the sport, certainly it is not good for the 
communities, and I think it is something that needs to be 
addressed.
    Major league baseball has done it wrong the other way. 
While teams have not moved I do not think we have had a team 
moved since the Rangers, but what has affected major league 
baseball is that the parity has affected it. The Pittsburgh 
Pirates cannot be competitive in the environment today. They 
simply cannot be.
    They cannot compete with the New York Yankees or the 
Atlanta Braves, and you can go on down the list, and so while 
the NFL has dealt with their problem by moving franchises, 
major league baseball has done the right thing in keeping 
franchises, but they have kept them in a position where they 
cannot compete.
    So we are faced with a very serious problem in sports, and 
while there is great parity in the NFL, we have teams moving 
helter skelter, and while there is stability in major league 
baseball, there is a lack of parity, and so at some place we 
hope to find a happy medium, and I commend the Senator for his 
attempt to try to deal with that issue.
    But as the Senator knows, because he has also been a very 
strong advocate of holding the professional sports accountable, 
not just in the area of stadium construction and other areas, I 
think this is a problem we need to look at in a broader 
context, and the context of the antitrust exemption of how we 
are going to deal with both stability from the standpoint of 
keeping teams in the cities in which they belong.
    And second, if we do that and are successful in doing that, 
having a system in place that provides some sort of parity so 
we do not have New York Yankees and the Atlanta Braves in the 
World Series every year, because that simply is not going to be 
in the best interests of baseball, and certainly is not in the 
best interests of taxpayers, who spend lots of money in keeping 
their teams to see them finish in last place, if they do.
    So I thank the Senator.
    Senator Specter. Thank you very much, Senator Santorum.
    The legislation, in addition to the provision that the NFL 
and major league baseball will pay for 50 percent of stadium 
construction cost grants, the NFL, an exemption to be able to 
control franchise moves to provide the stability that Senator 
Santorum accurately calls for.
    The provisions of the bill would apply to any stadium which 
is not finished by the time the bill would be enacted, so that 
it could be applied to the two stadiums under construction in 
Pittsburgh if enacted in time, and the legislation addresses a 
national problem, and did not seek to interfere with the 
stadiums in Pittsburgh or with whatever plans are projected for 
the city of Philadelphia, but if it would be enacted, as I say, 
before those stadiums were completed, it would apply to them.
    We are now going to move to our distinguished panel of 
witnesses. For ease and simplicity we have asked all the 
witnesses to be seated at the same time. Our first witness is 
going to be our distinguished mayor, America's mayor, Mayor 
Rendell. City Controller Jonathan Saidel is to be our next 
witness, State Representative Andrew Carn is to be our third 
witness, and Mr. Sam Katz is to be our fourth witness.
    Mr. Katz will not be able to arrive until shortly after 10 
o'clock, and we had extended an invitation to the former 
president of the city council, John Street, who declined, and 
we also invited major league baseball and the National Football 
League. Commissioner Tagliabue has testified already in one of 
two hearings already held in Washington, and so at this time it 
is a great pleasure to welcome a longstanding colleague, Mayor 
Ed Rendell, who is a famous mayor and was a more famous 
district attorney, and even a much more famous assistant 
district attorney. [Laughter.]
    Mayor Rendell, would you come forward, and Controller 
Saidel, would you step forward, and Representative Carn.
    I find it hard to understand why, after my speech--why in 
the middle of my speech they moved the microphone to you, Mayor 
Rendell. Perhaps you can explain that.
    Senator Biden. Welcome to Philadelphia. [Laughter.]

                  STATEMENT OF HON. ED RENDELL

    Mr. Rendell. Good morning. If I could ask, Senator, the 
panel's indulgence, it is always a pleasure to be here with the 
Controller and Representative Carn. If I could give my 5-minute 
presentation and answer any questions you have, I did not 
schedule to be on the panel. I apologize. I have to be back in 
the office fairly soon, but I am sure you will not have too 
many questions.
    Senator Specter. Mayor, you are not on a panel. You can 
proceed to testify and we will let you go by noon. [Laughter.]
    Mr. Rendell. Let me begin by saying I agree with a lot of 
what all three of you said in your presentations. No. 1, I join 
with Senator Biden and Senator Santorum in congratulating you, 
Senator. This is an issue that deserves to be looked at, both 
the issue of franchise relocation and the issue of how we pay 
for new stadiums has to be looked at. I wish that it had been 
looked at by the Congress a half a decade ago. I think it would 
have been beneficial.
    We have seen in the last decade an explosion in stadium 
construction and demands on cities for stadium construction, 
but it would have been great to have this hearing a half-decade 
ago, but I congratulate you for your persistence and your 
insight in having these hearings, and I also agree with Senator 
Santorum that there are problems in professional sports that go 
beyond even the fairly wide-reaching scope of this bill.
    It is almost unconscionable that baseball careens down 
these paths without any sort of spending cap that can equalize 
parity among the teams as the NFL has, and I do not know if 
there is anything that can be done to legislate in that area. 
Probably not, but clearly it is the major sport that does not 
have a spending cap, and without a spending cap, you will find 
not only large markets but large markets with wealthy owners, 
or owners who have ties into their cable companies or 
entertainment companies who will always be better financed and 
the Pittsburghs and the Minnesotas and a city like 
Philadelphia, where there is private ownership and not tied 
into a megastructure will be at a competitive disadvantage.
    You will see a spectacle like the Florida Marlins going 
from the best team in baseball to the worst team in baseball 
simply because of the owner's whim on revenues, and that has to 
stop, and again that is probably for a forum other than this.
    I certainly agree with Senator Biden that municipal 
resources need to be used for more important things, for 
police, for schools, for construction of buildings that are 
essential to the quality of life of every day Philadelphians, 
or every day citizens of any city, and toward that end, 
clearly, Senator Specter's bill, were it to become effective 
and were it to be workable, could, in fact, be an important 
step toward doing that.
    I am happy to tell you, and I do not know the situation 
exactly in Pittsburgh, but I am happy to tell you that in 
Philadelphia, and as you know the stadiums, if they are to be 
constructed, originally it was said in the press it would be 
one-thirds debt, one-third local government, and one-third 
teams. That is not going to be the way it breaks down.
    The State is going to be below a third. The city is going 
to be slightly above a third, and the teams are going to be 
significantly higher than a third, with the teams assuming all 
of the risk for cost overruns by very specific and clearly 
delineated parts of the basic lease structure.
    I am happy to tell you that from the standpoint of the city 
of Philadelphia we are going to be able to construct two 
stadiums without an impact, Senator Biden, on city funds that 
could otherwise be used for police, for fire, for any of the 
things--for schools, for any of the things that you said.
    We are basically going to make this stadium pay for itself. 
The four basic means for financing the debt service and the 
bonds necessary to participate in our share of the stadiums 
will come from, No. 1, a ticket surcharge, and that ticket 
surcharge is essential for us, because it is a user fee, 
basically.
    It puts a little bit of a cost on people who follow sports 
and are going to get the value of that stadium. A little older 
lady from Northeast Philadelphia who does not like sports will 
not pay the surcharge and will not pay the user fee.
    It is also a way for us as a city to capture revenues from 
people from the State of New Jersey and the State of Delaware 
and the Philadelphia suburbs who attend the stadiums. Far less 
than half the people who attend Eagles and Phillies games are 
Philadelphia residents, and it will allow us to capture some of 
the revenue from those people.
    Second, we will pay for the stadium from a rental car tax, 
and the rental car tax will fall 75 to 80 percent on visitors 
to the Philadelphia Airport. Of all of the cars rented in the 
Philadelphia area, somewhere between 75 and 80 percent are 
rented at the Philadelphia Airport, they are rented by 
visitors, they are rented by business people. The rental car 
tax is an additional 2 percent and is relatively negligible on 
people's choices to rent cars or come to an area.
    The third area of financing that we will use is the 
deferred
stadium maintenance. As you know, we pay a significant amount 
of money, roughly averaged about $6 million a year over the 
last decade for maintaining Veterans Stadium. When you have a 
municipally-owned stadium, as it gets older the maintenance 
cost increased dramatically. Our consultants tell us that those 
costs will go up incrementally as the stadium gets older and 
older and older and, as all of you, I think, know, teams are 
assigned to a lease until 2011 for the use of the current 
stadium.
    In the succeeding 11 or 12 years those costs will go up, 
but using the current revenue stream from our capital budget, 
not touching any other capital moneys, but just the moneys we 
use to maintain the stadium now, that is our third source of 
payment, and our fourth is tax increments.
    We have established with the teams that again no leases 
have been signed, and there is still some pulling and tugging 
here, but we have established with the team the baseline of 
what taxes they are producing now that go into the general fund 
revenue of the city of Philadelphia.
    We have held that general fund revenue secure. Those taxes 
will continue to go into the revenues of the city, but 
incremental taxes, incremental sales tax, incremental amusement 
tax, incremental wage tax, incremental business taxes are used 
for the additional revenue stream. A complaint we always get 
from citizens and often from elected officials, why don't we 
let these rich players, who are getting so much money on these 
multimillion dollar contracts, why aren't they paying for some 
of the stadium construction?
    Well, in fact, in Philadelphia they will be, because the 
increase in NFL salaries, as you know, the cap, the spending 
cap in the NFL is going to double in the next 3 or 4 years. 
That increase, the incremental wage tax that the players will 
be paying from those increasingly inflated salaries is going to 
pay for the new stadium, so I would love to have had a plan 
like Senator Specter's in place.
    It would have meant that we could have probably kept some 
more of the increment as opposed to putting it into the stadium 
construction itself, but the good news is, not $1 of capital or 
operating cost will be affected by the leases that I believe we 
are going to sign. Not $1 will be diverted from the capital 
operating budgets of the city of Philadelphia.
    And Senator, I always hear, well, why don't we use this 
money for something else. Well, in our case--the State money is 
a different question, but in our case the moneys we are using 
would not exist were we not to have a stadium. We would not 
have a surcharge without a new stadium, we would not have a 
rental car tax without a new stadium, we would not have tax 
increments without a new stadium, and so it is not like we are 
taking revenues that would potentially exist for other causes 
and diverting them to building stadiums for sports teams.
    We are basically using what the new stadiums will kick off 
to fund the stadiums on the city share. On the State side, I 
understand the argument, shouldn't those State dollars be used 
for something else. Obviously, people have to understand the 
distinction between capital and operating dollars.
    They could not be used to fund, for example, what I believe 
is a significant deficit in moneys that the city of 
Philadelphia gets from the State for schools, because they 
would be one-shot infusions, which would not help over the long 
run on the operating budget.
    Could they have been used for school construction? Yes. 
They could have been used as a one-shot ability to help us 
rehabilitate some of our schools. But on the city side we have 
been able to fashion it in a way that, again, it is basically 
the revenues that the new stadiums kick off, the surcharge tax 
incremental revenues, etc., and the deferred or transferred 
revenue that is used to maintain the current stadium, to pay 
for the stadium.
    Having said that, it would still be great to have Senator 
Specter's bill. I only raise two caveats to Senator Specter's 
bill. One is, there are no guarantees that every city could tap 
into the trust fund, because, as the bill correctly says, it is 
trust funds as available, and so let us assume four cities 
decide they want to build new stadiums.
    Let us assume those four cities use up the trust funds. We 
are the fifth city. Philadelphia or Pittsburgh is the fifth 
city to come along. What happens to us? We have to wait until a 
new contract is signed for TV revenues. It may not be workable.
    We have a system in sports where even when there is a 
salary cap, as there is in the NFL, the Dallas Cowboys produce 
$50 million a year more in stadium revenue than the 
Philadelphia Eagles do, $50 million a year more, and that is an 
unconscionable situation, and so I worry about just the 
question of availability of trust funds. Do the swift get it, 
and those who are not so swift as they crop up later, are they 
left out in the cold, and that is a worry, Senator.
    I think that can probably be addressed. We obviously cannot 
dictate how much money is going to be in the trust fund, since 
it is cued into the TV contracts. I would suggest maybe we 
could go even a little lower than a half, which would create 
more available funds for a greater number of stadiums, and 
second, on the baseball side, where they do not produce those 
type of TV revenues, I am not sure baseball would ever be able 
to meet the obligation of a half for any stadiums, No. 1.
    And No. 2, I read the letter from the Phillies ownership to 
you, Senator, which was a thoughtful letter, where they say 
that small market teams would get hurt by using the TV 
revenues, because the national TV revenues are pooled, unlike 
the regional TV revenues. The Yankees, Senator, get so much 
more out of their regional TV revenues than the Pirates do. The 
one place where the Pirates and the Yankees share equally is in 
the national TV revenues, and deferring some of that for 
stadium construction would take away one of the few weapons 
that small market teams have.
    Again, those are problems that I think need to be tweaked 
and thought about, but I commend you, Senator, and all three of 
you, for your interest in this. It is something that for the 
long-term health of sports and the long-term relationship 
between cities and sports has to be dealt with.
    Senator Specter. Thank you very much, Mayor Rendell. We 
will have a round of questioning now, we realize your crowded 
schedule, and we will move through your participation as soon 
as we can.
    When you talk about the limitation on the 10 percent, it is 
a start. We are trying to structure it at the outset. When you 
talk about the TV revenues, there is a big disparity between 
football and baseball. No. 1, the football certainly has the 
wherewithal to make a very significant contribution. The issue 
of salary caps and the issue of revenue-sharing, those issues 
are being taken up by professional sports.
    Government necessarily has a very limited role, and should 
not interfere or go into the marketplace on the private 
transactions at all, but where, however, you have the antitrust 
exemption which produces the TV contract, that's another 
matter, and where you have baseball's antitrust exemption and 
teams move--Brooklyn has not recovered, although it is 41 years 
since the Dodgers moved to Los Angeles, and the Giants moved 
from New York City to San Francisco, and it has decimated 
communities, as Senator Santorum has pointed out.
    We really have a situation with the salaries, $12 million a 
year. They have a goose which lays the golden egg, and it may 
expire, but where so many cities are hurt by the transfers we 
have tried to stabilize it with proposed legislation, and where 
the taxpayers are called for to pay big tax dollars, that is 
obviously a matter of public concern.
    I am pleased to hear you say with such emphasis that 
overruns will be borne by the sports teams. When you gave the 
percentages, would the city's share be less than one-third for 
the new Philadelphia stadiums?
    Mr. Rendell. No, because the State share is considerably 
less than one-third. We will be slightly higher than a third, 
and the teams will approach 40 percent.
    Senator Specter. What is the status of the new stadium for 
the Phillies?
    Mr. Rendell. There will be legislation introduced in the 
city council hopefully the first week in October. As to both 
stadiums, the local decisions will have to be made by then. The 
Phillies are still dealing with the question of whether the 
proposed stadium will be in Spring Garden or the sports complex 
down in Philadelphia. Those issues are going on right now. 
There are more public hearings this week.
    Senator Specter. And what is the status of the new stadium 
for the Eagles?
    Mr. Rendell. And the Eagles have indicated they do want to 
be in the sports complex itself, so that location decision is 
slightly dependent on what the Phillies choose. We have not 
signed leases with either team, and as I have indicated, we are 
heavy into the negotiations, but we have not signed a lease.
    But I can tell you, I can make this commitment as I have 
publicly in many forums, but before the three of you we will 
not sign a lease that requires us to violate the basic 
principle that I set forth. There will not be any impact on the 
capital or operating budget of the city of Philadelphia. We 
have told the teams that over and over again.
    I do not know how serious they thought we were at the 
outset of this a year ago, but I think they understand that we 
are keenly serious, and the funding scheme that we have 
outlined accomplishes that goal, and we are not backing off of 
that. If the teams are unwilling to sign a lease that lives up 
to those goals, Senator, I can assure you there will not be a 
leased signed in the next 4 months.
    Senator Specter. I have seen interpretations of the 
existing Eagles, Phillies--Eagles city contract which obligates 
the Eagles to stay in Philadelphia until the year 2011. I would 
be interested in your view on that.
    Mr. Rendell. I think we are secure in both with the 
Phillies and the Eagles on the lease. If there are breaches 
because of--and you read the newspapers periodically--the 
condition of the stadium, the condition of the stands, there is 
a provision in the lease that requires the teams, if they 
believe there is a breach as to the condition of the stadium, 
to cure it, and, in fact, the Phillies did that during the 
Goode administration, they withheld rent and used that rent to 
cure a defect in the stadium, or maintenance of the stadium, 
and then just deducted that from their rent, and so no one has 
done that in the last 8 years, and so I believe no one, neither 
team would have any standing to move.
    Senator Specter. One final question before yielding to 
Senator Biden. There were two problems with the Eagles 
yesterday, one I will not mention. [Laughter.]
    It needs no additional mention. But there was another 
problem, and that was the blackout, and that is a matter for 
the parties, in a sense, but if all of this taxpayer's money is 
going to go into a new stadium, it is going to be paid for by a 
lot of taxpayers who will be out of money by the time they pay 
their taxes for the new stadium.
    They may not be able to afford a ticket, and you have the 
blackout, which is something that is inexplicable, where the 
Eagles need every bit of public interest and enthusiasm, which 
is generated by television, and people who have dishes all 
around the country can flip in and see the Eagles, and you can 
see it in Arizona, and on this state of the record I do not 
know that there is a public way to express for the city or the 
State or the Federal Government, but if we are going to put all 
of this taxpayer's money in, that may be another matter. Is 
there a way before that comes by jawboning or by logic that 
there could be some impact?
    I know that none of the TV stations will pick this up 
except Fox, but how about it?
    Mr. Rendell. I think you are correct, Senator, the Eagles 
did have the right to join with the local affiliate, the local 
Fox affiliate to purchase those tickets. Now, at the time the 
blackout decision was made there were 7,000 available tickets. 
Once the blackout was announced, they sold four, and we were up 
to 64,000.
    But I agree with you, No. 1, because there are public 
dollars that go into the operation of the sport, No. 2, because 
of the salaries and the stadium construction costs the average 
ticket price has gotten beyond some citizens' ability to pay 
for a ticket.
    I would like to see--and I do not know if this can be done 
through Federal legislation, but I would like to see it 
addressed. The Eagles had the option to join with the 
television station and buy the tickets, the 7,000 tickets, and 
then take the risk, and I think as a management tool you are 
probably correct, given the need, and I think the Eagles showed 
some very, very exciting play. I think they have a very 
aggressive defense. If I were the management, I would have 
liked for that to have been seen by as many Philadelphians as 
possible.
    But that is something I think should be addressed. If we 
are going to pay, the taxpayers, through these type of methods, 
if we are going to pay substantially for this, and if the 
ticket price gets beyond what the low-income family can afford, 
I would take a look at that blackout legislation. But the local 
affiliate had the opportunity to buy the tickets. They felt 
7,000 was too many for them to buy, and the club could have 
turned them over.
    Senator Specter. Thank you very much, Mayor Rendell.
    Senator Biden.
    Senator Biden. Mr. Chairman, your last question was my 
first question, because it seemed counter intuitive to me that 
that decision was made, but I think that if Federal legislation 
goes forward I cannot understand--I would have great 
difficulty, even though I am not in a State or a city that 
bears the burden of having to construct a stadium, as you well 
know--it is going to sound strange to some people, but 
Delawareans and Wilmingtonians, they kind of think these teams 
are their teams as well, and I know they are not, and when 
Carpenter owned the Phillies we did think it was our team.
    But the truth of the matter is, it gets harder and harder 
to explain to people. This is all very complicated. To you and 
to us, and to you particularly, Mr. Mayor, you are so 
knowledgeable about it. You deal with it every day as the rest 
of the panel does, and you understand all the financing 
implications, but for the average person out there it is 
getting more and more difficult.
    I mean, if I can be anecdotal for just a moment, one of the 
reasons why this little stadium they built in Wilmington, DE 
for the Blue Rocks, minor league stadium is sold out every 
single time, you can still take your kid to the game, you can 
go to the game, you can pay $8, you can sit there and you can 
have good hot dogs and you do not have to pay $400 for it, and 
you can actually go to a game.
    It is very, very difficult for, not low-income wage 
earners, it is--this has become a significant--and I am not 
criticizing, but it is a significant business. Most of the good 
seats in good stadiums are purchased by businesses and 
businesspeople, and people with significant amounts of money 
who are not your average middle class sports fan, and so it 
gets harder to explain this.
    But again, I do not have the burden, nor do I, as a 
resident of the State of Delaware, do I have the risk that is 
incumbent upon you and the city council and the people of the 
State of Pennsylvania to take, Mr. Mayor.
    One of the things that I have observed--and again, this is 
anecdotal--is for years being chairman of the Judiciary 
Committee and dealing tangentially and sometimes directly with 
sports-related issues for the major leagues franchises in all 
sports, it used to be that 10 years ago you would contact the 
owners of the league and if they got around to it they would 
call you back. Now, they are contacting us before we get to 
them, and I get a sense that they have an increasing sense that 
their situation is tenuous.
    It is not so automatic that they can just--let me put it 
this way. Is there any difference--and this is a very difficult 
question to answer, I suspect, and you are so good at this you 
may be able to help me frame my question as well as the answer.
    Had you been mayor of this city 20 years ago, and one of 
the two major league, or any of the major league teams here--
let us stick with football and baseball--came to you and said, 
unless you do such-and-such with regard to stadium financing 
and doing renovating or building a new stadium or finding me a 
place, I am going to go to New Jersey, or I am going to go 
somewhere else, and the same thing happened today, is there any 
difference in the leverage that the teams possessed then and 
now? Is it greater or is it less?
    Are the things that they have to calculate also more 
complicated now in terms of being a slam dunk, and do you 
understand what I am trying to get at?
    Mr. Rendell. I think you are, Senator, and I think the cost 
of operating the major league franchise has become so great 
that there is a level of desperation on their part that is more 
significant than it was 20 years ago.
    Second, you do not find too many Ruly Carpenters any more 
who can absorb a price of operating and owning a major league 
franchise. The Ruly Carpenters, they were not interested in 
making money. They were sportsmen, and the people of that 
generation, the Mara's, where I grew up in New York, the 
Stoneham's in New York, they were sportsmen. They wanted to do 
this because it was their love. It was why some people invest 
in racehorses, even though they lose money every year on those 
racehorses. It was a love of theirs.
    That is gone. Most of the ownership now, particularly in 
the big markets, or the places that are doing well, most of 
that ownership is corporate. The WGN's, the Turner Broadcasting 
System give the Cubs and the Braves enormous advantages. The 
Madison Square Garden owns cable companies and owns the Nicks 
and the Rangers.
    It has all changed, and it has changed dramatically, but 
the one lesson that we can take from modern day is, if you 
look--and I have studied stadium financing for the last 10 
years, and if you wait until there is a year or two to go on 
the lease, the State and city government winds up paying a far 
greater share than they do when you can make a deal, when you 
have got, like we do, 10, 11, 12 years to go on the lease.
    That is the one thing that is clear. The midnight deal that 
kept the White Sox from moving to Florida cost the State of 
Illinois dearly. Dearly. The same thing happened with the 
Ravens, the same thing. As Senator Specter pointed out, when 
you are seeking a team for anew market, the same thing happened 
there, so it is best to make these decisions not under the gun.
    People forget, the city of Cleveland went to court to 
enjoin the Browns from leaving under the lease, and they won, 
and they won in the local court, but since there was only 2\1/
2\ years to go on the lease, Mayor White did what I think he 
had to do and made a deal with the NFL, and that deal resulted 
in the Browns having a brand new stadium with NFL funds. Not 
alone, those were grant funds, but with NFL funds, and of 
course that stadium opened for the first time last night. Mayor 
White could have enforced the lease and then had the Browns for 
2\1/2\ more years and then had nothing at the end.
    But the closer you get to when that lease deadline is up, 
the pressure that is on major sports franchises to keep abreast 
of the revenue because of salaries that are out of control, 
those things create an atmosphere that good decisions are not 
made, in my judgment. But yes, in 20 years we have seen the 
Carpenter's and the Mara's and the Stoneham's basically depart 
from sports. There are a few left, but not many.
    Senator Biden. I find it somewhat disingenuous that owners 
will tell me how they are, and they are, many of them, losing 
money, but then when they sell the teams, I find, for example, 
an outfit that has significant Delaware and Wilmington 
connections, bought the Browns for almost $\3/4\ million, and 
it seems to me the rationale for investing has changed. My last 
question----
    Mr. Rendell. Well, understand, in that instance they got 
stadium ownership as well, so they got an asset above and 
beyond the team itself.
    Senator Biden. Could you explain, as briefly as you can, 
what the consequences--not the psychological consequences, but 
what practical consequences would be for the city of 
Philadelphia in your view if, in fact, the Eagles or the 
Phillies picked up and left?
    Mr. Rendell. Well, the tax consequence for the Eagles and 
Phillies leaving would be the equivalent, because of the salary 
ranges the equivalent of us losing one business that had 2,500 
workers averaging $32, $33, $34,000 a year, or two businesses 
having 1,250 workers that do that, plus there is a lot of 
indirect business that supplies all of the food that goes into 
the stadium. You can imagine how many hot dogs are consumed. 
All of that comes from local vendors, and so there is a 
tremendous amount of supply side, as Senator Specter knows, 
because he was integrally involved in this.
    When we computed the loss figures for the Navy Yard we just 
did not compute the 12\1/2\ thousand workers that were there in 
1991 and the tax consequences for losing their jobs and their 
salaries. We computed all of the vendors that fed the operation 
of the Navy Yard.
    Now, the two teams do not produce anywhere close to what 
the Navy Yard did in vendor supply purchases, but there are a 
lot of supply purchases that go into the teams. Could we absorb 
on an economic basis the loss of these teams in direct and even 
indirect revenue? Of course we could. There is no question 
about that.
    If you look at this as a transaction--and by the way, it is 
an economic development transaction, and the city council of 
Philadelphia at my urging has instituted a number of developing 
deals that call for tax increment financing, where basically 
the taxes of the development are plowed back into the deal 
itself, and there is always some gnashing of teeth in those 
deals, because people say, well, you are giving away taxes.
    One of the things I have tried to say is, given the 
competitive disadvantage that a city like ours has earned 
compared to the suburbs or South Jersey or even the Sun Belt, 
because of our high tax structure, because we deal with 75 to 
80, 85 percent of the region's poor, because of all the demands 
that that puts on our budget and our high tax structure which 
we are trying to bring down as fast as we can, but given all of 
that, if we do not do tax increment financing we do not have 
the deal. It is as plain and simple as that.
    So you are not giving up any existing tax revenues and, of 
course, you have a limited period, and after that period the 
tax revenues continue to start to kick in, and the same is true 
here, so in one sense it is an economic development deal with 
2,500 workers, the equivalent of 2,500 workers because of the 
tax structure, because of the salaries, and the indirect vendor 
sales. But I do not think you can--I do not think you can 
eliminate the emotional and psychological damage.
    Senator Biden. I am not suggesting you can. I was just 
curious.
    Mr. Rendell. There are things we do as a city, all of the 
time having nothing to do with sports, that generate a feel of 
vibrancy for cities. Cities have to have soul. They have to 
have a pulse to them. They have to have a sense of vibrancy, a 
dynamism, or they will not exist economically. With mass 
communications, with the changes in technology and the changes 
in the type of work that is done in America today, there is no 
rationale for cities.
    It is in places to come that have all sorts of 
entertainment alternatives. There is all sorts of different 
experiences. If there is not a common bond that ties a city and 
a region together, and you said it best, Wilmingtonians think 
of themselves as Eagles fans and Phillies fans, there is no 
question about it, and there is nothing like sports that binds 
a community together, that take someone on the lower end of the 
economic spectrum and someone at the highest end of the 
economic spectrum and gives them a commonality of interest.
    And again, if we started running cities purely on the 
bottom lines, they would not exist very long, because the 
economic rationale for cities that we had at the beginning when 
people had to gather together in a central district to do 
commerce, when only a city could support manufacturing, that is 
gone, so if we take away those nontangible factors, if we take 
away the psychological and emotional factors, I am not sure 
there is a raison d'etre for cities.
    Senator Biden. Thank you very much. Thank you, Mr. 
Chairman.
    Senator Specter. Thank you, Senator Biden.
    Senator Santorum.
    Senator Santorum. I think the point you made is a terrific 
one, Mr. Mayor. Having gone through the psychological trauma of 
almost losing, well, two teams, not only a major league 
baseball franchise in Pittsburgh, nearly just a few weeks ago a 
national hockey league team----
    Mr. Rendell. Senator, can I interject, and you know this 
better than anyone in this room, what would the city of 
Pittsburgh's feeling have been, and what would their viability, 
as a first class city able to attract major corporations, have 
been if they lost the Steelers, the Pirates, and the Penguins?
    Senator Santorum. The whole discussion is, this would have 
been a city with a proud tradition and proud heritage that had 
an identity. I mean, you talked about an identity. Those 
places, those teams gave the city an identity, brought us 
together as a community. I thought it was very, very important. 
It would have had a deep psychological impact on our region, no 
question about it, and I think it would have sent a message to 
the business community that this is a city that has given up.
    This is a city that is not going to fight for what it has, 
much less try to attract what it could, and I think there are 
many in Pittsburgh, and I know there are many in Philadelphia 
to say, ``Well, it is not important. It is bottom line 
economics.'' It is not bottom line economics. There is a lot 
more to it, and the reason I bring this up is, it is 
importance, you do know that major league baseball and the 
National Football League understand that, and understand the 
leverage they have in their negotiations.
    This is not a cold business deal that you are sitting 
across the table negotiating. This goes far beyond that, and 
that gives a huge leverage to those negotiators, and that is 
why it is important that we look at ways to try to balance that 
leverage a little bit with local governments who do not find 
themselves as an equal partner here in this negotiation.
    Because they have this whole emotional side that goes as 
well as real economic--you talk about intangibles, but they are 
intangible in the sense that they are goodwill and other 
things, but they result in tangible economic benefits to the 
community, and cities realize that, and they realize the 
importance of these franchises, and to me it is something that 
Senator Specter, I guess, for years has been trying to get at, 
is how we try to level the playing field from a negotiating 
point of view with team owners and with the leagues.
    I am very interested in what the Senator has come up with 
here, and I hope, and I know we will, that we continue to look 
as to how we can structure, use the power that Congress has 
with the antitrust exemptions to try to get some relief from 
what I see as real problems with parity in major league 
baseball, and again, the problems with moves in the National 
Football League.
    Mr. Rendell. I agree, Senator, and I think what Senator 
Specter is doing here is extremely commendable if it can be 
worked out, and as Senator Specter said, it is a start, what we 
proposed here today, if it can be worked out. You used the 
right terminology. It increases the leverage. It increases our 
leverage. Not only does it balance the playing field in terms 
of dollars, but it does increase the leverage, no question 
about it. It creates a different dynamic when you sit across 
the table with a sports team.
    Senator Santorum. Thank you. No questions, and I, too, have 
to run, but thank you.
    Senator Specter. Well, Thank you, Senator Santorum, and 
thank you, Mayor Rendell, for taking time to be here. We thank 
you.
    Mr. Rendell. Thank you. I do not know if I will get a 
chance publicly to say this. This may be my last congressional 
hearing. But I want to thank you and Senator Santorum as well 
for your incredible support for this city over the last 8 
years. You have been terrific, and you are demanding and you 
want the facts, and you hold us to a high standard, but you 
have been terrific in your support.
    Senator Specter. Well, thank you very much for those good 
words, Mayor Rendell, and we thank you for your tremendous 
contribution. This is only September 13. We might see you back 
between now and the first Monday in January.
    We now turn to the distinguished city controller, Jonathan 
Saidel, now serving his third consecutive 4-year term as 
Philadelphia's City Controller, graduate of Temple University 
and Delaware Law School, and in addition to being attorney-at-
law is a certified public accountant.
    He has taken some very important, courageous stands on 
fiscal matters for the city, and he has some very distinct 
views, we know, on the financial abilities of teams to pay 
their own way, and we thank you for joining us, Mr. Controller, 
and look forward to your testimony.

                STATEMENT OF JONATHAN A. SAIDEL

    Mr. Saidel. Thank you, Mr. Chairman. I will quickly run 
through our statement. I thank you for the opportunity to 
address you today on Senate bill 952, the Stadium Financing and 
Franchise Relocation Act of 1999. Thank you for focusing 
attention on the important issue of stadium financing, which in 
recent years has dominated the minds of citizens, sports fans, 
and elected officials in communities all across America.
    As you know, sports equals big business, and big business 
is largely driven by stadium-generated revenues. Unfortunately, 
as team owners seek to maximize these revenues, they are often 
doing so at the expense of communities that could ill-afford to 
spend scarce tax dollars to subsidize sports teams operations.
    Like you, I am a sports fan, and as a fan I look forward to 
attending games in the new stadiums. I want to see the Phillies 
win a pennant at a ball park with a grass field, and would love 
to see the Eagles drive the Cowboys into the mud of a new 
stadium. I also recognize the city must offer high quality 
entertainment options to engage visitors and provide amenities 
to residents to be successful in the future. But as city 
controller, I am fiscal watch-dog over city expenditures, and 
my job is not to give away city money. It is to make sure city 
money is spent in the most efficient and effective manner.
    In recent years, many American cities have financed 
stadiums, but many of the deals have been poor investments for 
taxpayers. The deals struck have been the result of bargaining 
under duress as teams threaten to leave town while the public 
gets fleeced to enrich millionaire owners and players.
    Alternatively, baseball's San Francisco Giants and 
football's Washington Redskins proved that teams can build new 
stadiums without significant public support. I therefore 
believe that when it comes to public money for new stadiums we 
must not use scarce tax dollars to enrich team owners.
    The city should not used broad-based taxes or cross-subsidy 
taxes to fund new stadium construction and to add to team 
owners' profits. Instead, we should work to ensure that any 
city contribution for new stadium construction results in a 
sharing of any direct benefits to the team and to the city and 
is directly related to the use of stadiums and the true benefit 
the city realizes from these stadiums.
    Your focus on stadium financing at the Federal level is a 
sound one. Congress has provided the National Football League 
with protection from market forces, which has increased team 
value, team profits, and players' salaries. Major league 
baseball received similar protection through its limited 
exemption from antitrust legislation.
    By mandating partial league funding for new stadiums, 
Senate bill 952 takes an important and necessary step toward 
correcting the inequities between communities which drives the 
demand for public subsidy of new stadiums. I would like to make 
sure that the total project cost as defined in Senate bill 962 
includes any infrastructure improvements, land acquisition, and 
site remediation which may be necessary as part of the stadium 
construction. These expenditures, which can equal perhaps 50 
percent of the actual cost of stadium construction, are 
additional burdens which should be shared by the leagues, not 
left to local taxpayers.
    Additionally, in large and lucrative markets like 
Philadelphia, local governments should have the option to 
finance their share of stadium construction costs through 
stadium user fees. Unlike broad-based taxes, which take money 
from the citizenry, user fees actually reduce incomes earned by 
teams, because team owners will set prices at a level 
determined by the market.
    Amending Senate bill 952 to expressly allow local 
governments to utilize these fees to fund their share of 
stadium construction costs would provide communities with full 
protection of the bill while giving them the flexibility to 
take advantage of the worth of their market.
    The Philadelphia market is a lucrative one. Because of the 
value of our market and the fact that our teams are committed 
to long-term leases, we know that there is no pressure to do a 
bad deal just to keep teams from fleeing to the cities so 
desperate for major league status that they are willing to 
break the public bank to attract a team, therefore there is no 
reason that we in Philadelphia cannot work to create a stadium 
finance package that benefits the city as well as the teams.
    My office has worked for more than 3 years to address the 
issue of stadium finance in Philadelphia. We have worked with 
Indiana University professor Mark Rosentraub, a nationally 
recognized stadium finance expert, to conduct a thorough cost/
benefit analysis, and met with representatives from sports 
teams and the Rendell administration in an effort to evaluate 
stadium finance proposals.
    My staff produced a summary of their work, which is 
entitled, ``Stadia Overview. Myths and Realities.'' This 
document, which I have attached to my testimony, examines 
misconceptions associated with stadium finance and presents a 
workable plan for stadium finance in Philadelphia.
    The document explains how new stadiums will not necessarily 
improve the competitiveness of Phillies and the Eagles in the 
future. It challenges the notion that new stadiums will be 
significant economic engines for Philadelphia and notes that 
every credible economic analyst concludes that savings do not 
equal economic development. New stadiums mostly create spending 
shifts, not new consumption patterns.
    It dismisses the notion that Philadelphia Phillies and 
Eagles will leave Philadelphia unless the city funds new 
stadiums. It points out the tremendous financial benefit the 
Phillies and Eagles will realize from new stadiums.
    According to the Controller's Office's analysis, the 
Phillies could earn more than $60 million a year and Eagles 
more than $37 million a year in the new stadium even if they 
paid the city the rent equal to the city's stadium construction 
costs. This does not take into account the values of the 
respective franchises, which will skyrocket once the teams 
receive the new stadiums.
    It shows the city stands to lose money in the future if the 
Phillies and the Eagles are allowed to break their Veterans 
Stadium leases. For example, the city will lose approximately 
$6 million a year in luxury box income. This revenue stream, 
which is due to begin in 2001, was part of the deal to keep the 
Eagles in Philadelphia when they threatened to move to Phoenix, 
and the city will never see a dime if we build a new football 
stadium. The city could also lose an additional $500,000 each 
year in real estate tax revenues, depending on where the new 
stadiums are built.
    It challenges the idea that rental car taxes increased tax 
receipt and avoided Veterans Stadium costs should pay for the 
new stadium. It shows how teams will price tickets based on 
market demand regardless of any city-imposed user fees.
    Finally, the document puts forth the elements of a workable 
plan for new stadium construction in Philadelphia. We believe 
such a plan represents the best possible deal for the city, and 
the best chance for the teams to play in new stadiums in the 
near future. Given the new stadium's potential impact to the 
team's bottom lines, this should be very desirable.
    In a second document, entitled ``Analysis of Stadia Finance 
Proposals'', my office examines assumptions related to the 
stadium finance in Philadelphia and critiques reported plans to 
fund new stadiums for the Phillies and Eagles. The projected 
total cost of the new stadiums and resulting infrastructure 
improvements could be more than $800 million. Including funding 
from the parking authority, the total cost to the city could be 
more than $337 million.
    I applaud Mayor Rendell for the steps he has taken 
privately to reduce public funding for new stadiums. For 
example, I certainly endorse the idea of a 5 percent ticket 
surcharge. I do believe that more can be done to reduce public 
funding through the approach I have outlined in my Analysis of 
Stadia Finance Proposals. This document, which is also attached 
to my testimony, provides reasonable alternatives which would 
encourage teams to field competitive teams, maximize the 
stadium-related benefit for the city, and preserve scarce tax 
dollars for Philadelphia's pressing needs.
    For example, the teams could pay the city rent equal to the 
city's debt service costs, or the city could impose a surcharge 
on all consumption at the new stadiums which would fund the 
city's future debt service costs.
    The Philadelphia Metropolitan Region is among the largest 
for professional sports and offers team owners an extraordinary 
opportunity to earn substantial profits. Broad-based taxes or 
taxes that subsidize franchises are not needed to guarantee 
profit levels for the owners of Philadelphia teams. The size of 
the Philadelphia market dictates that the city should finance 
its portion of the cost for both facilities from user fees or 
rental charges. Even if this were done, both teams would still 
be among the most profitable in their respective leagues.
    The worth of large markets was proved in the case of the 
New England Patriots. The ownership of the Patriots passed up a 
$374 million stadium deal with lavish revenue guarantees in 
Connecticut for a deal where the ownership will only receive 
$70 million in infrastructure improvements to remain in the 
Massachusetts and the lucrative Boston television market.
    Philadelphia is an even larger market than Boston, and it 
is in the best interests of the National Football League, major 
league baseball, and television networks to keep the Phillies 
and Eagles where they are.
    As I stated, sports equals big business, and the owners of 
the Philadelphia Eagles and Philadelphia Phillies stand to 
generate significant annual profits from the new stadiums. In 
addition, new stadiums will dramatically increase the Phillies 
and Eagles franchises.
    To be successful in the future, the city of Philadelphia 
needs to reduce the cost of living and doing business in the 
city. At the same time, we must improve public education, 
reduce crime, and improve overall quality of life in all our 
neighborhoods. Given these tremendous needs, we cannot afford 
to waste a single tax dollar, and we certainly cannot afford to 
enhance the wealth of team owners at taxpayer expense or 
subsidize stadium construction costs beyond the true benefits 
to the city.
    As a fan, I look forward to going to games in beautiful new 
stadiums that will make Philadelphia the envy of other cities. 
As city controller, I look forward to working with the teams 
and the city administration to craft a deal that will allow 
team owners to enhance their bottom line without wasting the 
city's scarce tax dollars.
    Again, thank you for your initiative in this case, and I 
will answer any questions you have.
    Senator Specter. Thank you. Before going to questions, we 
will hear from Representative Carn and Mr. Katz. We turn now to 
the distinguished State Representative, Andrew J. Carn, a nine-
term Representative first elected in 1982 to represent the 
197th Legislative District located in north central 
Philadelphia.
    A graduate of Thomas Edison High School, Howard University, 
Representative Carn has been very active in civic matters as 
director of statewide programs for the leadership council, 
director of the Neighborhood Housing Services of Allegheny 
West, a very vigorous consumer advocate, took a very forceful 
stand on the acquisition by First Union of the local bank last 
year, and Wall Street is about to agree with the Market Street 
and 52d Street, and Representative Carn.
    The floor is yours, Mr. Representative.

                 STATEMENT OF HON. ANDREW CARN

    Mr. Carn. Thank you, Senator. I would like to thank you for 
affording me this opportunity to speak on the important issue 
of stadium financing. I am honored to be joined by such an 
esteemed group of panelists, and I hope that our views will 
assist our Federal-elected officials in finding solutions to 
this problem.
    As you are aware, much of the discussion surrounding 
potential new stadiums in our city has focused on the issue of 
location for a baseball-only stadium. However, today's hearing 
examines the equally and perhaps more important issue of 
financing. That is to say, how and who are going to pay for it.
    I applaud and support Senate bill 952, the Stadium 
Financing and Relocation Act. This legislation attempts to 
ensure that the sports industry pays its fair share of cost 
associated with building new stadiums and arenas. This modest 
proposal would require that professional sports teams pay at 
least 50 percent of new stadium construction cost. In my view, 
Senate bill 952 was developed to achieve the same goals as my 
legislative efforts in Harrisburg, which is to guarantee that 
any stadium or arena deal is pro-taxpayer and pro-community.
    As far back as September 1997, State Representative Bill 
Robinson of Pittsburgh and I have been advocating for increased 
financial participation from professional sports leagues and 
teams to help build new stadiums in Pennsylvania.
    It is my understanding that some concerns were raised 
during a public hearing in Washington about the effects of 
using the television revenues to fund the proposed leagues 
construction trust fund under this legislation because of the 
possible negative impact on small-market clubs. If television 
revenues are not a good source of revenue for the construction 
trust fund, I would suggest using other forms of revenue such 
as merchandising, a tax on naming rights in the stadium 
advertising, concessions, or some other source of money.
    I support this legislation for two reasons. First, I 
believe that taxpayers should be protected and receive any 
benefits from the start of the process. Second, the 
relationship between pro teams and communities has changed. it 
is now a business relationship, and the taxpayers should be 
treated like any other investor.
    To understand why the Stadium Financing and Relocation Act 
is necessary, we need only look at Pennsylvania's recent 
experience with stadium funding. In February, the State 
legislature approved $320 million for stadiums in Philadelphia 
and Pittsburgh. The State has allocated $170 million for two 
stadiums in our city. The measure was publicized as a loan, but 
in fact is a grant, or tax increment financing agreement.
    Under the State plan, sports teams who receive public 
assistance must generate more tax dollars in future years than 
they do now. If the teams do not generate more money, then they 
must repay the difference. Sounds pretty good.
    The problem is that the tax calculations will not be 
adjusted for inflation. That means that as the cost of player's 
salaries, hot dogs, popcorn or other items rise, the taxes 
generated rise. There is no collateral on the loan if the teams 
do not generate more taxes.
    House Majority Leader John Perzel described this 
arrangement as a hybrid between a grant and a loan. His 
description prompted one of my colleagues to call the State 
stadium financing funding bill a ``groan.'' I offered a loan 
proposal on that day, but it was defeated. A copy of the State 
funding bill has been included in my testimony for the record.
    Furthermore, the assumption of the State stadium funding 
bill was flawed. The teams are going to pay taxes anyway. Can 
you imagine not having to repay your student loan if you are 
making more money and paying more taxes in 10 years? I can tell 
you as a father of a college student that my fellow parents and 
many students would love to get money for college under this 
kind of arrangement.
    Under a true loan scenario like a student loan, the teams 
would repay the loan and still pay taxes. This is exactly the 
type of plan that the State of Massachusetts enacted 1 month 
after the Pennsylvania stadium give-away.
    On June 15, Senator Specter and other Senators heard from 
Massachusetts Speaker of the House Thomas Finneran. Speaker 
Finneran courageously stood his ground against excessive public 
spending on stadiums in the fight over the Patriots' stadium. 
At that hearing, Speaker Finneran said,

    In Massachusetts we have declared that the only appropriate 
use of taxpayer money is for infrastructure improvements. There 
is no State taxpayer money for brick and mortar to build a new 
ball park or a stadium. There is no State taxpayer money to 
purchase land or engage in any creative land swap or lease-back 
scheme.

    After the Pennsylvania General Assembly enacted the stadium 
funding bill the National Football League announced that it was 
loaning money to teams to help them build stadiums. The Eagles 
have announced that they intend to utilize this resource. 
Sounds good.
    How are the Eagles going to repay the loan? The NFL is 
going to be repaid from revenues generated by the new stadium. 
This means that the NFL will be repaid from the revenues of a 
stadium that was constructed with two-thirds taxpayers' money. 
You would think it would be only fair that the taxpayers would 
be repaid first. In addition, both teams will receive the name 
rights to buildings that they will not own, and a $1-a-year 
lease.
    The final and most disturbing aspects of the Pennsylvania 
stadium experience is the exclusion of the public. In 1997, the 
people of Pittsburgh and the 10 surrounding counties voted 
against public financing for stadiums, yet public money is 
being spent on stadiums.
    In Philadelphia, some people want to provide school choice 
and others want the public to have a choice on riverboat 
gambling, yet many of these same proponents of public choices 
on issues vehemently oppose public choice in stadium funding.
    In fact, I offered southeastern Pennsylvania voters a 
choice on stadiums when I offered a referendum measure on the 
House floor in June. The Republican Appropriations Committee 
indicated the referendum would not cost the State any money, 
and the cost to the city was minimal.
    My proposal was defeated 101 to 97, with many southeastern 
Pennsylvania Representatives, including some Philadelphians 
voting against the measure. Some of my colleagues have a lot of 
explaining to do, because many of them voted to allow the 
Pittsburgh referendum then turned around and voted against 
their own constituents having the opportunity to have their say 
on this issue.
    I share this information to demonstrate that taxpayers in 
Philadelphia and across the Nation for the most part are not 
being well-served in stadium deals. Senate bill 952 is an 
excellent starting point in the effort to ensure that taxpayers 
and communities receive better value for their investment in 
stadium deals.
    Ensuring that half of stadium or arena construction is 
covered by sports leagues can only help taxpayers, because it 
lessens their financial burden. This legislation would have 
saved State taxpayers $120 million and city taxpayers $100 
million respectively.
    However, I also encourage you to look at other proposals 
that are pending in Congress such as the Give-the-Fans a Chance 
Act, sponsored by Representative Earl Blumenauer of Oregon, 
which would provide for complete or partial public ownership of 
franchises.
    Another bill by Senator Moynihan of New York would remove 
tax-exempt status for stadium financing bonds. In addition, I 
recommend that you review the Carn-Robinson stadium legislative 
package that was introduced in Harrisburg. We propose some 
creative ways to ensure that teams and communities benefit in 
stadium deals. For example, we propose that naming rights and 
other revenues be shared with the public.
    I look forward to working with you, Senator, the mayor, my 
fellow panelists and the public to ensure taxpayers and 
communities receive the maximum benefit in stadium and arena 
deals. Thank you for this opportunity.
    Senator Specter. Thank you, Representative Carn. We turn 
now to Mr. Sam Katz, investment banker and financial advisor, 
who has very specialized experience on financing sports 
stadiums, having been involved with the Orioles Market, Camden 
Yards, the Joe Robbie Stadium, and the First Union Center, each 
built without new taxes.
    Other sports projects which Mr. Katz has been involved with 
include the Colorado Rockies, the Cleveland Indians, the 
Phoenix Suns, the Portland Trail Blazers, the Buffalo Sabers, 
the St. Louis Blues, and the Florida Panthers.
    In addition, in the public sector he has had extensive 
experience with transit authorities at Houston, Washington, 
Atlanta, Los Angeles, very active in civic affairs, and trustee 
of the Academy of National Sciences, worked as a member of the 
board of education in his school district in the past.
    And it should be noted that we had also invited former 
president of the city council, John Street, who had extensive 
experience with the city issues as well, but he declined.
    We welcome you here, Mr. Katz, and look forward to your 
testimony.

                     STATEMENT OF SAM KATZ

    Mr. Katz. Thank you, Senator. I wanted to talk specifically 
about the evolution of stadium financing in the context of your 
legislation and make some comments about where I think that 
legislation can affect the future of financing.
    As you indicated, I spent a substantial portion of my 
career working on financing of both football and baseball parks 
as well as indoor arenas for hockey and basketball, and as well 
as having worked for a number of cities that have presently or 
recently been engaged in trying to compete for NFL expansion 
both in Los Angeles and Houston.
    Just as a way of some background, prior to the development 
by Joe Robbie in Miami of the new stadium for that team, the 
vast majority of both football and baseball parks in the United 
States were funded largely from the proceeds of bonds issued by 
counties and cities.
    These facilities were then viewed as public assembly 
facilities and were often designed to host both baseball and 
football and not dissimilar from Veterans and Three Rivers and 
Riverfront and Candlestick Park and other stadiums, as well as 
dome stadiums like the Metrodome and the Kingdome and the 
Astrodome.
    They were generally built at a cost whose impact on local 
government finances was quite manageable, in part because they 
were relatively inexpensive. The repayment of the debts that 
were incurred for the construction of those facilities relied 
on municipal and not facility income streams.
    In 1983, Mr. Robbie pioneered the concept of a privately-
financed sports venue. He believed that such facilities could 
be profitable on their own if they were designed to maximize 
revenue generation for the team. Working with Mr. Robbie, we 
structured a financing program which was predicated on the 
marketing of some 230 luxury suites and 10,000 club seats, the 
sale of which were subject to multiyear contracts, creating in 
effect leases which collectively became financeable.
    By pledging the income from suites and from club seats the 
Miami Dolphins were able to finance and construct a 73,000-seat 
stadium largely from the revenue streams of just 13,000 of 
those seats, but it was not simply the uniqueness of the 
financing that caught everyone's attention. It was also the 
excitement of the design and the amenities of the seating, the 
merchandising and the marketing opportunities, that accelerated 
stadium and arena construction, a boom that has taken place 
over the last decade-and-a-half.
    But there was a political story behind the Dolphins 
project. In 1983, the Orange Bowl, which then was the home of 
the Miami Dolphins and the University of Miami, was in serious 
disrepair. Owned by the city of Miami, a refurbishing program 
was proposed and a bonding issue put on the ballot. This 
initiative was opposed by the Miami Dolphins, which provided 
the principal funding to defeat it, and that enabled Mr. Robbie 
to privately finance, which he did so as a matter of ego and 
pride.
    However, from an economic perspective, his stadium, which 
was subsequently acquired in the sale of the Miami Dolphins to 
Wayne Huizenga, has never achieved the results expected or 
produced the benefits to the team that were hoped for, but 
throughout the professional sports world Robbie Stadium, which 
is now called Pro Player Park, made a tremendous impact and 
helped launch a dramatic change in the way the leagues and the 
member teams came to view venues as important business lines in 
the same way licensed merchandise and broadcast had become.
    In some instances the buildings themselves had become 
skyline signature projects such as Oriole Park at Camden Yards, 
Jacobs Field in Cleveland, and have boosted civic pride and 
community image. In almost all cases these projects have 
significantly impacted team revenue generation, franchise 
values, but unfortunately have also impacted the cost of being 
a pro sports fan.
    The advent of a generation of modern market-driven high-
end-customer-driven expensive stadiums has also given rise to 
another phenomenon, and that is the use of leverage through the 
threat to leave by ownerships seeking public investment in such 
projects.
    In addition, as the leagues themselves have expanded, and 
in an age when profitable buildings have become an important 
variable in the formula for franchise success, the decision to 
expand to a particular city is in part, and not a small part, 
influenced by the extent to which a new facility will 
strengthen the team's economic standing over the long term.
    These two factors, the threat of relocation and the 
influence of expansion by the leagues, have created a veritable 
bidding war among regions which has diverted an extraordinary 
commitment of public resources to these projects. Public funds 
have been invested in suites, club seats, restaurants, bars and 
clubs, and parking facilities that only businesses and high-
net-worth individuals can afford.
    While wonderful new buildings have been built, the vast 
majority of the returns from these investments have flowed not 
to the source of capital, but to the tenants of the buildings. 
In effect, the cost of capital for these projects has also in 
many instances been effectively subsidized by the availability, 
as Representative Carn pointed out, of tax-exempt debt that 
frees the buyers of bonds issued in support of those projects 
from Federal income tax issues on the interest income.
    And for some sports, as you well know, Senator, an 
antitrust exemption has enabled the sports business to operate 
free from certain constraints that affect competitiveness in 
other sectors of the economy. Very few industries in this 
country have enjoyed such favorable treatment from local, 
State, and Federal Government.
    By far the most effective means of pressuring publics to 
invest, as you well know, has been the threat to relocate. This 
has been particularly effective in baseball, although more 
recently has been seen as a tool in the NFL negotiations. The 
Chicago White Sox and the New England Patriots, the Seattle 
Seahawks, the NFL St. Louis Cardinals, the Pirates, the Rams, 
the Tampa Bay Buccaneers and others have all been effective 
with this tactic.
    Happily, this threat has not been invoked by either of the 
two Philadelphia teams. While we may not like this condition, 
it is also not uncommon. Every day, as Mayor Rendell well 
knows, cities like Philadelphia are faced with threats by 
private companies to leave, and we often engage in pot-
sweetening through tax credits, special zones, job training 
initiatives, and other public policy steps designed to keep 
those companies here.
    Expansion, too, has fueled construction initiatives in 
Arizona, Cleveland, Los Angeles, and Houston. In each case, the 
deal gets sweeter, the give-ups larger, the revenues reserved 
for the team more substantial, the level of public investment 
heavier.
    It does not have to be this way. A more enlightened and 
tougher negotiating stance can and should be taken by the 
public's representatives, and although I did not have the 
chance to study in detail what Controller Saidel has proposed, 
it seems that there is much merit in what he is offering as 
well.
    In an effort to assist in that regard, your bill, Senator, 
Senate bill 952, ties the expansion of the antitrust exemption 
for professional sports to the participation by major league 
baseball and the National Football League in the financing of 
new facilities. I commend you for this initiative. I think it 
reflects an honest and understandable frustration with an 
unquestionably well-organized effort to leverage scarce public 
resources into enterprises that seem well-equipped to support 
these projects more extensively with private funds.
    Here in Philadelphia, in a city where school buildings are 
rapidly becoming outdated and basic infrastructure has been put 
on a steady diet of deferred maintenance, the use of $400 
million of public funds to construct two new facilities for the 
Phillies and the Eagles is met with a healthy level of 
skepticism throughout the community, and there can be no 
denying that between league-wide broadcast and properties 
income, professional baseball and football have become healthy 
businesses more than capable of funding new stadium 
construction costs here and elsewhere.
    However, when we look at the current status of stadium 
development, it is also obvious to me that this legislation 
would, if enacted, be a very late entry into a game that is 
nearing the end of a long construction cycle.
    Senator, I will leave with you copies of two schedules I 
put together over the weekend, one of which looks at all the 
teams in the National Football League and one of which looks at 
all of the teams in major league baseball, and on the basis of 
that analysis of projects, many of which I have been involved 
in or are well aware of, it seems to me we are now at a place 
where, of the 31 National Football League teams, only six are 
left to develop new stadiums, and of the 30 major league 
baseball teams, including Philadelphia and Pittsburgh, which 
seem well down the road in their financing, only seven are 
presently candidates for developing new ball parks.
    The implications for those teams which have not financed 
their facilities could in some instances be detrimental. 
Consider the case of Boston, which has to compete in a division 
with three teams, Toronto, Baltimore, and Tampa Bay, which have 
new or relatively new facilities paid for largely with taxpayer 
dollars, as well as competing with the New York Yankees, who, 
as we pointed out earlier, enjoy extraordinary cable television 
income. For Boston to find itself in need of securing 50 
percent of its financing privately should it need to build a 
new ball park may significantly impact its competitive position 
relative to the other teams in its division.
    In the final analysis, the decision about whether and how 
to publicly invest in new sports facilities is a local 
decision. In many instances, the local financial commitment has 
been made as a product of public referenda such as the kind of 
referenda that Representative Carn would have liked to have 
given the voters in Philadelphia.
    Those referenda have given those communities the right to 
determine whether their local taxes should be used for these 
purposes. While academics and some politicians have railed 
against the application of these resources and have argued, in 
many instances correctly, that the economic benefits do not 
support these investments, in fact, the number of successful 
referenda have been very surprising.
    Those are my thoughts on your legislation, Senator. I 
appreciate the opportunity to be here.
    I would like to make a couple of other comments, if I 
might, in response to some of the comments that were made here. 
First of all, I heard for the first time today from Mayor 
Rendell that the plan for financing Philadelphia's ball park 
included an allocation of taxes generated from within those two 
facilities. I would be concerned if there was not an inflation 
adjustment factor in considering and holding harmless the city 
for its share of incremental tax revenues, and hope that it is 
not too late for that to be considered in those negotiations.
    Second, as Representative Carn noted, what started out as a 
grant, then was talked about as a loan at the State level, with 
respect to the repayment by the teams to the State of the funds 
invested, Representative Perzel and others were able to get a 
provision in that law which requires a 10-year calculation of 
the incremental tax benefits to the State from the operations 
of the two stadiums and, as I understand it, if the tax revenue 
generated to the State is not sufficient over that previous 10-
year period to pay the debt service, the teams have an 
obligation to fund the deficit. I would like to see that same 
provision built into the Philadelphia arrangements.
    Senator Biden asked a question of Mayor Rendell, how has 
the leverage changed today versus 20 years ago, and I would 
just quickly note that 20 years ago there were an awful lot of 
large cities that did not have major league sports teams. 
Today, for the Phillies and the Eagles the choices of cities to 
relocate to are generally cities that are smaller markets with 
less corporate concentration, and therefore I think leverage is 
still on our side.
    And last, just as an observation, because having worked 
both with team owners and on the other side of team owners it 
is not uncommon for teams to say that they need new facilities 
in order to be competitive, and I made the point with respect 
to the Boston Red Sox that their competitive position will be 
affected, depending on the kind of financing they have to do.
    However, at the end of the next decade, every major league 
football team and every major league baseball team will likely 
have a new stadium, and believe it or not, one of those teams 
will still come in last place, and the argument, I suspect, 
that competitiveness is used to justify these investments I 
think probably will not come out in the wash.
    I like what your bill is intended to do, and the only 
concern that I have is, since there are really at this point 
only 13 out of the 62 professional baseball and football teams 
left looking to develop stadiums, how will it impact them 
versus the 48 or so teams, or 47 teams that have already built 
those projects.
    I thank you for the opportunity to be here, and I hopefully 
can answer any questions you might have.
    Senator Specter. Thank you very much, Mr. Katz. It is true 
that one team will come in last, but it does not have to be the 
same team every year. [Laughter.]
    Which is getting to be a habit locally. [Laughter.]
    I recall as a youngster growing up in Wichita, KS, in the 
late thirties. One day, the Wichita Beacon published an article 
from a Philadelphia newspaper which had the standings inverted, 
and both Philadelphia teams were in first place.
    Controller Saidel, the issue of whether the teams can 
afford to build their own stadiums is always a paramount 
question, and it depends in substantial nature how you make 
allocations on the complex accounting formula which you have 
some substantial experience in.
    In one of our hearings in Washington, one of the experts, a 
professor who had consulted with you, made a comment about the 
ability of Philadelphia teams to afford their own stadiums. I 
would be interested in your observations on that, to the extent 
you would care to comment.
    Mr. Saidel. I believe, Senator, that overall the teams can 
afford to build their own stadiums. The uniqueness of 
merchandising, the uniqueness that has cropped up in the last 
decade as to naming rights, and a variety of other imaginative 
ways that stadiums can generate funds, gives the teams I think 
an ability to produce their own stadiums.
    What I talk about in my presentation to you, and I have and 
will to city council next month, if the mayor brings this 
forward for a vote, is that at a minimum we can loan them money 
and they can pay back $8 million a year and they can still make 
$16 million respectively--$37 million for the Eagles, $16 
million for the Phillies--based upon their ability to market 
their own merchandise and to create their own ability to sell 
their own tickets and not rely strictly upon what you have 
correctly talked about is threatening to leave at every 
moment's notice, and enjoying scarce tax dollars, so I believe 
they have the ability in the long run to make themselves 
profitable, to make the stadium profitable with their limited 
amounts of ability.
    Because of the cap formula, one of the ways that there was 
additional cash-flow to most of the major teams in the United 
States is through their generation of funding through the 
stadiums. The stadiums in and of themselves--and winning teams 
does not necessarily mean you are going to do well in the 
stadium. The Cincinnati Reds have done much better than the 
Philadelphia Phillies, and yet they are in last place as far as 
stadium revenues, but you have to be innovative, and I think 
they have the availability to be innovative.
    What I have talked about is capping our investment at some 
minimum range and allowing them to be innovative, to share in 
the naming, to share in the use of advertising, which was done 
in Baltimore in a variety of other ways that I think they can 
be profitable and not use city tax dollars.
    Senator Specter. In your answer, Mr. Controller, you talked 
about threats to leave. Have there been threats by the 
Philadelphia Phillies and the Eagles? Is it below the surface? 
How much below the surface? What are the realities?
    Mr. Saidel. There is in my conversations, there always is 
implied within their conversations, the Eagles, the ability to 
go to Houston or Los Angeles. As Mr. Katz mentioned, there are 
very few markets left where there are no teams. Twenty years 
ago, in response to Senator Biden's question, the teams may 
have had 8 teams and now they have 16 as an example, but there 
always is an implied threat to move, and that creates a duress 
atmosphere under which we have to negotiate.
    I believe the Phillies, the Phillies cannot leave. This is 
the best market they can ever find, where there is only one 
professional team within 7\1/2\ million people. The Eagles may 
have a better opportunity to leave in comparison to the 
Phillies, but I applaud Cleveland in the sense that they kept 
the name Cleveland Browns and now have a new team.
    There will always be someone, I believe, in the long run 
that will come to Philadelphia because of our fan participation 
and our ability to create an atmosphere that is creative and 
profitable for the teams.
    Senator Specter. With respect to the current lease 
arrangements, are there provisions by both the Phillies and the 
Eagles to stay in Philadelphia through the year 2011 as a 
result of very substantial money put into the Vet when it was 
constructed?
    Mr. Saidel. Right. The Veterans Stadium at this point 
barely breaks even. We have spent $50 million in capital 
improvements in which we have a long-term bond issuance of $3 
million per year until the year 2022. There is a large penalty 
clause if the Eagles or the Phillies break that lease and 
leave. My problem with building new stadiums is, who is going 
to repay me for the $50 million that I spent on new seats and 
the construction and infrastructure improvements in Veterans 
Stadium? We are still going to have to pay the loans.
    We will lose, as an example, if the Phillies move, about 
$500,000 to $1 million in real estate taxes by the use of 
eminent domain and the reduction of tax ratables because we 
will not be taxing the stadium but we do tax the new building, 
so there is a large penalty clause upon which the Eagles or the 
Phillies could leave. That has never been exercised.
    We also will lose the availability that under the threat to 
move to Phoenix a number of years ago we give up 70 percent of 
the luxury box income which will begin in 2 years at $6 million 
a year if that stadium is destroyed and the new stadium is 
built.
    So when Mayor Rendell talked about the fact that we will 
save capital programs that are involved in Veterans Stadium, he 
neglected to mention the income stream that we will, or we 
could receive if both teams stayed in Veterans Stadium till the 
end of the lease.
    Senator Specter. Referring to the issue where the Eagles 
threatened to move to Phoenix in 1984, that was----
    Mr. Saidel. That was terrible.
    Senator Specter. I remember, we had hearings in Washington 
and litigation started in Philadelphia. The city was panicked 
at the prospect of having the Eagles move. I do not know what 
it was like in Baltimore when the Colts left in the middle of 
the night, or when the Browns left Cleveland, but it was 
something here in Philadelphia.
    Mr. Carn, I commend you for what you have done. We have 
heard testimony about the serious situation of the public 
schools, but how about the other side of the coin? What is your 
evaluation of the loss to a city like Philadelphia if the 
Eagles were to go, or the Phillies were to go?
    Mr. Carn. As a lifelong resident of Philadelphia, I think 
it would be devastating on--again, I used to go to Phillies 
games as a little boy, and we have carved out our history here, 
but the question is, in doing it fast and not doing it right, 
it is clear to me that we can accommodate the needs of the 
Phillies and the Eagles if we sit down and negotiate from a 
better position as Government entities.
    Again, my perspective has always been, well, let's make 
sure that the taxpayer benefits in this process. I want the 
Phillies to be a winner in this process, I want the Eagles to 
be a winner, but the taxpayer also needs to be a winner, and in 
all the testimony that has been given shows that there is 
enough money in the marketplace to assist in the construction 
of stadiums but there has not been a policy from our 
governmental entities to promote the use of more private 
dollars, but clearly there are examples, as Mr. Katz pointed 
out, where private financing has been successful in building 
stadiums, and I just want to encourage more private investment 
in these kind of projects.
    We need more resources for our city, and whether the mayor 
says it or not, he is asking the taxpayers of Philadelphia to 
contribute $200 million of tax revenues. He might say they 
might not impact the operating budget or the capital budget. 
Those are slick words.
    Senator Specter. Why did you wait so long for this photo 
opportunity? [Laughter.]
    Mr. Carn. I just wanted to make my point that we can use 
those dollars for other needs in the city and still through 
private investors meet the needs of local stadiums.
    Senator Specter. What kind of response do you get from the 
up-State members of the House of Representatives and the State 
senate to this very substantial subsidy coming from State 
revenues for the big cities?
    Mr. Carn. Well, they very much are opposed to it. As a 
matter of fact, prior to the vote in Harrisburg for the stadium 
funding the Republicans had a 70-percent favorable rating. 
Right after the vote on stadiums statewide the polls show that 
their favorable rating dropped to 50 percent, and so clearly 
the voters of Pennsylvania had expressed themselves in 11 
counties in the western part of Pennsylvania primarily 4 to 1 
against public financing.
    We, in our position in Government, ignored that, made money 
available, but the public had expressed themselves, and these 
are polls taken by the Republican caucus of the House.
    Senator Specter. One of the things which is generally not 
felt is the up-State concern about funding being directed to 
Philadelphia especially, but to some extent Pittsburgh, and 
when I was a candidate for the U.S. Senate in 1980 I was 
constantly explaining my Philadelphia residency, and I was in a 
western county running against former Mayor Flaherty of 
Pittsburgh, who was talking about that in a race between 
Philadelphia and Pittsburgh the fellows out there should not be 
real amorous for the folks running from Philadelphia, and a 
reporter said, you are from Philadelphia and he is from 
Pittsburgh. We do not like either of you. [Laughter.]
    That was the up-State comment, and that is why I press a 
little bit as to how they feel about this kind of funding.
    Mr. Carn. Senator, I want to say that I was on the 
statewide talk show earlier in the debate on this issue, and I 
was amazed at how upset up-State or central Pennsylvanians were 
over the possibility of State dollars being utilized to build 
stadiums in Philadelphia and Pittsburgh. They were livid.
    I received so many calls that had really expressed the 
sentiment that you just expressed, but that was early in the 
debate, and I remember coming back to Harrisburg that Monday 
after that broadcast and I had about 10 to 12 of my colleagues 
come up to me and say they had changed their position, because 
just behind that broadcast they were inundated by phone calls 
because I kept saying top the callers, call your State 
representative, call your State senator. I said, I am just one.
    But they were inundated in central Pennsylvania and the 
northern tiers of Pennsylvania. They were inundated by callers.
    Senator Specter. Please be explicit when you tell them to 
call their State senators. [Laughter.]
    Mr. Katz, I appreciate your expertise in the field very 
much. There will be a lot of stadiums built in the next 10 
years. The statistics I see from Rosentraub on major league 
losers refers to about half of the professional sports teams in 
new stadiums either now or within the next few years, and a lot 
of construction is going to be going on in the next 5 years, 
and when you talk about legislation in this field we are facing 
some very heavy lobbying interest.
    If you were to find a special interest group which has 
close knowledge of or access to Members of Congress and the 
House of Representatives or Senators, you could not find a more 
powerful group than these sports owners. Talk about the world's 
most exclusive club, it's not the U.S. Senate. It is the major 
sports owners in America. They are very, very powerful and 
persuasive, and it is a long-term effort.
    I put my first legislation in the hopper on this issue in 
the early eighties when I got to the Senate, because I believed 
that professional sports were affected by the public interest, 
and I am still personally angry about the movement of the 
dollars and all the teams which have been relocated, and it is 
a long-term battle to deal with baseball's antitrust exemption.
    It started off, as you know, in 1922, when Oliver Wendel 
Holmes said baseball was a sport, and that was recognized as 
being erroneous in the 1970 Supreme Court decision, but it is 
still a long way from being able to take any effective action.
    I am very much interested in what you say about Joe Robbie 
Stadium, and why would that not be a model for private funding 
for other stadiums like the Pennsylvania stadiums?
    Mr. Katz. Well, first of all, Senator, what I would be 
happy to do with your staff is to simply go through the 
projects that are in transition. You are correct that in the 
next 5 years quite a number of stadiums will be built, but, for 
example, two new stadiums in Cincinnati will be built in part 
with the proceeds of bonds sold and secured by sales taxes that 
are being set up and approved by the voters in the county 
around Cincinnati, Hamilton County.
    The new stadium is being put up and is now in the process 
of Denver taking care of the Denver Broncos based on a 
referendum that was passed in 1991, and so all I am saying is 
that I just identified 13 out of 61 cities which do not now 
have, including the two Philadelphia projects, do not now have 
financing locked up, and therefore would be impacted by your 
legislation.
    Already, as you now know, the National Basketball 
Association is virtually completed construction on all the 
arenas around the country, and almost every National Basketball 
Association team is playing in an arena that is less than 10 
years old.
    The National Hockey League is in the process of getting to 
the same place, and by the end of 2004 or 2005 most of baseball 
and football will be there.
    Senator Specter. But in hockey and basketball, to what 
extent have they looked to the taxpayers?
    Mr. Katz. To a much lesser extent, because they are closed 
buildings which can house concerts and family shows and lesser 
minor league sporting events and all other kinds of civic and 
community events.
    The arenas like First Union Center, which was principally 
financed privately--and by the way, Joe Robbie is not the only 
stadium, as you well know. Pacific Telesis Park in downtown San 
Francisco is being built 100 percent with private money for the 
San Francisco Giants. Jack Kent Cooke Stadium in Washington, or 
outside of Washington, 100 percent private money.
    Senator Specter. Well, if they are doing that, why not the 
Pennsylvania stadiums?
    Mr. Katz. Well, I would say that some of it is history. The 
Pirates really started the ball rolling in Pennsylvania. When 
Kevin Klatchy came to Pennsylvania and bought the Pittsburgh 
Pirates he did so with an understanding that by the summer of 
1998 there would be in place a finance plan that was clear to 
him would produce a new stadium with public funding.
    When the referendum that Representative Carn is talking 
about was defeated, the Pirates were effectively free to leave, 
and what they called Plan B was put in motion in which the 
State was asked, and did commit before the legislature acted, 
to provide one-third of the money. One-third of the money was 
to be provided by a combination of the city of Pittsburgh in 
Allegheny County, and one-third by the Pittsburgh Pirates.
    While there has never been any discussion here in 
Philadelphia about one-third, one-third, one-third, that deal 
was across the Allegheny Mountains and arrived on the laps of 
the Eagles and the Phillies, so the discussion here started off 
with a combination of two-thirds public, one-third private 
before anybody even initiated serious conversation.
    Let me just say something about the Philadelphia situation, 
because I am extremely concerned that what Andy Carn just 
talked about, which is public participation, is likely to be 
rolled over here in Philadelphia because of the timeframe in 
which this transaction appears to be on course to be done.
    There is, as the mayor said, a significant disadvantage to 
a city that negotiates at the eleventh hour of the expiration 
of its lease, but 2011 and 1999 do not put us in the eleventh 
hour of the negotiation of these leases, and if we are going to 
have an introduction of what will promise to be 1,000-page 
documents 4 weeks before a mayoral election, which I would 
prefer to see the public's attention focused on that, for 
obvious reasons, as opposed to trying to get through all of the 
details in a very short period of time of these leases, I think 
in the long run the public's interest will not be served.
    We have seen in Philadelphia a dismissal of the proposed 
site at 30th Street. We have seen a dismissal of a whole series 
of other sites which have not been given in my mind very much 
serious public consideration. We have had virtually no 
conversation, and even today I would say that the mayor did not 
provide a lot of information about how the projects are going 
to be financed, and Controller Saidel has a proposal to finance 
it on a basis different than what is being talked about. It 
seems that a couple of weeks is hardly enough time to get that 
on the table.
    And last but not least, these buildings are public assembly 
buildings, and the design of them is something that the public 
will have a very strong interest in, and so for me it would be 
advantageous to see more time given to this activity so that 
the public's input both on financing and on lease terms, onsite 
and on design can be more fairly considered, rather than try to 
get these things done in a timeframe that would give the public 
very little opportunity.
    You should know, and I am sure you do, Senator, that the 
documentation that was considered by the city council and the 
approval of the First Union Center project with the city as the 
ground lessor was several hundred pages, and was not rushed 
through the city council, and I believe they got the 
opportunity for lots of public comment, and I think we may well 
be missing that opportunity if we feel compelled to get all of 
this done by the end of 1999.
    Senator Specter. Well, thank you very much for those 
observations, Mr. Katz. I do think this is an area which has 
not received sufficient attention, and although we can talk 
about what has happened up until this point there is going to 
be a lot happening in the future.
    This book is in the early chapters of sports moves in 
America, and there is a lot happening. When you take a look at 
the impact of television and the super stations with the 
Braves, what is happening in Chicago and the acquisition by 
Rupert Murdoch of the Dodgers and the Fox Network, and the 
efforts of Telstar to alter network and local controls, there 
is a lot going on, and at the tail end comes the consumer, and 
that is why it is necessary for people like Representative Carn 
to dig into it, and Controller Saidel to make an analysis, and 
the citizens.
    You have had a lot of experience, Mr. Katz, in this area, 
and we are going to continue to push at it at the national 
level, but it is a tough fight, because the people who have the 
business interest have much more concrete ideas of where they 
are going, and playing defense is very tough. Whoever has the 
ball is likely to win the game on the last score.
    Thank you all very much.
    [Whereupon, at 11.10 a.m., the committee adjourned.]
                            A P P E N D I X

                              ----------                              


                         Questions and Answers

                              ----------                              


        Responses of Professor Benjamin Klein to Questions From 
                        Senator Patrick J. Leahy

    Thank you for the opportunity to respond to the suggested changes 
in the federal tax treatment of professional sports team relocations. 
My responses correspond to the numbered questions attached to the 
letter from Senator Hatch dated December 17, 1999.

    Answer 1A. I do not believe the proposed change in the tax code 
would make economic sense. While I believe that several of the 
franchise moves in recent decades have not been economically efficient 
from the standpoint of local communities and the overall league, I do 
not believe that treating team relocations as sales for tax purposes 
would be a productive response. As I explained in my written statement, 
I believe that providing the leagues with an antitrust exemption over 
franchise relocation issues would eliminate most inefficient 
relocations, and would be economically superior to the proposed 
relocation tax.
    Treating a team relocation as a sale for tax purposes would have 
several adverse consequences. First, it would impose a large and 
essentially arbitrary sanction for moving a team without any regard to 
whether the move made any economic sense. Thus, the tax would deter 
some relocations that are clearly in the public interest--such as those 
from cities with lackluster support for a team to those that would 
value it highly.
    Second, the severity of the proposed sanction would depend largely 
on such extraneous factors as how long the present ownership group had 
owned the team, and the particular circumstances of each owner's 
individual tax situation. For example, owners that had owned their 
teams for many years, and thus had significant appreciation in team 
value, would pay a much higher penalty to move than those who had 
recently purchased a team. I can see no economic justification for such 
a policy.
    Third, the proposal would apply federal tax policy in an 
illogically discriminatory manner. The rationale of the proposal--
blanket preservation of the local economic status quo--would apply 
equally to relocations of factories or other businesses that have some 
impact on the local economy. Thus, the relocation tax could not 
reasonably be limited to sports businesses.
    Fourth, the proposal would interject federal tax policy into 
decisions that have traditionally and appropriately been left to local 
and state policy makers. As I explained in my Senate testimony and 
elsewhere\1\, team relocation decisions and stadium financing projects 
do not create a net drain on the federal treasury, and therefore do not 
warrant discriminatory treatment under federal tax policy. The relative 
value of a sports team to one locale as opposed to another is an issue 
that is better resolved by local and state governments without 
interference from the IRS.

    \1\ A more complete discussion of the impact of stadium projects on 
federal tax collections is included in my article with Kevin Green and 
Brian Lebowitz ``Using Tax-Exempt Bonds to Finance Professional Sports 
Stadiums'', Tax Notes, Vol. 78, No. 13 (March 1998), 1663-1686. 
Reprinted in The Exempt Organization Tax Review, Vol. 20, No. 2 (May 
1998), 240-259.

    Answer 1B. The proposal likely would result in fewer teams seeking 
to relocate, except where the relocation accompanied a sale, in which 
case the tax consequences would be relatively insubstantial. From an 
economic perspective, teams will only seek to relocate if the perceived 
benefits to the team from doing so outweigh the costs, which would be 
artificially inflated by the proposal. Teams seeking to relocate 
without a prior sale could be expected to try to transfer some or all 
---------------------------------------------------------------------------
of the tax costs to the community to which they propose to move.

    Answer 1C. I do not believe that the proposed legislation can be 
economically justified based on its ability to alter the relative 
bargaining power of the local community and the team. As I explained in 
my written statement, I believe that providing the leagues with an 
antitrust exemption over franchise relocation issues would 
significantly reduce the ability of individual teams to threaten local 
communities with relocation. Sports leagues have much stronger economic 
incentives than individual teams to avoid the adverse publicity and 
loss of fan support associated with team relocations. Hence, state and 
local governments in cities with an existing team would generally be in 
a significantly improved bargaining position if the league had the 
ability to veto franchise relocations that were not in the league's 
interest. Such a policy would achieve this benefit without the economic 
distortions present in the proposed legislation.
                               __________

           Responses of Jerry Richardson, to Questions From 
                      Senator Russell D. Feingold

    Answer 1. As the owner of a small media market team, the Carolina 
Panthers, I think your team's experience is similar to another small 
market team in my home state, the Green Bay Packers. Please elaborate 
on the effect of the bill on small media market teams, like the Packers 
and the Panthers.
    In my opinion, one of the real strengths of the National Football 
League is that teams in small media markets, like the Carolina Panthers 
and the Green Bay Packers, can compete effectively on the playing field 
with teams from New York, to Chicago, or other larger communities. The 
clearest proof of this is the experience of my own team, the Carolina 
Panthers. We began to play in 1995, and 1 year later played the 
Packers, who were founded in 1919, in the NFC Championship Game, with 
the winner representing the National Football Conference in the Super 
Bowl. Unfortunately for us, the Packers went to the Super Bowl and won 
the Championship.
    The NFL's structure is such that all clubs have a fair opportunity 
to acquire and retain the player talent necessary to field a 
competitive team, regardless of market size. A central element of that 
structure is the League's revenue sharing plan, and particularly the 
equal sharing of all national television revenue. As you may know, all 
of the League's regular season and post season games are televised as 
part of our national contracts with ABC, CBS, FOX, and ESPN, with the 
revenues shared equally by all NFL member clubs.\1\
---------------------------------------------------------------------------
    \1\ Those contracts also require that all of a team's road games be 
televised back to its home fans. If the home games are sold out, they 
are similarly televised to the fans in the home city. All of these 
games are shown on free television--even the Sunday night ESPN game is 
simultaneously televised on free television in the markets of the 
competing teams. These requirements are of great benefit to our fans 
and is unique in professional sports.
---------------------------------------------------------------------------
    As far as the Carolina Panthers are concerned, that equal sharing 
of television revenue is critical to our ability to field a competitive 
team and put a first-class product on the playing field each year.
    S. 952 would have a serious negative effect on small market teams 
like the Panthers and the Green Bay Packers. It would not simply reduce 
our share of national television revenue each year by 10 percent, in 
itself an unwarranted and adverse consequence, but would 
disproportionately affect small market teams like Carolina and Green 
Bay. This is because the bill targets a source of shared revenue, which 
is critically important to small market clubs. Teams in larger markets, 
with their greater access to sponsorship revenue, premium seat buyers, 
and other local marketing and revenue opportunities, can more readily 
make up reductions in television income than can teams like the 
Panthers or Packers. It would be extremely difficult, if not impossible 
for our club to offset the loss of 10 percent of its national 
television revenue, and doing so would simply impose greater burdens on 
our fans. By focusing on equally shared national television revenue, 
the bill actually magnifies the problem of revenue disparities between 
large market and small market teams, and thereby threatens the 
viability of small market teams and competitive balance on the playing 
field that has allowed teams like Carolina and Green Bay to be 
successful.
    A further inequitable consequence of the bill is that the revenue 
taxed away from teams like Carolina and Green Bay would be 
disproportionately used to fund the construction of stadiums in larger 
cities, simply because those projects are generally more costly. In 
short, the bill would impose greater burdens on small market clubs, 
which I believe is precisely the opposite of what was intended by 
Congress when it originally enacted the Sports Broadcasting Act.

    Answer 2. I understand that you are the chair of the NFL's Stadium 
Committee. Since passage of the March 1999 resolution providing for 
League contribution to stadium construction, please tell us about the 
financing commitments, if any, the League has made to stadium projects.
    The NFL has participated in the financing of stadium costs since 
1987 with far reaching policies to create public-private partnerships. 
Last March, the member clubs adopted Resolution G-3, a revision and 
extension of the initial policy, a copy of which is attached to these 
responses. This resolution was adopted after careful study by the 
League's Finance and Stadium Committees, the latter of which I chair. 
Resolution G-3 enhances the League's participation in the financing of 
stadium construction and renovation in three principal respects. First, 
it provides for ``up front'' League loans in respect of private 
contributions toward construction or renovation costs. Under prior 
League policy, the League's contribution was made over time (generally 
15 years) and was based on the revenues generated by the leasing of 
premium seats or the sale of personal seat licenses. Under the new 
resolution, a club is eligible to receive League funding in one or more 
lump sums at an early stage in the process, which will reduce financing 
costs, lower the overall cost of the project, and allow for enhanced 
private contributions.
    Second, the amount to be loaned by the League in respect of any 
given project can be as much as 50 percent of the private contribution 
toward the stadium project, as opposed to 34 percent under prior League 
policies. This larger amount is available for any stadium project in 
one of the six largest television markets. Thus, in one of those 
markets, a private contribution of $200 million would result in a 
League financial commitment of up to $100 million. Teams not located in 
one of the six largest television markets are eligible for a loan of 34 
percent of the private contribution to the project, as was the case 
under the previous stadium financing program. However, as previously 
stated, it would be paid up front.
    The potential for a contribution equal to 50 percent of the private 
commitment to stadium projects in the largest television markets 
recognizes the League's shared interest in maintaining a strong 
presence in those cities, which in turn is of considerable importance 
to our network partners. This of course benefits teams like Carolina 
and Green Bay, which share equally in the revenues from the national 
television agreements.
    Third, the loan from the League is not based solely on amounts 
generated from premium seats or personal seat licenses. Instead, the 
member clubs have agreed to set aside a portion of their national 
television revenues to repay a portion of the loan from the League. 
This direct assessment of the national television revenues means that 
all clubs will contribute to the financing of new and improved stadium 
facilities and will reduce the need for clubs to rely on premium 
seating or sell personal seat licenses to finance stadium projects.
    Following the approval of Resolution G-3, the member clubs approved 
requests for League financial assistance relating to stadium projects 
in Denver, New England and Philadelphia. Because New England and 
Philadelphia are each located in one of the six largest television 
markets, they are eligible to receive a loan equal to 50 percent of the 
private contribution to those projects. In the case of Denver, the 
membership approved a loan equal to 34 percent of the private 
contribution to that project. Copies of the resolutions approving those 
loans are attached to these responses. The projects in Denver, New 
England and Philadelphia will likely result in private contributions of 
over $600 million, with a substantial contribution to each being made 
by the League. We anticipate that over the next several years League 
financing commitments will increase significantly.

    Answer 3. It is my understanding that public and economic support 
for stadium projects varies considerably from state to state, city to 
city. Consequently, I wonder whether local communities, the League and 
the teams should be able to decide among themselves, without Federal 
intervention, how to finance stadium construction projects. Do you 
believe that the local communities, not the Federal Government, are 
best equipped to deal with this issue?
    I agree completely with the premise underlying your question. In my 
years as Chairman of the Stadium Committee, I have worked on stadium 
projects in communities throughout the country. Those projects have 
been in both large and small markets, have had different mixes of 
public and private financing, and have followed different paths leading 
to the approval--or in some cases, the rejection--of the project being 
considered. I have learned that there are as many different solutions 
to stadium issues as there are communities in this country. As a 
result, teams and communities have developed a number of creative 
public-private financial partnerships to address stadium issues.
    Stadium proposals receive a great deal of scrutiny from local 
officials and voters, who make decisions that reflect local economics 
and community needs. In my judgment, the best way to handle these 
issues is to allow the local owner and the elected officials and 
taxpayers of that community to address the team's stadium needs and how 
they will be financed. That is not to say that the National Football 
League cannot play a constructive role, which I believe we have done in 
many communities. The resolution approved last March is a further 
example of how the NFL can and will contribute in the future. But it is 
clear to me, as I testified last summer, that a ``one size fits all'' 
approach to stadium financing is not only unfair to NFL teams and their 
fans, but ignores the particular factors present in each individual 
community. Given this reality, I do not think there is any national 
interest that calls for Congress to override the carefully considered 
judgments of state and local governments, or the results of direct 
voter referenda, by imposing a Federal approach to what is a 
particularly local issue.
                                 ______
                                 

                    1999 Resolution G-3--As Amended

    Whereas, it is appropriate to improve the League's current policies 
to support new stadium construction through club seat sharing 
exemptions, as reflected in the club seat sharing exemption guidelines 
adopted by the League in 1994 (the ``Guidelines''), and through PSL 
sharing exemptions.
    Whereas, a revised policy can facilitate new stadium construction 
projects by (1) making upfront League loans in support of Clubs' 
private contributions to such projects (rather than annually exempting 
from sharing the visiting team share (``VTS'') of club seat premiums 
over a period up to 15 years) and (2) assuring that League loans will 
amount to at least 34 percent of an affected Club's private 
contribution to a project:
    Whereas, such League loans should be subject to member club 
approval on a case-by-case basis;
    Be it Resolved:
    (1) That for any stadium construction project involving a private 
investment for which an affected Club makes a binding commitment from 
now through the 2002 NFL season (through March 31, 2003), the League 
shall make a loan to the affected Club to support such project based on 
the amount that the affected Club has committed to such project as a 
private contribution (the ``Private Contribution'');
    (2) That the amount of such League loan shall range from 34 percent 
to 50 percent of the Private Contribution, determined on a case-by-case 
basis based on the size of the Private Contribution, with incremental 
League loans in excess of 34 percent generally to be made available to 
facilitate stadium construction projects in the largest markets that 
are home to an NFL Club, and with the League loans in smaller markets 
generally limited to 34 percent of the Private Contribution;
    (3) That the Commissioner is authorized to make arrangements for 
the League to borrow from commercial or institutional lenders funds to 
make such League loans, with the funds to be repaid to such lenders 
over an appropriate time period (10 years of such other period as may 
be determined by the Finance Committee);
    (4) That the specific borrowings from commercial or institutional 
lenders related to any stadium construction project must be approved as 
part of the League's approval of a League loan to such project, with 
the borrowings to be repaid principally from the VTS of club seat 
premiums generated by such project, and, to the extent that the VTS of 
club seat premiums is insufficient to repay such loans, with any 
incremental funds needed for repayment to be assessed against the 
League's network television revenues;
    Further Resolved:
    (1) that if PSL's are sold with respect to a particular stadium 
construction project, such PSL's shall be eligible for an exemption 
from sharing in accordance with current policies;
     (2) that the amount of VTS exempted in respect of PSL's sold shall 
be offset against the principal amount of League loans available for 
the project; and
    (3) that for purposes of determining whether a project is eligible 
for incremental League loans, only the first $75 million of PSL 
proceeds shall be treated as a portion of the Private Contribution;
    Further Resolved:
    (1) That any League loan under the League policy adopted by this 
resolution, as between an affected Club and the League, shall be 
forgiven over the term of the aforementioned League borrowing on an 
equal annual basis, and
    (2) That, if an affected Club that receives a League loan under the 
League policy adopted by this resolution (or a controlling interest 
therein) is subsequently sold other than to a member or members of an 
owner's immediate family (as defined in the NFL Constitution and 
Bylaws) before the final maturing date of the League loan, then the 
selling party shall repay to the League from the sale proceeds at 
closing an amount equal to the outstanding principal balance on the 
League loan; and
    Further Resolved, that in order for a stadium construction project 
involving a Private Contribution to qualify for a League loan, the 
conditions set forth in Attachment A to this resolution must be 
satisfied.
          submitted by finance committee and stadium committee
    Reason and Effect: To modify and simplify the League's policies 
with respect to stadium construction projects to provide for amount 
other things, (1) a standard 34 percent League loan towards the private 
contribution to such projects, (2) such League loan to be made upfront 
a the beginning of such projects from funds to be borrowed by the 
League, and (3) an incremental League loan (in excess of 34 percent in 
respect of such projects in the largest markets.
                                 ______
                                 
Attachment A

    (a) The League must approve a resolution specifically directing in 
the making of a loan in respect of a particular stadium construction 
project, following an evaluation of (1) the necessity of a new or 
renovated stadium in a market in terms of the suitability, economic 
competitiveness, and physical condition of the existing facility, the 
stadium's importance to League franchise stability, the League's 
concerns regarding its national image and presence, the importance of 
an affected market to the League's national television ratings, and 
other League business priorities, and (2) the specific attributes of 
the project, including the scope and cost of the project relative to 
the economics in a market and the League as a whole, the balance of 
projected shareable and non-shareable revenue streams and the 
construction costs associated with each, whether a renovation project 
is a ``qualifying'' project (as defined in the Guidelines), and similar 
factors;
    (b) Such resolution must be adopted and the stadium construction 
project must be committed to by both public and private parties, from 
now through the 2002 NFL season (through March 31, 2003);
    (c) The stadium construction project must be a ``public-private 
partnership'' to which public authorities and an affected Club each 
have committed funds;
    (d) The project must not involve any relocation of or change in an 
affected Club's ``home territory'' (as defined in the Constitution and 
By-laws);
    (e) Increases in the visiting team share generated by the new or 
renovated stadium must meet the standards set forth in the Guidelines; 
and
    (f) The NFL Players Association must agree to exclude from DGR, 
over a reasonable period of time on a straight-line amortization basis, 
the entire amount of the Private Contribution, together with an amount 
equal to the imputed interest on the Private Contribution at a 
commercially reasonable interest rate.
                                 ______
                                 

                          1999 Resolution JC-3

    Whereas, 1999 Resolution G-3 as amended established a new League 
policy to facilitate new stadium construction projects;
    Whereas, the Philadelphia Eagles are prepared to participate in a 
public-private partnership for the construction of a new stadium in 
downtown Philadelphia;
    Whereas, the member clubs have determined that the Philadelphia 
stadium project, as described to the membership, will serve the 
League's interests by creating a new and much needed facility in a 
major television market and by increasing Visiting Team Share over that 
generated by the Eagles' current stadium;
    Whereas, the member clubs have determined that the Philadelphia 
stadium project qualifies for a stadium construction contribution from 
the League under the criteria set forth in 1999 Resolution G-3.
    Be It Resolved, that the League shall make a loan to support the 
Philadelphia stadium project, which loan shall be made to the Eagles, 
the stadium project, and/or a stadium company that the Eagles may 
choose to create in connection with the stadium project, and the amount 
of which loan (a) shall be determined based upon guidelines developed 
and applied jointly by the finance and Stadium Committees and to be 
reviewed by the NFLPA and (b) shall be based on the club's ``Private 
Contribution,'' as defined in 1999 Resolution G-3;
    Further Resolved, that the amount of such Private Contribution 
shall be subject to verification and audit in accordance with 
procedures to be determined and approved by the Finance and Stadium 
Committees and to review by the NFLPA as contemplated by 1999 
Resolution G-3 and related agreements between the NFL Management 
Council and the NFLPA);
    Further Resolved, that the amount of such League loan shall be 50 
percent of the Private Contribution, as so determined;
    Further Resolved, that the Commissioner is hereby authorized to 
make arrangements for the League (or a League affiliate created to 
administer the stadium contribution program) to borrow funds to make 
such loan on terms consistent with 1999 Resolution G-3;
    Further Resolved, that any such loan shall be repaid first from the 
VTS of PSL's and club seat premiums generated by the Philadelphia 
stadium project (the amount of which shall be subject to verification 
and audit in accordance with procedures to be determined and approved 
by the Finance and Stadium Committees), with any incremental funds 
needed for repayment to be assessed against the League's network 
television revenues;
    Further Resolved, that the aforementioned League loan shall be 
forgiven over the term of the aforementioned League borrowing in a 
manner consistent with 1999, Resolution G-3;
    Further Resolved, that if the Eagles, any stadium company that may 
be created in connection with the Philadelphia stadium project, or a 
controlling interest in either of them, is sold other than to a member 
or members of the current owner's immediate family before the final 
maturity date of the League loan, the selling party shall repay to the 
League from the sale proceeds at closing an amount equal to the 
outstanding principal balance on the League loan, computed solely for 
purposes of determining such repayment amount by subtracting one-
fifteenth of the initial principal balance of such loan from such 
initial principal balance for each year that such loan has been 
outstanding;
    Further Resolved, that the terms and conditions of the stadium 
contribution granted hereby shall be evidenced by agreements with all 
relevant parties acceptable in form and substance to the Commissioner, 
and that the Commissioner shall execute and deliver such agreements on 
behalf of the League, which shall contain such additional specific 
terms and conditions as the Commissioner may deem necessary or 
appropriate.
              submitted by finance and stadium committees
    Reason and Effect: To approve in principle a stadium construction 
contribution for a new stadium to be constructed in downtown 
Philadelphia.


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              VOTE                             DISPOSITION
------------------------------------------------------------------------
For     ______
Against  ______
Abstain  ______
Absent  ______
------------------------------------------------------------------------

                                 ______
                                 

                          1999 Resolution JC-4

    Whereas, a new stadium for the Denver Broncos is being constructed 
through a public-private partnership;
    Whereas, Pat Bowlen has created a separate company, Stadium 
Management Company (``SMC''), which he controls, to borrow monies to 
fund the Broncos' private investment in the new stadium, to hold the 
master lease for the stadium, and to operate the stadium following its 
construction;
    Whereas, the final terms of the debt to be incurred by SMC to fund 
the Broncos' contribution to the stadium project, the financial terms 
of the master lease between SMC and the Denver stadium district, and 
the financial terms of the sublease between SMC and the Broncos have 
been submitted for Executive Committee approval as required by 1988 
Resolution FC-3 and 1988 Resolution FC-5; and
    Whereas, as described to the membership, the Broncos' new stadium 
project will serve the League's interests by creating a new and much 
needed facility in an important League market and by increasing 
Visiting Team Share over that generated by the Broncos' current 
stadium; and
    Whereas, the member clubs have determined that the Denver stadium 
project qualifies for a stadium construction contribution from the 
League under the new League policy established by 1999 Resolution G-3 
(as amended) to facilitate new stadium construction projects;
    Be it Resolved, that the terms of the financing agreements to be 
entered into by SMC to fund construction of the Broncos' new stadium 
(including the required temporary and limited waiver of the debt 
ceiling) be, and hereby are, approved;
    Further Resolved, that the financial terms of the master lease and 
sublease for the new stadium be, and hereby are, approved;
    Further Resolved, that the debt and lease approvals granted hereby, 
and the terms and conditions thereof (including that if, at any time, a 
transaction is proposed after which the Broncos and SMC shall no longer 
be commonly owned and controlled, the sublease will be amended, subject 
to then-outstanding stadium financing obligations, so that the Broncos 
will have the right to receive substantially all football-related asset 
streams from the stadium and the obligation to pay SMC a negotiated 
arms'-length rent from such revenues), shall be reflected in customary 
letter agreements among relevant parties in form and substance 
satisfactory to the Commissioner and the Finance Committee;
    Further Resolved, that the League shall make a loan to support the 
Denver stadium project, which loan shall be made to SMC, the Broncos, 
and/or the stadium project, and the amount of which loan (a) shall be 
determined based upon guidelines developed and applied jointly by the 
Finance and Stadium Committees and to be reviewed by the NFLPA and (b) 
shall be based on the club's ``Private Contribution,'' as defined in 
1999 Resolution G-3;
    Further Resolved, that the amount of such Private Contribution 
shall be subject to verification and audit in accordance with 
procedures to be determined and approved by the Finance and Stadium 
Committees and to review by the NFLPA as contemplated by 1999 
Resolution G-3 and related agreements between the NFL Management 
Council and the NFLPA);
    Further Resolved, that the Commissioner is hereby authorized to 
cause funds to be borrowed by the League (or a League affiliate created 
to administer the stadium contribution program) on terms consistent 
with 1999 Resolution G-3 in order to make such loan in support of the 
Denver stadium project;
    Further Resolved, that such loan shall be repaid first from the 
Visiting Team Share of club seat premiums generated by the Denver 
stadium project (the amount of which shall be subject to verification 
and audit in accordance with procedures to be determined and approved 
by the Finance and Stadium Committees), with any incremental funds 
needed for repayment to be assessed against the League's network 
television revenues;
    Further Resolved, that the aforementioned League loan shall be 
forgiven over the term of the aforementioned League borrowing in a 
manner consistent with 1999 Resolution G-3;
    Further Resolved, that if the Broncos and/or SMC, or a controlling 
interest in either of them, is sold other than to a member or members 
of the current controlling owner's immediate family (as defined in the 
NFL Constitution and Bylaws) before the final maturity date of the 
League loan, the selling party shall repay to the League from the sale 
proceeds at closing an amount equal to the then-outstanding principal 
balance on the League loan, computed solely for purposes of determining 
such repayment amount by subtracting one-fifteenth of the initial 
principal balance of such loan from such initial principal balance for 
each year that such loan has been outstanding; and
    Further Resolved, that the terms and conditions of the stadium 
contribution granted hereby shall be evidenced by agreements with all 
relevant parties acceptable in form and substance to the Commissioner, 
and that the Commissioner shall execute and deliver such agreements on 
behalf of the League, which shall contain such additional specific 
terms and conditions as the Commissioner may deem necessary or 
appropriate.
              submitted by finance and stadium committees
    Reason and Effect: To approve the financial terms of the Broncos' 
new stadium lease documents, their stadium construction financing 
documents and the related debt ceiling waiver, and a stadium 
construction contribution to be made to the Broncos under 1999 
Resolution G-3.


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              VOTE                             DISPOSITION
------------------------------------------------------------------------
For     ______
Against  ______
Abstain  ______
Absent  ______
------------------------------------------------------------------------

                                 ______
                                 

                          1999 Resolution JC-5

    Whereas, 1999 Resolution G-3, as amended established a new League 
policy to facilitate new stadium construction projects;
    Whereas, the New England Patriots have undertaken to participate in 
a public-private partnership for the construction of a new stadium in 
Foxboro, Massachusetts;
    Whereas, the member clubs have determined that the Foxboro stadium 
project, as described to the membership, will serve the League's 
interests by creating a new and much needed facility in a major 
television market and by increasing Visiting Team Share over that 
generated by the Patriots' current stadium;
    Whereas, the member clubs have determined that the Foxboro stadium 
project qualifies for a stadium construction contribution from the 
League under the criteria set forth in 1999 Resolution G-3.
    Be it Resolved, that the League shall make a loan to support the 
Foxboro stadium project, which loan shall be made to the Patriots, the 
stadium project, and/or a stadium company that the Patriots may choose 
to create in connection with the stadium project, and the amount of 
which loan (a) shall be determined based upon guidelines developed and 
applied jointly by the Finance and Stadium Committees and to be 
reviewed by the NFLPA and (b) shall be based on the club's ``Private 
Contribution.'' as defined in 1999 Resolution G-3;
    Further Resolved, that the amount of such Private Contribution 
shall be subject to verification and audit in accordance with 
procedures to be determined and approved by the Finance and Stadium 
Committees and to review by the NFLPA as contemplated by 1999 
Resolution G-3 and related agreements between the NFL Management 
Council and the NFLPA;
    Further Resolved, that the amount of such League loan shall be 50 
percent of the Private Contribution, as so determined;
    Further Resolved, that the Commissioner is hereby authorized to 
cause funds to be borrowed by the League (or a League affiliate created 
to administer the stadium contribution program) on terms consistent 
with 1999 Resolution G-3 in order to make such loan in support of the 
Foxboro stadium project;
    Further Resolved, that any such loan shall be repaid first from the 
VTS of PSL's and club seat premiums generated by the Foxboro stadium 
project (the amount of which shall be subject to verification and audit 
in accordance with procedures to be determined and approved by the 
Finance and Stadium Committees), with any incremental funds needed for 
repayment to be assessed against the League's network television 
revenues;
    Further Resolved, that any such League loan shall be forgiven over 
the term of the aforementioned League borrowing in a manner consistent 
with 1999 Resolution G-3;
    Further Resolved, that if the Patriots, any stadium company created 
in connection with the Foxboro stadium project, or a controlling 
interest in either of them, is sold other than to a member or members 
of the current owner's immediate family before the final maturity date 
of the League loan, the selling party shall repay to the League from 
the sale proceeds at closing an amount equal to the outstanding 
principal balance on the League loan, computed solely for purposes of 
determining such repayment amount by subtracting one-fifteenth of the 
initial principal balance of such loan from such initial principal 
balance for each year that such loan has been outstanding;
    Further Resolved, that the terms and conditions of the stadium 
contribution granted hereby shall be evidenced by agreements with all 
relevant parties acceptable in form and substance to the Commissioner, 
and that the Commissioner shall execute and deliver such agreements on 
behalf of the League, which shall contain such additional specific 
terms and conditions as the Commissioner may deem necessary or 
appropriate.
              submitted by finance and stadium committees
    Reason and Effect: To approve in principle a stadium construction 
contribution for a new stadium to be constructed in Foxboro, 
Massachusetts.


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              VOTE                             DISPOSITION
------------------------------------------------------------------------
For     ______
Against  ______
Abstain  ______
Absent  ______
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