Fans of the New York Jets would have liked nothing better than to be spending money to cheer on their team at Sunday's Super Bowl in Dallas. Unfortunately, their team was defeated by the Pittsburgh Steelers in the AFC Championship game. But in an odd twist of league economics and political gamesmanship, even those New Jerseyans who didn't die with the Jets or stop watching when the Giants collapsed in December will be paying for football. That's because the state (i.e., the taxpayers) still owes about $110 million in debt on the old Giants Stadium.
New Jersey isn't alone.
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Harris County, Texas, still owes about $32 million in debt on the Houston Astrodome, which opened in 1965 and was dubbed the "Eighth Wonder of the World." The RCA Dome in Indianapolis, which was demolished in 2008, still has about $60 million of outstanding debt and will not be paid off for at least 10 years. Even tiny Vero Beach, Fla., longtime home to Dodgers Spring Training, is on the hook for some $17 million in debt after the Dodgers moved to Glendale, Ariz., two years ago. Pima County, Ariz., taxpayers similarly still have to pay $21.3 million in stadium debt after the Chicago White Sox and Arizona Diamondbacks moved their training camps to Phoenix from Tucson.
Many in New Jersey applauded when the Jets and Giants opened the $1.6 billion New Meadowlands Stadium because it was financed with $1.3 billion in private debt and $300 million from the NFL's G3 fund for stadium construction, but the economics are still appalling.
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The New York Giants may now call the $1.6 billion New Meadowlands Stadium (above) home, but there's still $110 million in debt owed on their old stomping grounds.
Under the old Giants Stadium financing scheme, New Jersey took in about $20 million a year in tax revenues. Under the new deal, the Giants and Jets will pay about $6 million a year in taxes, or about 20% of what the property would generate if it were privately held and taxed at the rate that most other businesses pay.
"The problem with tearing down stadiums early isn't the debt," said Neil deMause, who co-wrote "Field of Schemes" (Bison) and blogs at a website with the same name. "It's the revenues that you're giving up by allowing teams to move into new buildings with sweetheart leases."
Indeed, the owners of New York's Madison Square Garden, prime real estate at the corner of 33rd Street and Eighth Avenue in Manhattan, have been exempted from paying property taxes since 1982, costing the city hundreds of millions of dollars in lost tax revenue. The $375 million used to build the Prudential Center, where the New Jersey Devils play hockey, was actually financed by the Newark Housing Authority. But the agency that looks after low-income housing claims the Devils owe it $10 million in back rent. The Devils have countersued, claiming construction delays and a failed parking deal cost the team $17 million. Never mind that Newark has laid off cops and firemen and, according to Mayor Corey Booker, is cutting back on "everything from toilet paper to printer paper."
The problem—in New York, New Jersey and elsewhere—is twofold.
First, politicians and fans alike have to stop thinking of these sports franchises as their beloved teams. They're businesses, operating to make money, and they all do quite well. The Giants and Yankees are two of the most profitable businesses in all of sports. The Yankees had the highest payroll in baseball in 2010, just over $200 million. But what's often forgotten is that the Yankees make $350 million a year on their TV contract alone. That's before they've sold a season of $1,200 tickets, $40 ball caps and $15 mixed drinks inside the stadium's Hard Rock Café.
Second, there was nothing functionally wrong with the old Yankee Stadium, the old Giants Stadium, or many other stadiums that have been replaced over the past decade. The problem was that the old stadiums didn't generate enough luxury revenue. So New Jersey, which is about $36 billion in debt at last count, gave up about $15 million in annual tax revenue so that the Giants and Jets could be more profitable. Similarly, New York City used its finite bonding authority to help the richest franchise in all of sports build a $1.5 billion luxury palace in the Bronx that's too expensive for the average taxpayer. If there was ever an issue for the Tea Party to glom onto, this is it.
"The only thing limiting how soon owners will ask for a new stadium is chutzpah," said Mr. deMause.
Indeed, the politicians deserve our scorn as much as the team owners do. The old Giants Stadium cost $78 million, yet the outstanding debt more than 30 years later is $110 million. How did this happen? Simple: The politicians spent the money that was originally intended to pay off the debt on other things. It's a common problem. Revenues get diverted to other programs and the stadium debt gets refinanced.
"If I buy a house with a 30-year-mortgage and 20 years later I refinance it so that I can buy a yacht, is that house debt or yacht debt?" asks Mr. deMause. "Cities are using these revenue streams to pay for all sorts of stuff, and playing bookkeeping games."
The other problem is that cities often overestimate how much revenue a stadium tax will generate—and they often do it to make the new tax and the new stadium more palatable to the citizenry. Hamilton County, Ohio, passed a special tax to pay for stadiums for the NFL's Cincinnati Bengals and baseball's Reds. As of last year, the fund was about $15 million in debt, a figure that the Bond Buyer estimates could balloon to $90 million by 2014.
So while Packers and Steelers fans are more than happy to pay to watch this year's Super Bowl in person, many fans stuck at home should remember: You're paying, too. You just don't know it.
Mr. Yost is the author of "Tailgating, Sacks and Salary Caps: How the NFL Became the Most Successful Sports League in History."
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