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Philadelphia Controller Jonathan A. Saidel on the New Stadia

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The City That's at Your Back

	Jonathan A. Saidel

"Why should your typical Philadelphian who works 8am to 5pm, who can barely afford to pay his mortgage and his kids' education, have to pay for a sports stadium?" asks Philadelphia Controller, Jonathan A. Saidel. 

The "Project Cost" of the stadia construction published by the Pennsylvania Industrial Development Corporation is $1,008,900,000 added to which is the city's repayment of a $90 million bond granted from the Philadelphia Authority for Industrial Development. 

The PIDC publishes on its website that the "$1 billion two-stadium project which PIDC has managed," is "historic." Mr. Saidel contends that the project is probably "historic" only in that it represents the costliest expenditure on sports which the taxpayers of any American city have ever allowed. 

"It is possible that when compared with other cities, our city just may not have the largest percentage of sports fans out of its total population," he said. 

Because of a Supreme Court ruling 90 years ago (where the Federal League sued the Major League), baseball was ruled not to be "interstate commerce" and was thus exempted from antitrust laws. Judge Oliver Wendell Holmes ruled, "baseball is exempt from antitrust regulations due to its peculiar nature." 

In the same year that Eddie Plank and Chief Bender, star pitchers with the pennant-winning 1914 Philadelphia Athletics, made the jump to the Federal League, the latter entity filed an anti-trust lawsuit against the American and National Leagues. The case was heard in federal court in Chicago, presided over by Judge Kennesaw Landis, the man who would eventually become the commissioner of baseball. 

In the 1914 case, the bone of contention was collusion. However, the Supreme Court ruled that baseball, which involves no interstate travel and is not sold outside state lines, is not interstate commerce. Because of this logic, baseball was granted an antitrust exemption which stands to this date. 

"Congress has allowed the National Football League protection from market forces, which has increased team value, team profits, and player salary. Major League Baseball receives similar protection through its limited exemption from anti-trust legislation. But the Phillies and Eagles are allowed to be monopolies because of this legislation," Mr. Saidel said. 

In 1998, the Curt Flood act was passed to amend the Clayton Act (the Act which in 1914 had enhanced penalties under the 1898 Sherman Anti-Trust Laws and established the Federal Trade Commission which creates and enforces anti-trust laws). Through the Curt Flood Act, the baseball exemption would now cover only labor issues, instead of business issues. The act gave the Players Association the same rights as unions in other major sports. But in declaring that labor disputes were not exempt from anti-trust legislation, Curt Flood gave players the right to sue under Sherman, Clayton and Flood, decertifying their union if the owners' attempted an impasse during collective bargaining. Congress also specifically stated that the anti-trust exemption still stood regarding relocation, the minor leagues, the "reserve" clause (a part of a contract with a professional athlete extending his contract for a year beyond its expiration) and broadcasting contracts.

Artist Max Mason: "New Ball Park construction", oil on canvas, 62 x 96 inches.   photo, Gross Mcleaf Gallery

In 1999, Mr. Saidel strongly had urged Philadelphia to pass Senate Bill 952, which had contended that stadium finance ought to be funded at least partially by the leagues. Mr. Saidel now sees that professional sports institutions enjoy a flood of public money whenever they threaten to relocate. 

Today, baseball players, while continually pushing for increases in salaries through its Players Association, also have as much power to decide where a stadium will be built or relocated as the owners. The result of the Sherman, Clayton, and Curt Flood acts is that major league baseball is currently both a monopoly, and, not one. Two sports clubs can stand down an entire city for the simple reason that if it isn't allowed, the players will get mad at the owners, who will in turn, threaten to move the club. 

The last time that a major league sports team relocated was in 1971, when the Washington Senators became the Texas Rangers. In 1992 when the San Francisco Giants desired a move to Tampa and in 1995 when the Houston Astros petitioned to move to Northern Virginia, both teams failed at testing the antitrust exemption. What the Philadelphians feared, was that their beloved clubs would actually cross state lines, embarking upon such a journey as would definitively have challenged Judge Holmes' ruling and voided the exemption. But the exodus probably wouldn't have happened. Ball clubs tend to like the historical exemption. And Philadelphia likes history. Right?

Sam Rhodes, Senior Vice President of the Philadelphia Industrial Development Corporation, explains that the recent development is lucrative for the city. 

"The stadia construction represents one of the best deals between the city and public sports teams that has ever occurred," Mr. Rhodes explained. "Funds have been secured for the redevelopment and upgrading of the neighborhoods surrounding the stadia whose presence has had a positive influence on nearby schools."

Mr. Saidel said, "I don't see how they (the stadia) upgrade our neighborhoods. I was in favor of putting the facilities somewhere near Center City where they would have had the chance of improving the lives of a comparatively greater population of businesses and people than they are now doing."

Five years ago, PIDC's role started with a site search process which evaluated a number of locations for the Eagles and Phillies. Then, PIDC managed the land assemblage in South Philadelphia and negotiated the lease structure with the two teams.

"I was for at least putting Citizen's Bank Stadium near the 30th Street Station or near where the East Central incinerator plant stood at North Delaware Avenue and Spring Garden Street so that people who move to and from the Phillies games could spend some time in Philadelphia and patronize local businesses," explained Saidel. "But as it is, people jump on I-95 and head home without spending any money in Philly." 

"I was never in favor of using public money to sustain a monopoly," said Mr. Saidel who insists that Major League Baseball and the National Football League are acting in collusion. 

After the sites were selected, the PIDC directed the necessary legislation at the local and state level, and arranged the public funding. Since the sites were chosen in late, 2000, parcels of land were purchased by the city for $95 million. 

"Philadelphia now boasts a sports district unrivaled by any city in the country," Mr. Rhodes added. "Here, the revenue possibilities are huge." 

Mr. Saidel reminds that the communities surrounding Shea Stadium and Yankee Stadium did not experience greater economic growth or heightened tourist trade because of the presence of the ball clubs. "There is a real lack of utility when you think of the tremendous burden now being placed on the children that are being born today in Philadelphia in the sense that the Eagles only play eight games and the Phillies only play eight-five games per year in Philadelphia, while the rest of the time--- besides some short term outsider leasing of the properties, the stadia are left vacant during most of the year," Mr. Saidel said. 

The state and city kicked in $10 million and $96.7 million respectively for team site work for which the Delaware River Port Authority also granted $14 million on loan. Another $21 million was located from "other" sources (i.e. private donations, grant awards, etc.) to foot the infrastructure bill, totaling $141.7 million of which $106.7 million is coming directly from public tax revenue. This equates to 68.24% coming from Philadelphia taxes and 7.05% secured from your state taxes. The loan from the Camden-based DRPA equals 10.12% of that total, a loan which the Philadelphians' taxes must repay. The "other" sources account for 14.8% of the total site work cost. 

Contingency costs (i.e. moving the PECO substation and all its trucks, indemnifying former property owners for environmental remediation) were handled by the city to the tune of $10 million. Philadelphia combined with the "other" sources described above is paying off the $11.2 million bond provided by the Philadelphia Authority for Industrial Development to improve the infrastructure of the nearby 50-acre former naval hospital that sat across from the former Veterans Stadium. To pay off this P.A.I.D. bond, the city will allot $3.2 million while the "other" sources will step in $8 million. 

The Eagles and Phillies added $310 million and $172 million respectively to their shared cause, the former team allowing $10 million to be taken from their Philadelphia Capital Reserve for paper clips, coffee filters and huge "We're #1" foam-rubber hands. 

The state paid $85 million for each stadium and the city allotted $89 million for the raising of the Eagles' Lincoln Financial Field. In the end, the city provided $303.9 million (including the $10 million Eagles reserve allowance), the commonwealth $180 million and the Delaware River Port Authority attributing the aforementioned $14 million. 

"The state's contribution came in the form of grants from the State Redevelopment Capital Assistance Program," said Mr. Rhodes. 

"The city capitulated, which was a mistake, by giving in to the teams' demands," Mr. Saidel lamented. "There is nothing that can now be done to cop our losses except to hope that the Eagles stay in the top rounds and the Phillies drag out a play-off's and World Series to seven games, playing the majority of those games at home." 

Neither team has contributed directly toward the paying for construction labor, contingencies, land acquisition or the repaying of P.A.I.D. bonds. 

"Presently, the Phillies and Eagles are not required to pay the city back," said Mr. Saidel.

Brett Mandel, Controller's Office Financial and Policy Director explained, "There is currently no surcharge on tickets, no tax on advertising revenue, no tax on attendance, no food and beverage tax, no lodging or parking taxes, no game-day tax from public parking ramps and no media access charges."

The new tax on city vehicle rentals that was advocated to pay for stadia construction, has not yet been implemented.

"I think that a tax should have some relationship to the money it is being used for," Mr. Said said. He continued, "Ninety-nine percent of the time some unsuspecting fool is coming here for business and gets off a flight with no intention of seeing a ball game but finds that this charge has been tacked onto his rental car bill." Mr. Saidel explained that the airports can easily move their car rental companies three blocks away from the airports and thus out of the jurisdiction in which the tax may be collected and that the airports may easily develop a shuttle bus service to avoid levying what seems to them to be a "tea" tax. 

The teams' combined contributions for the entire construction project have equaled $482 million, $320 million coming from the Eagles and $172 million coming from the Phillies. Another P.A.I.D. bond amounting to $90 million has been granted toward Eagles' stadium operation and maintenance costs, making the total city investment, $398 million. Out of the total building and land development cost of $1,008,900,000 combined with the repayment of the $90 million P.A.I.D.bond to cover operation and maintenance, the teams themselves have covered 43.86%, the city 36.22%, the state 16.38%, DRPA 1.28%, and the "other" 2.64%. 

"Do the math," said Saidel, "If you are spending most of your time trying to figure out how to screw people, you are losing sight of what government should about, and I don't think it's about taking money off of people." 

He means that 52.6% of the payment has been handled by Philadelphia tax payers alone and only 43.86% is being covered by the teams of the entire $1,098,900,000 spent on creating the largest sports and most expensive complex in any USA city. 

"Government should be about investing money wisely for the benefit of all." He continued, "The teams should have funded their own stadia and should be supporting themselves."

 Regarding the $500,000 per year real estate tax that the city lost when the Phillies prematurely ended their lease, Mr. Saidel continued to explain that the city crossed the rubicon, "I tried a variety of things to stop the decision, including holding up the Phillies' payments but to tell you the truth there is nothing much the city can do now after capitulating." 

There are numerous ways in which stadia are able to raise revenue but none of these represent activities which the city of Philadelphia is allowed to tax. 

"Do the math."

Personal seat licenses are an investment by fans giving them the right to purchase specific seats in a stadium. If the PSL owner opts not to purchase the seats for a particular game, the seats may be offered to the public. The Eagles have already sold $60 million worth of PSL's to pay for the construction of Lincoln.

G-3 is a loan program established by the National Football League to assist its teams in building new stadia. Large market teams are eligible for more funding than mid and small market teams, hence you probably couldn't get a G-3 loan no matter how well your football team performs, if it is not part of the NFL. The loans have generous repayment terms. The Eagles has secured $150 million dollars in G-3 loans.

Naming rights are when private corporations pay for the right to have their name displayed on seats, bull pens, helmets, walls, archways and team vehicles. Lincoln has sold $6.7 million in naming rights through 2002.

"Philadelphians will pay the bill by the old stand-by's," said Mr. Mandel. "through their wage and business taxes, income and other taxes, the money simply coming from the public sector."

There are still other non-taxable, creative ways to locate revenue. During the first weekend of November, the Eagles copped a quick $40,000 on "NFL 101." "The price per ticket was $50 per seat," said Eagles Promotions Manager, Anita Newby," and we sold 800 seats." The class was a two-day class for women, explained Ms. Newby, "teaching wives and girlfriends how to understand football and why football is good."

"If the teams can't make money on their own, they ought to sell the teams so somebody else can make money," said Mr. Saidel.

Mr. Mandel continued, "Debt payment on the operating and maintenance subsidization (the $90 million P.A.I.D. bond) will be made by the taxpayers per successive five-year periods, with Philadelphians giving $6.8 million during the first five, $7.8 million the next, then $9 million per each of succeeding five year period."

"One dollar is too much," said Mr. Saidel.

"Twenty million dollars will be paid by taxpayers each year for twenty three years as debt service on the stadium bonds which the city sold to raise the stadia project revenue," Mr. Mandel said. "That's a total of twenty-five to thirty-million dollars per year paid by Philadelphia's taxpayers until the debts are honored."

"Hopefully, by that time," added Mr. Saidel, "we'll see the Phillies or the Eagles win a championship. 

Forever considered a model of fiscal vice, the Circus Maximus had continually drained the public coffers in ancient Rome. Politicians had used the games to gain popularity among the Romans. Emperor Caligula for instance, began his reign with a huge, four-week-long circus. Taxes were raised immediately after the games to restore the treasury.

"Perhaps nothing can be done now, but I can only tell you that if I was the mayor of Philadelphia, I would at least try some amount of persuasion," Mr. Saidel said. "Joe Banner, Eagles CEO, has said on the radio that he would never vote for me and I don't even know if he lives in Philadelphia, nor do I care."

Mr. Saidel teaches a course at the University of Pennsylvania, called "Auditing Municipal Government Performance." In this course, he teaches how audits, pre-audit and post-audit reviews, and investigations are used to maintain control in a large city and how the controller's office interacts with operating organizations and other oversight agencies.

"In my class, there are international students, whose education is paid by their governments of such countries as Turkey and China," Mr. Saidel said. "If we are going to use public funding, we should instead promote our city as a cultural attraction in addition to promoting the usual historical draws such as the Liberty Bell and Independence Hall."

Tarquinius Priscus, the fifth king of Rome is said to have modeled the Circus Maximus on Romulus' celebration of the Consualia, a race held in honor of Consus, an ancient god of agriculture. The Roman historian Livy said that the Consualia was so distracting that "nobody had eyes or thoughts for anything else."

"Although I enjoy baseball a lot," said Mr. Saidel, "the game cannot be compared to walking through the art museum."

Historian Cassius Dio related a typical "distraction" episode in 196 A.D.. One afternoon, after announcing that taxes would be raised to prolong the civil war against the supporters of the Roman Governor of Britain, Albinus, Emperor Septimius Severus was confronted between chariot races. "The populace," narrated Dio, "could not restrain itself, but indulged in the most open lamentations and shouted: 'How long are we to suffer such things and how long are we to be waging war?' And after making some other remarks of this kind, they finally shouted, 'So much for that,' and turned their attention to the horse race."

"Art and Culture are the sustainable things in a city, not sports on the scale like we have them in Philadelphia," said Mr. Saidel.

Robert B. Kebric notes in his book Roman People (Mayfield, 2000) that Emperor Caligula had become disturbed by the taxation complaints voiced between races, that he turned his soldiers upon the crowd. Caligula had probably forgotten that more chariots would be on their way to anesthetize indignation.

Radio DJ Gene Shay said, "One day the people are going to rebel the way they did when the players' first went on strike to increase their salaries. The way people are going to rebel is to stop being an audience more than ever before."

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