Free Markets, Free People

Rent seeking and the Florida Marlins

First, let me say – I love baseball. Since I was a kid and played in Little League, it has been the game for me. And consequently I’m a huge professional baseball fan. I live for the season and the playoffs.

However, I’m not a fan of professional baseball’s ethics at times. And I’m certainly not a fan of those who own teams and attempt to swindle taxpayers into paying for their new stadiums. Obviously that’s not just something that professional baseball teams do. You can find examples of it among all professional sports teams. But the latest example does come from professional baseball, specifically, the Florida Marlins.

If you follow the game at all, you know that the Miami-Dade county government has agreed to pick up the lion’s share of the cost of a new stadium for the team down there. Owner Jeffrey Loria and president David Samson have, for years, maintained that the Florida Marlin franchise was, at best, a break even venture. They claimed, they needed a new stadium to attract fans and become profitable and if the county couldn’t help provide it, they’d probably have to move the team.

The Miami-Dade County government acquiesced to this blatant attempt at rent-seeking, apparently believing the financial claims of the Marlin’s front office.

Miami-Dade County agreed – without the consent of taxpayers – to take $409 million in loans loaded with balloon payments and long grace periods. By 2049, when the debt is due, the county will have paid billions.

In fact, it is estimated the $645 million dollar stadium complex will end up costing $2.4 billion with all of the loans the county unilaterally took out without taxpayer permission to keep the team in Miami. The Marlin’s franchise will only pay $155 million of the stadium cost.

In case you’re not familiar with the term “rent seeking” or need a refresher, it’s defined as:

The expenditure of resources in order to bring about an uncompensated transfer of goods or services from another person or persons to one’s self as the result of a “favorable” decision on some public policy. … Examples of rent-seeking behavior would include all of the various ways by which individuals or groups lobby government for taxing, spending and regulatory policies that confer financial benefits or other special advantages upon them at the expense of the taxpayers or of consumers or of other groups or individuals with which the beneficiaries may be in economic competition.

That is precisely what the Florida Marlin team has done. As mentioned, they’re not alone. This happens all too often. Tax payers end up being burdened with increased taxation that benefits a private company or business but puts a huge dent in the government’s budget. That’s not how it should work. It is both an abuse of power by government and abuse of the taxpayer by the private entity via its rent seeking.

What’s even worse is it appears the county government may have been conned by the team, according to this report:

Most harrowing is the takeaway that baseball’s biggest welfare case could have funded a much greater portion of the ballpark. In 2009, when the Marlins started spending some of their profits on their portion of the stadium, they still had an operating income of $11.1 million. The team fought to conceal the $48.9 million in profits over the last two years because the revelation would have prompted county commissioners to insist the team provide more funding. Loria, an art dealer with a net worth of hundreds of millions, wouldn’t stand for that. He wanted as much public funding as possible – money that could’ve gone toward education or to save some of the 1,200 jobs the county is cutting this year.

The lesson, of course, is one that governments never seem to learn. The pot of money they have to work with is finite. There’s only so much the taxpayer will stand for. When government involves itself in a project of high cost and dubious worth – no matter what the “experts” tell them about the importance of something like a professional baseball franchise to the city – they usually end up hurting themselves and those they serve. The tradeoff here is actually obvious. Those interest payments on the huge loans taken by the county could have been used to save jobs that actually served the community.

Instead they are going to pay for a stadium from which a private enterprise will profit, even while that private entity pays less than a quarter of its cost.

That’s not the free enterprise system at work. That’s not capitalism. Instead it is an example of corporate rent-seeking – subsidizing business on the back of the taxpayers – that governments do more and more.

No baseball team is worth $2.4 billion dollars, but that’s what the citizens of Miami and Dade county, via their government, have now committed to spend to keep the Marlins there. I’m a fan of baseball, but I’m not a fan of rent seeking. And I’d guess most the taxpayers in Miami, no matter how much they enjoy the game, probably feel exactly as I do.

~McQ

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10 Responses to Rent seeking and the Florida Marlins

  • I read that, and it’s an absolute disgrace.  I’m shocked that the County isn’t suing. Since the Marlins out and out lied to get this funding, I would think the County should seek recompense. If nothing else, shouldn’t they be doing that as a CYA, since I’m sure the citizens of that area may be more than a little annoyed with the whole thing?

    Oh, and Hanley Ramirez has the worst dye job I’ve ever seen

  • Always a stupid, wrong thing to do.  Whether it’s a sports facility for a bunch of multi-millionaires, or a business park.
    It should ALWAYS be a market decision, with NO public money or concessions behind it.

  • There’s a third player in this rent seeking.  A probably sizable portion of the Miami-Dade County constituency that also believed they needed to and were willing to acquiesce to the Marlin’s terms and bring the rest of the taxpayers along with them.
     
    Depending on the size of that constituency, I would say this isn’t just government/corporate collusion.  And its a tougher situation to fix.

  • The article did not answer some questions:
    Who gets the money from any off-season activity?
    Is the tourism tax applied to ticket sales?
    Sure, this is a bad deal for the city’s taxpayers, but let me guess that city officials have a box set aside for them…

  • I lived in St Pete FL in the ’80s when the “Suncoast Dome” (now Tropicana Field) was built.  Local land sharks, with the Libro-Rag St Pete Times in their back pockets, proposed a taxpayer funded sports dome and bought up the low rent residential property at the proposed site.   No MLB expansion teams were being granted, so they courted the White Sox who announced they were moving to Florida.  The project started, but the Sox had no intention of moving, they just wanted a new stadium.  Lo and behold – a brand new Comisky Field.

    With $80+ million committed, and sans taxpayer consent, St Pete forged ahead on the “Field of Dreams” meme; If we build it, they’ll come.  They did, and they didn’t.  Final cost to St Pete taxpayers – north of $140 million (not including I275 access ramps and utility infrastructure.  Still no team. 

    Similar scenario when the Glazer family bought the Bucs.  Tampa Stadium was an outstanding facility - even hosted the Superbowl in ’91 – but the Glazers demanded a new stadium or they were moving the Bucs to Orlando.  Most of us said good riddance, but Ray James Stadium is born. 

    Sports is business is politics is money – and taxpayers will scream bloody murder until you threaten to take their team away.  Then they just grumble and bear it.

  • We do.  The voters here have been mighty pissed off about this entire situation.  I can’t find the numbers, but the Miami Herald did a poll on this that showed a good majority did NOT want this stadium built.  Aside from the fact it would drain us, Miami really isn’t a baseball city.  Sure, we Cubans love our baseball, but Miami has always been a Dolphins city.
    And, now, a Heat City.

  • I still recall how, fifteen years ago, the city government of Nashville lied through their teeth about their arrangements to pay off a rich football team owner by building a stadium to bring the Titans to Nashville.

    Opponents forced a referendum. The pro-stadium folks dumped a lot of money into a campaign that had radio commercials with cheerleaders singing about what a great deal it was, and how there would be no new taxes to finance the stadium. That anti-stadium contingent had very little money, but it was still pretty close, though the pro-stadium position won, and the Oilers became the Tennessee Titans. (Though the city failed to get a contractual term concerning the name and had to raise a considerable public ruckus to get the owner to abandon the Oilers as a name.)

    The very next year, Nashville had one of its largest property tax increases, and the mayor admitted that part of it was to pay for the money spent on the stadium.

    I have not attended a single game at that stadium, and I shall not. Taking money from elderly widows in East Nashville to help a man worth hundreds of millions make more money was despicable beyond belief. That team will get no support of any sort from me.

    Well, no voluntary support anyway. I have to pay those increased property taxes every year. I estimate that so far I have paid somewhere in the neighborhood of $800-$1000 for the supposed privilege of having a football team in my city. 

  • With revenue sharing television licensing, merchandising and ticket sales, baseball teams do not lose money. They might not make as much as they wish, they might be able to produce a book which, combined with careful book keeping and future projects, looks like they aren’t making money, but these are money making ventures. The easiest way to tell is to see how fast savy and wealthy business people line up to buy one.

    The only franchise which might be struggling are ones like the Pirates which haven’t had a winning club for years and hasn’t been in the post season for decades – nor in the world series for even longer.

  • The next bubble ready to pop (behind higher ed, of course) has to be all the stadiums built during the boom.  Houston built one for every single pro sports team (NFL Texans, NBA Rockets and MLB Astros), and supposedly they’re planning one for the (I’m not kidding) MLS Dynamo.  Toss in the idiotic light rail system, and for some peculiar reason Houston is facing a budget deficit.  (Did I mention they’re still paying some sorts of fees for the Astrodome, which is falling down around itself?)
    But that’s just Houston,  one of the few cities that so far has been relatively spared from the hardships of the recession.  I can’t wait to see what Cleveland, Phoenix or New York faces when they start defaulting on those loans.