Steelers to Pay for Stadium Expansion

After threatening the SEA with a law suit in an attempt to force the authority to pay the cost of adding seats to Heinz Field, the Steelers have settled for having the SEA borrow the needed funds to be repaid by the team.  This settlement with the SEA has to be the result of the likelihood of losing in court and the public relations beating the team was suffering on the issue. The Steelers will add a ticket surcharge to cover the bond debt service.

 

As we noted when the lawsuit was first talked about, the Steelers have benefitted enormously from the tax dollars expended to build the stadium.  Given the profitability of Heinz Field and strong demand for tickets it only made sense for the Steelers to incur the cost of building the additional seating.  It was the height of arrogance to ask the taxpayers through the SEA to bear the expense.

 

If the Steelers believed the seats would not pay for themselves in a reasonable time period, then why would it be in the interest of taxpayers to underwrite their cost?  This should have never been an issue. Obviously, the Steelers believe the seats will be a profitable investment. The fact that the Steelers made their demands of the SEA is a reflection of the assumption by the City’s sports teams that they are owed public subsidy, and lots of it. And given the past behavior of politicians who bend to their wishes they are probably justified in that belief.

 

Good for the SEA for holding firm in this case. Perhaps it is a portent of things to come in these matters.

Heinz Field Expansion

Yet another reason taxpayers should have a basic understanding of economics.

The director of planning and development for the Steelers, commenting on the impending trial of the team’s lawsuit against the Sports and Exhibition Authority (SEA) for refusing to pay two thirds of the cost to add 3,000 seats, is quoted as saying "it (the pre-trial hearing) was an important step to make sure the SEA lives up to its obligations." And then he proceeded to add, "The expansion of Heinz Field will allow an opportunity for more Steeler fans to attend games." Not content with that, the speaker went on, "If this matter is not resolved in the near future, another year of increased fan attendance and increased revenue will be lost."

This self-serving commentary notwithstanding, the question the Steelers should answer is this: "Will the new seats and scoreboard pay the full cost of building them with additional ticket sales, seat licenses, concession revenue and other in-stadium and game day parking revenue resulting from the 3,000 additional seats?" If the cost of the project, along with any borrowing costs, can be recouped and perhaps even boost profits through increased revenue generated by the additional seats within ten years, the Steelers ought to build the project and pay for it themselves.

If the project will not generate enough revenue to pay for itself, the Steelers should not build it.

Clearly, they should not be asking taxpayers to subsidize a project that will add to Steeler profits. And they certainly should not be asking for taxpayers to help pay for a project that cannot pay for itself.

Why should taxpayers subsidize another 3,000 fans who want to see Steeler games in person? When is enough, enough? If fan demand for tickets is sufficiently strong to warrant putting in another 3,000 seats, then fan demand is strong enough to raise prices to pay for seat additions. The attitude of entitlement on the part of the team and many of its fans with seats who are happy to get the heavy subsidy they receive is nothing short of deplorable.

Steelers’ Ludicrous Rationale for Heinz Field Subsidy

A clearer example of hubris and sense of entitlement could not be found than the Steelers’ justification for having the public underwrite the cost of expansion and upgrades at Heinz Field.

"This state- of- the- art expansion assures that Heinz Field would remain the first-class facility our fans expect and deserve." Is this what we have come to? Fans deserve to have the public subsidize a stadium that is already a tax exempt structure and is occupied by a team that has been massively enriched by the public’s underwriting most of the cost of construction?

For goodness sake, why should fans expect or deserve a first class facility at the expense of the public? When is enough enough? And how is adding seating capacity creating a first class facility for fans? Will they be really good seats for viewing games? Or will they simply add to Steelers’ revenue?

This is a prime example of what is wrong with today’s culture and perforce our economy. The notion that fans of professional sports teams deserve a "first class" facility in which to watch games and the public should subsidize that facility is simply outrageous. One can only marvel that the world has come to this.

The Steelers’ have been enriched enormously by the taxpayer investment in Heinz Field and the rights they received regarding development on the North Shore. The stadium pays no property tax and the Steelers’ rent payment is de minimus considering the value of the stadium.

Why is there so little gratitude on the part of the Steelers’? Is there no limit to their willingness to keep asking taxpayers for more money? If the Steelers’ want to expand the stadium, let the expansion pay for itself.

Or how about this. The Sports and Exhibition Authority will agree to pay for the expansion if the Steelers’ sign an ironclad agreement to pay sufficient additional rent necessary to cover the borrowing costs needed to build it. What could be more fair? But in the world of Steelerdom fair is apparently what they say it is-no more, no less.

Is a Sweet Steelers Deal About to Become Ridiculously Generous?

With all three Pittsburgh professional sports teams playing in fancy new digs, taxpayers could be forgiven for thinking they are through having to subsidize the teams. But they could be wrong.  There is high probability they will be asked to pony up even more money for Heinz Field as the team eyes adding 3,000 more seats at the southern end of the stadium. 

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Some Hart Comment Surgery Needed

In his attempt to present the "real" facts in response to a Tribune Review commentary regarding North Shore parking, Mark Hart of the Steelers offers up a litany of purported benefits stemming from the efforts of the Pirates, Steelers and Continental Real Estate.

The most salient point is the claim that, "The money this development has returned to the City far exceeds the investment of public dollars that helped to fuel this growth." The development referred to includes two sports venues, a hotel, office buildings, and a concert venue all of which, it is claimed, have created thousands of new jobs. Mr. Hart also states "that through the efforts of many, including limited support from the public, we have taken an area that held only Three Rivers Stadium and a plot of vacant land-and completely transformed it into a destination area".

Limited public support? Total state, local and Federal tax dollars to build new stadiums and reconfigure the street patterns is close $400 million. The return on the $125 million in claimed private development will never come close to paying back the taxpayers. Total real estate taxes will run about $3 million per year assuming the property is valued close to the development costs. The office buildings referred to did not significantly add new jobs; they were predominantly employees who were moved from other parts of the City. New restaurants are not necessarily producing net jobs or income. Much of their business is likely being taken from other restaurants in the City and County.

Moreover, the Hart comment claims the North Shore transformation is producing millions in amusement taxes, parking taxes, real estate taxes and payroll taxes. Sorry. Three Rivers Stadium was also producing amusement taxes and parking taxes. Mr. Hart needs to show how much additional amusement and parking tax can be attributed to the new stadiums over and above what would have been collected if games were still in that facility. Then too, he needs to take into account the fact that several acres of the near North Shore are now taken up with a tax exempt baseball park that was previously occupied by taxable or potentially taxable property.

As is too often the case, Mr. Hart looks only at what can be seen and does not take into account the unseen: Taxable development that could have occurred absent the new ballparks, the removal of taxable property from the tax rolls, and the opportunity cost for taxpayers for the hundreds of millions spent to build non-taxable facilities.

Finally, it should be noted that absent the two new stadiums, the extraordinary wasteful use of $535 million to build the North Shore connector would never have happened-a project that has not a ghost of a chance to repay the taxpayers for their investment.