Sports in America

by James A. Michener

  At this point Cedric Allen, an architect with an artistic eye, was called in, and he painted the inside of the building in six different bright colors, so that all seats are color-coded with corresponding entrances and exits. The result is one of the sauciest buildings in America, sprightly, well suited to its purposes and practical. It’s air conditioned, too, by means of large fans that suck in the cool outside air. Holt says:

  Over a heavy gravel bottom we laid a two-inch base of asphalt, topping it with one-half inch of a special rubber plus a three-sixteenths-inch composition pad to absorb the shock of landing. Then we installed a synthetic turf which is ideal for football but also good for track. We have a movable basketball court, and that’s it.

  To our surprise, we have been able to schedule major events for about three hundred nights a year. Football, of course, and basketball and track. But also high school sports from miles around. Art shows, roller derby, plays, operettas, jazz concerts, religious meetings. This one building has revolutionized social life in this section of Idaho.

  I had startling proof of its versatility. Onto the turf had been pasted, with inexpensive adhesive tape, the lines for a tennis court. Two questions perplexed me: ‘Will that tape stay down through a real set? And will the ball bounce on the turf?’ The problem was solved by finding me a racket and an opponent, and I played part of a set, scuffing into the lines and finding them stable, running for well-hit balls and finding them bouncing up much as they would from a good grass court. The tennis was not only possible, it was enjoyable, for the surface was much softer on the legs and feet than the courts I was accustomed to.

  I commend the Pocatello experiment most enthusiastically to northern communities. Already a variety of colleges and universities have been to Idaho to see how this innovation might be adapted to their needs. Holt says:

  The danger is that each community wants to alter the design a little here and there, and in doing so they lose our simplicity and our very low cost of $2,300,000 for basic construction, $2,800,000 for everything. Last case I heard of was coming in at $7,000,000. Costs have gone up, of course, but you should be able to do it for less than $5,000,000, and have a domed stadium which avoids whatever errors we allowed to slip in. And with imaginative management, it can be utilized more than three hundred nights a year. Whether it could be self-sufficient if you had to pay for the land—we got ours free, of course, because we’re a state enterprise on state land—I can’t say. But you can certainly pay the overhead and repairs.

  The worst example of stadium building I have ever seen, or heard of, occurred in Denver. The Broncos, a privately owned professional football team, used Mile High Stadium, which seated only 50,656. Football became so popular that more seats were obligatory, especially if the team were to operate at a profit.

  The stadium was owned by the city, which received a decent rental from the Broncos. If an additional 23,360 seats, which could be easily constructed, were added, who would pay the cost of $24,726,000? It was decreed that the public ought to pay, through taxation, but this was objected to on the rational argument that real estate taxes were already high and it would be immoral to tax all citizens to pay for a facility that would be used only by a few and to the profit of a private company.

  So an ingenious plan was devised whereby football, baseball, basketball and ice hockey were lumped together as entertainment, and a tax of forty cents was assessed on every ticket sold for any seat at any entertainment held within public buildings or facilities owned by the city. Thus, those who attended games would be paying for the increased facilities used by the teams playing those games.

  Reasonable enough, ostensibly. Such a rule avoids taxing the property of all for the use of a few. But the real impact of the proposal was to levy a forty-cent tax on everyone who attended an opera, or a play, or a symphony orchestra concert, or the performance of a string quartet, or a lecture on modem French art, so that the local football team could add 23,360 more spectators to each of their seven scheduled games.

  This incredible proposition was put before the voters of Denver, and incredibly, they accepted it, on the obvious grounds that football was more important to the community than a symphony concert. The vote, held on September 10, 1974, was 50,972 in favor and 48,448 against.

  This action is so abominable that I find no words sharp enough to condemn it. I am for sports. I am for stadiums. I am for the use of public money to build stadiums when no other way is feasible. And I patronize all kinds of sports with my own income, so I must not be condemned as being antisports. But to tax symphony-goers in order to make the operation of a privately owned football team more profitable is such a confusion of priorities that I cannot believe a city which I admire, and of which I have written with such affection, could approve. It did, and the whole city should be ashamed of itself—the sportsmen for having allowed such a thing, the politicians for having dared to put it to a plebiscite, and the voters for having approved it. In ancient Rome, stadiums were financed by imposing a tax on brothels, proving that the citizens of Rome had a clearer sense of values than those of Denver.

  The good stadiums are substantially better than the bad ones, and the difference isn’t always in the amount spent. The cost of an average seat in the New Orleans Superdome is $2,000; in the refurbished Yankee Stadium, $1,480; in the Denver addition, $1,060; at Pittsburgh’s Three Rivers Stadium, $700; in the Houston Astrodome, $640; in Atlanta in Atlanta Stadium, $315; and in Pocatello’s Mini-Dome, $128. The real difference is often in the imagination of the architects who add those finishing touches. The job in Pocatello would be much less congenial if those bright colors were missing. The new stadiums at Kansas City would be much less effective if the ramps for quick entrance and exit were absent. The Superdome in New Orleans would be much less imposing if its circular design were merely ordinary.

  One of the most interesting events connected with recent stadiums occurred in Philadelphia, when after agonizing delays and the waste of much money, a design-of-desperation was finally rushed forward and about to be accepted because no way of avoiding it could be found. Woody Bond, civic leader and former basketball mate of mine in college, had the guts to put his foot down. ‘This looks like an old-fashioned garage. It would add nothing to the posture of this city,’ he said. And he forced the architects to go back and draft something more in tune with the modern world. And getting it right didn’t cost a great deal more. The result was a stadium adjusted more or less to both football and baseball, one with many accouterments and a façade that is at least acceptable. It could have been better. It is infinitely better than it was going to be.

  Any commission charged with building a new stadium for its community should visit the good ones to learn how class can be obtained by the exercise of good taste. Unpretentious installations like Foxboro should be inspected, and modestly priced ones like Seattle. Specifically, preposterous scoreboards which dance and explode cannons and lead singing can be avoided, especially when they cost $2,000,000 to install. If this is to be an Age of Stadiums, let us erect some of timeless quality, like those noble affairs the Romans built in Turkey two thousand years ago.

  The commission should also face squarely the possibility that financial disaster may overtake any stadium, no matter how carefully planned. The cost overrun at the new Yankee Stadium in New York, the heavy tax burden placed upon the citizens of Philadelphia, the impending financial crisis of the baseball stadium in Arlington, Texas, represent the normal expectancy. The New Orleans Superdome, which excited me so much, was open less than six months when it ran into financial catastrophe. A deficit of $5,500,000 loomed, and Louisiana State Attorney General William Guste issued the statement that many citizens had anticipated when the stadium was announced: ‘If the Dome Commission is going to get the money, Governor Edwin Edwards is going to have to call a special session of the legislature.’ Purpose of the session? Additional taxes.

  Unforeseen disaster can also strike. Honolulu had barely finished its revolutio
nary stadium with the pirouetting segments when the World Football League ran into mortal trouble. I was in Hawaii one Wednesday when the local team had no quarterback for the forthcoming Sunday game. They telephoned a fellow in some city like Seattle and asked him if he’d like to call signals, and he flew out to take over. Shortly thereafter the league folded, leaving the splendid new stadium with no major occupant. A community plays a sophisticated brand of Russian roulette when its enthusiasts proclaim, ‘We’ll show the world we’re really big time! We’ll build a stadium! And while we’re at it, let’s put a dome on top!’

  In the early years of every professional sport, the owners were men of great dedication and expertise: in football, George Halas of Chicago; in baseball, Clark Griffith of Washington; in basketball, Eddie Gottlieb of Philadelphia. They added affection, folk humor and business mismanagement to the game, and stories about them are legion. Connie Mack and John McGraw became the epitome of the manager-owner.

  Their type was soon superseded, however, by the business tycoon who made his fortune in trade, then dabbled in sports ownership both as a means of advertising his product and finding community approval. The beer barons—Jacob Ruppert with his New York Yankees and Augie Busch with his St. Louis Cardinals—were prototypes; they became famous across America and the sales of their beer did not suffer in the process. It is interesting that when William Wrigley, the Chicago tycoon, wanted to buy into the National League, he was strongly opposed by Colonel Ruppert, who feared that such ownership might be used to commercialize chewing gum.

  Then came the third echelon of owner, the corporate manager who bought a club not only to publicize his business enterprises but also to take advantage of a curious development in federal tax laws. This new owner could afford to pay $20,000,000 for a franchise, ostensibly lose $1,000,000 a year in its operation, meld his sports activity in with his other businesses, apply his sports losses against his business profits and actually earn a profit on his sports team, a wonderland of juggling not open to the non-millionaire who might want to run a sports franchise and nothing else.

  There is nothing wrong with the basic law that made this fairy tale possible. It is called the law of depreciation, and it governs all business activity in the United States. Over the years our business and taxation experts have determined the normal life of all the tools, equipment and resources used in business ventures. A heavy truck, for example, costing $20,000 can be expected to be serviceable for four years; therefore, its original cost can be depreciated over a period of that time. This means that during each of the four years, the owner can charge one-fourth of the cost of the truck, or $5,000 a year, to depreciation, counting it as a deductible cost of doing business.

  Even in my profession the law of depreciation operates. The office in which I work, being a solid structure whose counterparts in other parts of the country remain usable for thirty-five years, can be depreciated over that period of years. If I pay $20,000 to build my office, I can charge a yearly depreciation of one-thirty-fifth of the original cost, or $572 a year. I am presupposing straight-line depreciation. In some fields it is lawful to use accelerated depreciation—a lot the first year, little the last. My electric typewriter can be depreciated in four years. The car I use in doing research depreciates to nothing in three years. My general office furniture in eight. (If at the end of the normal period of depreciation, when the value has been reduced to nothing, I can still use the item, fine. I get a bargain. But I can no longer charge depreciation against it, for in the phrase that covers this, ‘the depreciation has been used up.’)

  When applied to general business, this is a good law. It brings order and justice into a difficult field. And it allows business to operate in a reasonable way. I have sometimes heard complaints against the particular rate of depreciation allowed for an item; businessmen would usually prefer the quickest possible depreciation, for this allows them to charge off the item promptly, which enables them to pocket an immediate tax saving rather than a deferred one. But I have never heard a reasonable man complain against the general concept of depreciation.

  In sports, the law has been applied in an interesting way. When an owner purchases a franchise, he is buying two things: an intangible license to participate in organized league play and profit from the experience of the other twenty-three or twenty-seven teams in the league; a tangible batch of proved professional players whose life expectancy in the league is limited. It is not possible to depreciate the license to participate, for it does not wear out, nor does its value diminish. But the new owner can certainly depreciate the value of his athletes, for they do wear out, just like an electric typewriter or the reserves in an oil well. Suppose that the owner buys a new player from one of the other clubs for $1,000,000. His ability to play cannot last longer than ten years, so the owner has the legal right to depreciate this cost at the rate of $100,000 a year over a ten-year period. If the player lasts twelve years, that’s a bonus, but his depreciation has been used up.

  If this were the only problem, depreciation in professional sports would be no different from depreciation in any other enterprise, but in sports, there is one whale of a difference, and it is this which has accounted in large part for the recent revolution in sports, and particularly in the ownership of teams. Follow this hypothetical case.

  Seller S has owned an NBA basketball team for a long time. Every knowledgeable person agrees that it is worth at last $5,000,000, and when word escapes that S is willing to sell, at least six groups of buyers are eager to take the team off his hands. There is no argument over the sales price. Buyer B bids $5,500,000 and gets the team, and the sale is approved by the NBA.

  Now an interesting complication occurs, and prior to the winter of 1975 this was the situation. Seller S wants to allocate as much of the $5,500,000 sales price as possible to the intangible license, good will and the name of the club, for then he will be allowed to treat the money as capital gains and get a favorable tax break on it. But it is in the interest of Buyer B to allocate as much as possible of the $5,500,000 not to the intangible license but to the tangible ballplayers, for then he can begin depreciating them. Thus the interests of seller and buyer are diametrically opposed. The government, believe it or not, used to allow each man to allocate the $5,500,000 in whichever way was most profitable to him, within reason. Therefore the sale of the basketball team was organized in this way:

  BUSINESS DETAILS IN THE SALE OF A TEAM BY SELLER S TO BUTER B FOR $5,500,000

  It seems ridiculous that the value of Jenkins, the powerful center from the University of Texas at El Paso, could be valued by Seller S at $185,000 when his known salary was $250,000, and by Buyer B at $800,000 when his known life expectancy in the league could be no more than two years, but that’s how the deal was arranged, and the government approved.

  The beauty of this purchase was that as soon as Buyer B got title to the team, he could start depreciating the twelve players from scratch, disregarding the fact that Seller S had already depreciated them almost totally under his ownership. By the time Jenkins quits basketball, he will have been depreciated twice, once by S and once by B, for many times his true value. There is nothing illegal about this; a man builds a building, uses up all its depreciation, then sells it to another, who starts his depreciation anew. Finally he sells it to a third man, who then starts his depreciation.

  The deal was further complicated by the fact that the law allowed depreciation of a basketball player over a period of three to five years, a reasonable adjudication. But this had a crucial bearing on the conduct of sports, because it was no longer profitable to retain ownership of a team after the five-year depreciation period had elapsed. It was infinitely more profitable for Buyer B to obtain possession of the basketball team, with that $4,565,000 depreciation dangling before him like a rich lollipop, than for Seller S to hang on to it, after his depreciation had diminished to nearly zero.

  Thus it became much more profitable for B to buy a team than for S to keep one. And aft
er the new buyer had held on to it for five years, and used up his major depreciation, it was advisable for him to get rid of it, take his capital gains, and look for another team for sale in another sport.

  This explains the wild shifting about of franchises over the past fifteen years. I have been privy to the proposed sales of four top franchises; always I have urged men of wealth who had any interest in sports to get into the turmoil, believing that they could have fun doing so and perhaps even make a contribution to their communities. But the accountants always asked:

  Have you a collateral business making enough money so that you could use it to offset paper losses of four or five hundred thousand dollars a year? Would the ownership of a local team, with the publicity that ensues, be of specific advantage to you in the conduct of your business? Would you get fun out of ownership, and the upgrading of the team, and a possible chance for a divisional title? If the answer to those three questions is yes, go right out there and bid $20,000,000 for the team, because you can probably arrange the whole thing through banks for an outlay of no more than $2,000,000 in cash, and apply depreciation against your normal profits.

  Unfortunately, the critical question was never ‘Do you love sports?’ because that had become irrelevant. How could one of the owners back in 1910, who loved baseball, possibly afford to buy a team today if he did not have a collateral business to absorb the losses that might accrue or, of greater importance, profit from the depreciation legally allowed?

  Because this is the strange thing about depreciation. If you have no profits to charge it against, you derive no benefit from it. Let’s go back to the illustrative case. If Buyer B establishes $4,565,000 as the cost of his players, he can charge off close to $900,000 a year depreciation. But if his ball club doesn’t make that much, the depreciation is of no value to him. (He can carry it forward, of course, but if his club merely breaks even in the years ahead, he never uses it up.) However, if Buyer B has a large nationwide trucking firm which makes a lot of money, he can then apply the $900,000 depreciation allowed to his losing baseball club against the $1,800,000 profits made by the trucking firm, and he’s in great shape.