’86 tax reform gave owners clout in battles to get stadiums
By Evan Weiner | Special to the Sentinel
Ronald Reagan may have played a football hero on the screen, but in real life his tax policies made him a hero to professional sports teams that were able to expand and profit because of them.
Reagan left an enormous impact on sports by putting his signature on the Tax Reform Act of 1986.
To many sports fans, Ronald Reagan was known for two things. He was a sports announcer who “recreated” Chicago Cubs baseball games for the Des Moines, Iowa, radio station WHO, and he played the role of the dying George Gipp in a movie.
But in terms of sports, it was “Dutch” Reagan who changed league dynamics and accelerated the movement to build new stadiums and arenas complete with huge sources of potential income from luxury boxes and club seating.
It was Reagan who put the mechanism in place in 1986 that really started ownership free agency and a battle between cities for National Football League, Major League Baseball, National Basketball Association and National Hockey League teams.
The Tax Reform Act of 1986 opened a loophole in the tax laws and gave owners ammunition in their battles with cities and states to get stadiums.
The law gave municipalities a federal tax exemption on bonds to build new stadiums. The results are stunning. In 2004, 26 of the NFL’s 32 teams have new stadiums or renovated facilities with enhanced revenue streams.
Of the six that have not gotten new stadiums, the New York Giants will soon partner with New Jersey to renovate Giants Stadium, and the New York Jets have plans in the works with New York City and New York state to build a new Manhattan stadium. New Orleans is getting handouts from Louisiana.
Minnesota is actively seeking a new stadium, as is Jerry Jones for the Dallas Cowboys. Wayne Huizenga operates the football stadium in Miami, which was paid for by private funding and finished in 1987 before the 1986 tax reforms kicked in for then-Miami Dolphins owner Joe Robbie and his family.
Sports-team owners started putting pressure on municipalities shortly after Congress sent the completed bill to Reagan for his approval. The frenzy then started as the Chicago White Sox ownership threatened to move to a publicly funded stadium in St. Petersburg, had the Illinois General Assembly not given approval for building a new ballpark on Chicago’s South Side.
Baseball expanded to taxpayer-funded stadiums in Denver, St. Petersburg and Phoenix. Most cities built new ballparks for their Major League teams. The Yankees, Cubs, Red Sox, Dodgers, Royals, Twins, A’s and Mets still play in old facilities. Baseball is looking for a taxpayer-funded stadium for the Expos.
Spring training is different, too, with little cities being forced to build state-of-the-art complexes in a bid to keep teams from leaving for better offers in other areas of Florida or Arizona.
In 1990, Major League Baseball and Minor League Baseball signed a new agreement that mandated cities and states across the country to either build new facilities or renovate existing parks by 1994, or Major League owners could pull out of those cities. It’s no coincidence that independent baseball minor leagues sprung up, using cities that Major League Baseball deserted as the basis for their business ventures.
The National Hockey League was able to expand from 21 to 30 teams and relocate two Canadian-based franchises to the United States during the 1990s because of the 1986 Tax Act. The only non-U.S. city the league added was in Ottawa. Quebec City moved to Denver, Winnipeg ended up in Phoenix and the league added teams in new facilities in San Jose, Tampa, Miami, Anaheim, Nashville, Atlanta, St. Paul and Columbus, and Hartford relocated to Raleigh, N.C., when Connecticut said no to a new arena. Almost every NHL franchise has a new building with the exception of the three New York-area teams and Pittsburgh.
The NBA expanded in 1987 to Orlando, Miami, Minneapolis and Charlotte. Minneapolis eventually had financial difficulty and nearly moved to New Orleans in 1994. The Minnesota Legislature bailed out the team. The NBA awarded teams to Toronto and Vancouver; the Vancouver team moved to Memphis, Charlotte ended up in New Orleans; and Charlotte is building a taxpayer-funded arena for its new team. Only the New York-area teams have old buildings, although the Magic ownership is unhappy with its 15-year-old facility.
Without Ronald Reagan, the 40th president, sports in 2004 would be a lot different. His signature on the 1986 Tax Reform Act changed the world of sports.
Evan Weiner is a radio commentator on “The Business of Sports” for Westwood One’s Metro Networks. He wrote this commentary for the Orlando Sentinel.