Sticker Shock: The realities of the Texas Rangers stadium agreement
A wise philosopher once said, “Mo money, mo problems.”
It’s something that Arlington Mayor Jeff Williams likely didn’t consider as he sat in front of the media with Rangers co-owner Ray Davis to his left. All he thought about was the history he was making – an announcement of a landmark deal to keep the Texas Rangers in Arlington for the next thirty plus years. Both men were all smiles, even through the serious moments. Optimism oozed from their table with all the attention, even after being asked whether the Rangers and the $1 billion proposal were a package deal for the city.
“This will pass,” said Williams with conviction.
His confidence was overpowering and blatant. Why wouldn’t it have been? With the Cowboys under one arm, Williams had secured one of the most successful and profitable teams in the area until long after he vacated the mayor’s office.
It wasn’t long before those problems started to emerge.
Late Tuesday night, WFAA Channel 8 ran a piece online and on its 10 p.m. newscast informing locals about what it believed to be a tax loophole that would allow the Rangers to keep up to $300 million of the original $1 billion 50-50 split with the City of Arlington. The money would go to fund the proposed stadium, which would lower the Rangers obligation while giving a phantom increase to the city’s obligation in the agreement.
Soon Deadspin linked to it and threw in its two cents.
NBC’s HardBallTalk, D Magazine, and others also threw hats into the ring with comments on the report made by Brett Shipp. In a time where stadium financing skepticism is at an all time high, is what WFAA reported accurate?
In the six minute video, Shipp stares at the camera telling us that what they found is something that “the Rangers and Arlington City officials didn’t want you to see.”
It’s related to a section which talks about an admission and parking tax levied on, you guessed it, parking and admission. The “investigators” speak with two different “experts” in sports economics, before dropping the hammer.
WFAA has found that the projected money raised by these taxes over the 30-year term of the lease could be up to $300 million, which would dramatically shrink the obligation by the Rangers in the deal.
On Thursday afternoon, Arlington Chamber of Commerce President Michael Jacobson responded to the report, calling it “grossly inaccurate.” In the interest of fairness, here is Jacobson’s assessment of what the deal says regarding the taxes.
“As part of the agreement, the Rangers have the option to use a portion of the revenue they collect for parking and admission – revenue that would typically go to their bottom line – to help pay for the ballpark, though the club has not made a decision on whether to utilize this option. This information was provided to WFAA but the reporter chose to ignore this fact. Furthermore, WFAA’s baseless assertion that Arlington taxpayers could pay for 80% of the stadium is absurd and brings into the question accuracy of their entire story.”
That’s the city’s stance on the issue.
The rest is our analysis.
First and foremost, Shipp’s assertions that this issue is something that all parties involved didn’t want you to see is inaccurate. Not only was the parking and admissions tax mentioned in the paperwork handed out May 20 to a throng of reporters, but the master agreement where it’s laid out in detail is available online and has been since May 25. All anyone interested in the agreement needed to do was go read it – with no FOIA request needed. If you have access an internet-connected computer, you can read it. In fact, here’s a handy link to the Master Agreement between the City of Arlington and Rangers Baseball, LLC.
As far as the $300 million dollar figure being floated, that’s also a bit misleading. Within the televised report of the investigation, the number Shipp floats as what the Rangers would collect is fabricated. It’s pulled from legitimate numbers filed with the city on the Dallas Cowboys’ earnings from similar taxes. The problem starts when those numbers are extrapolated and appropriated to represent what the Rangers would potentially draw.
“So let’s say the Rangers collect only $10 million in admission and parking taxes.”
In the printed report, the quote is the following:
“Allowing the Rangers to collect the same tax could mean an additional $10 million in revenues, or $300 million in revenues over 30 years to pay of the Rangers’ share of stadium construction costs.”
Those numbers have no backing or support at all. They’re pulled out of thin air, taken from earnings in a different sport with different fans and different expenses. They’re fabricated for the purpose of instilling fear and outrage. That said, it wouldn’t be hard calculating an estimated admission tax based on 2015 data.
All it takes is some simple math.
Last year the Rangers total attendance was 2,491,875 million, according to this ESPN chart.
On page three of the Master Agreement, it reads that the Admission Tax is classified as no more than 10 percent the cost of a ticket sold to the ballpark. Taking 10 percent of the average Globe Life Park ticket cost last season, found here, of 23.64 gives you a tax rate of $2.36.
If you multiply that number by last season’s total attendance, you will find a total of $5,880,825 hypothetically generated. That leaves $4,119,175 to be made up in the parking tax, which, on page 9 of the Master Agreement, dictates is no more than $3 per car.
That means to reach $10 million over 1.3 million cars would have to park at the Globe. There’s no hard data reported on how many cars Texas hosted last year, so it’s impossible to say whether the number generated by WFAA is remotely accurate.
Putting that aside, the main issue is who gets to keep that revenue generated. The agreement allows the Rangers to collect it, but they pay that to Arlington. Where the conflict comes is what happens with that money. This is where things get murky to the average eye. Here’s the actual text from the Master Agreement, which is on pages 27/28.
This is where Shipp says the Rangers and Arlington are pulling the wool over the electorate’s eyes. That by being able to request “Incremental Funding” implies the Rangers will take that money and swim in a Scrooge McDuck type pool. That’s not quite the case. Incremental funding is something that the team can request, which the city council would have to approve. It allows for the team to not pay property taxes for a set amount of time as set by state law. The idea is to encourage development and growth in a certain area. It’s something that any city can do and many have done in order to give a direct incentive to organizations.
So the mechanism that most think is a scam for the team keeping their coffers full is more a trade off between two parties to reach a common end. “You don’t give us money for this, but be a lamb and use that money to do other things. Thanks a (several) million.”
For those still concerned about the city’s financial involvement, there’s a little more plain language on page 5.
So the team’s obligation is laid out as only $500 million. Before you wonder about what happen if the project goes over budget, section 3.2 subsection C on page 22 tells the tale there. Spoiler alert: it’s the team.
So if in the Master Agreement, acting as a contract between the two on who does what, lays out in plain English how much the city owes and who will pay for overrun, is the concern over this small clause which is less malicious intent and more a pro-business incentive merited?
Not anymore than the city ponying up half a billion dollars to replace a stadium younger than most of the athletes who play there.
The report also uses quotes from “sports economics experts” Rick Eckstein from Villanova and Robert Baade from Lake Forest College. Only one of them, Baade, has degrees in economics. Eckstein is a sociologist who has made sports economics his pet project. His major quote is as follows:
“If it really is a tax and could be used by the municipality, then in essence it’s just transferring revenue from the public sector to the private sector,” said Rick Eckstein, a Villanova University professor who studies sports stadium economics.
Putting aside that Eckstein using the word “if” displays uncertainty on his part whether what he’s talking about is true, his response is up for interpretation as to what questions were asked to get it. This feels like a response to the question “What does this mean if the team is keeping tax money meant for the city through this mechanism?” If that was the case, the answer Eckstein provided is true, but given in response to a leading question that sits without context of what was asked. For someone that wants to rage against the stadium machine, he’s a willing participant in creating the narrative desired.
There’s no doubt about Baade’s credentials; he’s been publishing works on the ins and outs of stadium finance since 1994. Combine that with several advanced degrees, and his status as an authority on these matters is beyond question. So when he says things like this…
“This is all about not physical obsolescence. It’s really about economic obsolescence,” said Baade, who studies the economic impact of sports stadiums. “So who derives the benefits from building this new stadium? And it comes as no surprise to anyone: the primary beneficiaries are owners and players. […] It means an increased value for the franchise. It means more money for the owners and players.”
He’s right. There’s no doubt that this deal will represent the most value to the team and people connected to it. Anyone thinking otherwise is naïve, ill-informed, or both. However, that would be the case without this speculation about admission and park taxes. That was true from the second Williams and Davis announced the deal.
That’s the part about this that, in the wake of “gotcha” reporting riddled with errors, seems to be lost. The city of Arlington is asking the citizens to pay out half a billion bucks for a brand new facility that most citizens won’t attend, that despite a city sponsored economic impact study will not bring as much business as desired, and that will replace something that is in perfect working order.
Then again, this represents a larger problem with modern day journalism. It’s overflowing with reporters and outlets who want to be the first on a story, who want to bust open a “controversy” for clicks and views. Shipp in recent media appearances has said he wants voters to be informed about what they’re voting on in November. That’s a noble goal, but it rings hollow when he conjures numbers that aren’t true while painting a scarier photo than is accurate or necessary.
Is this stuff complicated? Without question. The 51 pages of the Master Agreement is a deliverer of tired head, something that will confuse 99% of the populus. It’s also a contract for a billion dollar business deal; that’s not exactly something you can write down on a Waffle House napkin. The deal’s high importance and value demands complication; it’s why people spend years in higher education learning the ins and outs of writing them. Just breaking it down in this form took hours upon hours of reading, conversation, editing, and double checking to make sure everything written was accurate and comprehensible. To quote one of us during the process “This is the kind of crap that’s much better discussed in a room with a whiteboard with the door shut.”
In lieu of that, this stands as our offering. A simple look at something very complex. It doesn’t feature any attempts to sway voters with scary language about billionaires trying to take money they don’t deserve. The whole “Arlington giving rich people $500 million” does that by itself; we don’t need to.
Editor’s note: This piece was a collaborative effort between tax attorney Robert Aycock, Travis Smith, and myself. Robert’s legal and financial expertise coupled with Travis’ intuition and research skill as an experienced reporter made this piece possible by cutting through the complicated contractual language and simplifying it. They gave me the information, I shaped it to the form you see here. Their help is invaluable, and without it this endeavor wouldn’t be possible. They deserve most of the credit for this. So go give it to them.