NFL claims $600M in Super Bowl economic impact. Economists say it's closer to $0
sportsonearth.com
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[1] http://www.nbcnews.com/business/legal-procedure-critics-cry-...
The teams themselves are where almost all of the money is. Each one operates like an independent entity that has to follow rules set forth by the NFL. This is why they're called "franchises." The NFL does gross millions of dollars each year, but it's a tiny fraction compared to each individual team and the teams themselves do not enjoy the same tax status that the league itself has.
LOL. They make plenty, they just funnel cash to affiliates via the cost structure. Having a non-profit status enables this shell game by eliminating economic entropy.
Its 2013...this is not "news", its is standard operating procedures in many walks of life. Have you seen the television contracts for the NCAA?
Oh, wait...those are just a bunch of amateurs =D The players, maybe. But not the accountants, coaches, boosters, and administrators.
The NFL is paid by the teams to work for them negotiating with the NFLPA, TV contracts, etc. NFL employees are not tax exempt, and neither are the teams.
That can be solved at the state level, however. The states do not have to defer to the federal government's classification of 501(c) tax-exempt organizations when choosing who to exempt from state taxes. They could adopt a more stringent state-level definition. Or they could still defer to the federal categories, but a more restrictive subset. For example, a state could limit tax exemptions to 501(c)(3) charities (which have more stringent requirements), and not exempt 501(c)(6) organizations like the NFL. (Considering what kind of stuff slips into 501(c)(6), this is probably a good idea beyond just the NFL case.)
Debunking of this oft repeated incorrect meme in top comments here: http://www.reddit.com/r/politics/comments/1wk64y/senators_tr...
But more generally, the Super Bowl, a for-profit activity mainly aiming to enrich the teams who are NFL members, has structured much of its activity such that the NFL itself, a nonprofit organization, is doing all the organization and purchasing, thereby exempting most of the local economic activity from sales taxes, hotel occupancy taxes, and similar. A proper arrangement would be that the for-profit corporations profiting from the Super Bowl should be organizing it, rather than laundering their signature product through a nonprofit organization.
I can't think of another case where a group of companies' main product is run by an umbrella nonprofit. Chamber-of-commerce organizations usually do pretty minor coordinating and lobbying activity, not actual production operations. To get something analogous in tech you'd have to imagine something silly like all the cloud-computing companies getting together and setting up a Cloud Services Association, a 501(c)(6) nonprofit that operates all their datacenters jointly, rather than e.g. Amazon or Microsoft operating their own datacenters on a for-profit basis.
It also wouldn't matter very much whether the teams or the NFL itself organized the game (and part of the reason for the existence of the non-profit umbrella organization is to overcome the logistical nightmare of coordinating 32 separate entities). A condition for every Super Bowl in the past few years has been some form of sales tax relief for NFL activity. For example, New Jersey gave about $8 million in tax breaks for the game this year: http://www.nj.com/super-bowl/index.ssf/2014/02/nj_gave_nfl_8...
I also don't think it's fair to say the NFL runs the product. The teams (and the games between the teams) are the product. The NFL's tasks are: (1) Decide on a consistent set of rules, fines, etc. (2) Train and provide impartial referees. (3) Organize the Super Bowl/Pro Bowl/Draft. (4) Provide marketing/merchandise/legal stuff for the NFL in general.
Everything else (including organizing the 266 other games, the hundreds of employees for each team, and operating the stadiums) are up to the teams themselves. A "cloud services association" doesn't sound too ridiculous to me, but I don't think there's a proper analogy in the tech industry (and U.S. law recognizes this by providing some specific rules for professional sports leagues: http://en.wikipedia.org/wiki/United_States_antitrust_law#Sco...)
You are quite mistaken. You have a source for that?
The NFL has revenues exceeding $4B which are nearly all "profit" (that is, revenues>opex). This cash flows through the league and then is distributed to the teams, who all of which run on essentially zero taxable profits. In other words, the revenues of the teams are the "profits" of the NFL non-profit. That is why there is no need for profits--because they distribute the cash out as 'expenditures'. The level of expednitures is aribitrary[1]...it is just set to maximize the flow of funds from the tax-exempt body with the least amount of tax.
At the lower level, the Teams are structured to run on nearly zero profits. This is why they can-not "afford" to build stadiums of pay taxes etc. This of course is also a highly-structure tax-avoidance setup, where inflated costs ("sweetheart" deals) are made with affiliate entities, which shelters the teams from paying taxes. The locations and corporate business structures of the "related entities" are likewise set up to be both opaque and tax-optimized in legal structure and jurisdicion.
The values of NFL franchises are staggering. Their debt-loads are also staggering. Hint: the banks would never lend them this money if they did not know more than your average punter. In part these investments are "ego-polishing" (like the America's cup), but there is quite a bit more money floating around the NFL, and this money is going to make rich people even richer...very little of it is being paid in tax.
[1] There is no "true sale" of the NFL non-profit's product; they take no risk in holding inventory. Their main purpose is to shield the teams from 2 things: (1) anti-trust; and (2) tax. To wit: a tax-exempt monopoly that makes no profits? Something should immediately trigger your sense of the non-obvious being present.
Well, at one level the NFL mysteriously making $4B despite doing mostly organizational/marketing/legal work would seem to support the argument that the teams/games are the product. The NFL makes that money from giant TV contracts, licensing deals, and merchandise that are only popular because the sport is popular. The revenue distribution is somewhat unique -- and granted, opaque -- but not necessarily a tax-avoidance scheme. One relevant example is the MLB giving up its tax-exempt status in 2007, which had no impact on its annual taxes.
> At the lower level, the Teams are structured to run on nearly zero profits. This is why they can-not "afford" to build stadiums of pay taxes etc. This of course is also a highly-structure tax-avoidance setup, where inflated costs ("sweetheart" deals) are made with affiliate entities, which shelters the teams from paying taxes. The locations and corporate business structures of the "related entities" are likewise set up to be both opaque and tax-optimized in legal structure and jurisdicion.
If you don't consider the money they receive from the NFL, then each team runs at a huge loss. Of course, they have gigantic payrolls to their athletes and operating expenses for a stadium (this does vary by team, although the NY Jets & NY Giants funded the construction of MetLife stadium using zero public funding, for example). If you take into account the NFL's revenue distribution, then most teams make millions each year[1]. I am not sure what other tax-avoidance setups you're referring to and would be curious to read about that. Optimizing your business structure to minimize taxes doesn't seem particularly criminal.
> There is no "true sale" of the NFL non-profit's product; they take no risk in holding inventory. Their main purpose is to shield the teams from 2 things: (1) anti-trust; and (2) tax. To wit: a tax-exempt monopoly that makes no profits? Something should immediately trigger your sense of the non-obvious being present.
Of course they take risk. It's not particularly likely the NFL would go out of business anytime soon, but every investment they make carries risk. I think the one questionable aspect of the NFL's setup is that each team writes off its NFL membership dues (~$6m/year) as a business expenditure while the NFL's operating expenses (Goodell's salary, marketing, etc) are untaxed.
Each NFL team pays taxes on their profits at the local level. The umbrella org disperses those funds around to all teams. This is how nfl teams vs something like the MLB can play on equal monetary footing. The umbrella org doesn't get taxed on the money because it already has been taxed.
"The NFL League Office is a not-for-profit organization. The NFL League Office receives funding from the 32 member clubs to cover its non-revenue overhead activities such as office rent, League Office salaries and game officiating. In addition, the NFL League Office collects revenues on behalf of the 32 member clubs and distributes those revenues to the clubs. All national revenues (e.g. broadcast TV payments) collected and paid to the member clubs, as well as local revenues earned individually by the clubs, are subject to tax at the club level."
Roger Goodell pays taxes on his large salary. The NFLs 990 tax form shows they posted a loss as of their last filing.
Easy summary of the issue: http://www.forbes.com/sites/peterjreilly/2014/02/01/flap-abo...
Whatever else you might say, this does not appear to be the case for the person you are replying to and inserting it in there detracts from your own argument. None of that is helped by the fact that you reiterate points they have already addressed and acknowledged and the only facts you've added are that Roger Goodell pays taxes and that the NFL posted a loss. And I'm being generous, as this may be implied by parent post's discussion of maximizing the flow of funds out of the NFL.
The broader point--that the US supports a moneymaking enterprise by means of tax breaks, stadiums, etc. in ways that have questionable financial benefit to the public at large--does not appear to be well-addressed by your arguments.
FWIW, I don't think you'll find many people here who don't know that "non profit" doesn't mean "no money." And even if they did, there's nothing wrong with comparing what the public spends to what they get. There are plenty of ways for people to get "double" taxed, after all. Doesn't mean we don't have to pay them.
> of maximizing the flow of funds out of the NFL.
The money to the NFL org comes from the 32 teams which have already been taxed, some operating expenses are taken from this pool, then the cash is redistributed equally to the teams.
> The broader point--that the US supports a moneymaking enterprise by means of tax breaks, stadiums, etc. in ways that have questionable financial benefit to the public at large--does not appear to be well-addressed by your arguments.
This thread was mainly debunking the fact that the NFL is bilking the American public by it being a non-profit. I'd agree it is up in the air about subsiding big sporting arenas etc. My city built a $600 million stadium not too long ago and raised taxes so that we could host the Super Bowl. Apparently the city believed it was a net-net win for the state overall.
Feel free to read the multiple thread top comments on the various times on /r/politics this topic has been brought up. Also the NFL filing signed by Goodell last year operated at a loss.
"501(c)(6) — Business Leagues, Chambers of Commerce, Real Estate Boards."
http://en.wikipedia.org/wiki/National_Football_League#Corpor...
I wonder how much of their expense is salary (taxed) and "home office" (where the locality has plenty of opportunity to consider the exception and deal with it as they see fit).
They also allow any business to do the same, as long as whatever is purchased is sold to another party as a part of doing business.
So a computer tech shop, for example, would never pay for any parts it purchases at the store that are then included in a system it sells.
As a meta issue its a "belief system" so there's no point dragging math and logic into it. Exactly like debating evolution or other topics.
Comically, we got stuck with a new stadium because it was claimed if the local ball team pouted and left, all of us mere consumers would react by making huge piles of paper cash money in our backyards, and then light the piles of cash on fire. A complete lack of reasoning is BAU WRT sports economics.
As a startup issue you see pretty much the same style and type of arguments about the contribution of startups to the local economy.
But if you took the same land and used the same money to build a big shopping mall your X and Y would both be much bigger. Every time local governments did a study that compared a new stadium to just about any other use of the land the alternative was better.
I'm not opposed to stadiums, per se, but professional sports teams are businesses and as such need to pay their own expenses.
I would much prefer it if the politicians just came out and said 'we're going to spend your taxes on a great big stadium, because we will get to open it and name it, and you, the voters, like bread and circuses'.
Wrapping tax-spends up as some sort of business case just muddies the waters for people when a real business case needs to be analysed.
Perhaps the answer is that, for a jurisdiction, each time there is an election, a multiple choice question could be at the bottom. We wish to take one of the below actions, please indicate your preference:
1) increase tax by x and build stadium 2) increase tax by y and build hospital 3) increase tax by z and build new water reservoir 4) decrease tax by x and you decide what you want to do with it
My remark is flippant but we seem to be entering a strange world where people believe jobs and taxes can only be created through the application of tax monies to politicians ideas.
If Running a Stadium was profitable, the NFL or the Teams would do it, Since they do not want to touch the stadium with a 10 foot pole, then you know it will not be profitable
Public financing of something like a stadium or arena does three things: eliminates a tax liability for the teams/other users, eliminates risk, as the local taxing authority ultimately owns the debt, and keeps the labor and trade unions happy, and stadium projects keep the guys on the payroll.
Ultimately, all of people in a taxing district bear the burden of these giveaways. If I could apply for a full property tax exemption in NY, the $6,000/year I pay for my modest home would be used for capital improvements like a kitchen, solar panels and siding. That would give some construction dudes jobs, and generate more value. The government easily spent $100m on Super Bowl security. That's a lot of money spent better elsewhere or not at all.
I figure if the team doesn't want to pay for it then get a "buy a brick" drive going and see if it funds the stadium.
You could tweak the idea however you like. Whatever portion of the stadium is publicly funded could entitle the community to a matching portion of revenue generated from stadium events, for example.
At any rate, the idea (from both Easterbrook and myself) is more philosophical and humorous commentary.
Between people and companies fleeing the high costs of New York, enough money flowed in to build stadiums, elevated highways and buildings in the swamp. It's a regional thing, nobody even knows who the mayor of east Rutherford is.
But I noticed something later. When it was done it gave people a sense of community that they might otherwise not have. The players, owners, and financiers were all out-of-towners, but they still daily talked of how "their" team was doing. Even if they didn't make many games, it functioned as a kind of virtual center.
This was familiar. The stadium is a modern medieval cathedral. Its a church.
I don't know, of course, but I have a strong hunch that none of the costs associated with this message (businesses unable to receive their deliveries, carriers having to make contingency plans and add extra staff to catch up after the "festivities", customers having to work around shipping restrictions and delays, etc.) have been accounted for in NFL's economic analysis.
After a great storm comes through, there are plenty of estimates of the economic damage it causes. Of course the Super Bowl has benefits that a storm lacks, but I have to wonder if the negative externalities are properly accounted for, or if they just tally the benefits.
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(The Gross Domestic Product and other economic figures do not account for this and treats each economic transaction as equal. Additionally the knee injury hospital bill of the young player who never made it to the NFL also increases the GDP, adding to the confusion what "economic impact" is.)
Entertainment like anything in the economy benefits from greater efficiency, and modern economies deliver great value for the resources they spend on entertainment. There is cheap plentiful music everywhere, and lots of quick video available. Pro sports also provide quite efficient entertainment, as people spend tons of time not only watching the events but also tracking them and talking about them. It gives people a lot of enjoyment.
The beauty of logical fallacies is that you can use them to discredit anything you want. "Scientists are in agreement".. Appeal to authority! But that's not how logical fallacies work. You still need to provide a logically sound reasoning why the fallacy applies. Which you didn't.