From: Peter Jessen
Sent: Wednesday, June 27, 2001 1:50 AM
To: Politalk Minnesota
Subject: [Pol-MN1] [Re: Public Funding Issue re Stadiums]
What follows is a MINNESOTA version of the same piece I sent to the Politalk-US1 Forum. I have added a long section for MN plus some other edits, especially in the "Team and Owners" paragraph; I've also referenced the appropriate Appendices that back up the Model throughout this edited Email.
(Copy sent to MN legislature, House Speaker, Steve Sviggum and Senate President Roger Moe and others: Roy Terwilliger, Larry Fitzgerald, John Marty, David Jennings, Otis Courtney, Sarah Psick, Victor Moore, Tom Hanson)
I lived in Minneapolis 1989-1993, and ever since I delivered a key note address there in 1981, at the downtown Marriott, I have always felt it was one of the best cities in America, and have been involved consulting to companies there for the past couple of years, and within that context, got joyfully caught up in trying to resolve the stadium question, as explained below. Tim has just sent out a well thought out 7 part statement, which I will respond to after I send this piece. I originally had sent along two attachments. I now understand the Forum doesn't forward those. So, if you want to read what I say is attached, Email me and I will send them to you. I consider myself a "Friend of Minnesota," and specifically a "Friend of the Vikings," a "Friend of the Twins," a "Friend of the University," and a "Friend of the Metrodome." This is my valentine, my gift for success to all of you and them. Here is what I sent to the US1 Forum, modified in a special section below to fit Minnesota:
Peter Jessen Email of 6-26-01 to Politalk discussion
on Public Financing of Stadiums, modified for Minnesota
My name is Peter Jessen, and I currently live in Portland, Oregon, and have done consulting in New York City, Washington, D.C., Minnesota and California. I have an available attachment of a 58 page Model for Funding Stadiums using minimal public funds (other than the usual one would expect, streets and sewers). For a copy Email me at email@example.com. The first 31 pages answers the question of how to finance a stadium without public funding. The remaining pages provide background information and outline some tools that could be used to bring disparate groups together to finalize putting together a stadium without public funds. The model addresses issues relating to the good of BOTH the teams AND the citizen-tax-paying-fans. For those who want the quick summary, there is a one page executive summary on page 1, followed by a 7 page executive briefing, after which the Models three parts are discussed in detail:
I. Team Stadium ( including 8 ways to finance any stadium, followed by 40 ways in 26 categories to generate revenues on an ongoing, yearly basis. Please note: we only list 8 ways to finance one or more stadiums per city, rather than more, as explained below).
II. Team Operations and Player Compensation (including a 12 part compensation plan, suggesting a change from the management-union model to a "senior executive team" model, 5 public-partnership approaches that generate revenue for both team and city, and a call for an emphasis on being competitive (which is sustainable in a way everyone trying to be the end of the season sole winner is not). The rationale for this is in Appendix E of the Model. Appendix I discusses "Harnessing the Internet to Save Ten's of Millions in Operations Costs".
III. Communications (including internal and external communications, the development of an internet strategy and web portal for any team, and 20 means for maintaining on-going communications. Appendix F of the model discusses "The 'Four Corners' Approach to Building Community Support." Appendix J discusses "Establishing a Team Navigational Web Portal," with both a free side and a subscription side.
The Model follows three simple "mantras": (1) that there is indeed a non-tax way of profitably funding a stadium and running a team, (2) protect the game, whatever it is; in other words, don't kill the goose that lays the golden eggs, and (3) take a leadership role by providing and disseminating a workable and acceptable financing/revenue model."
The Model's title states the "new" way/paradigm shift/new lens of perception/thinking outside the box, call it what you will, that will enable teams to profitably build and maintain stadiums and their teams: A Multi-Use Sports-Entertainment MODEL for Profitably Building and Operating a Professional Sports Stadium/Arena/Team/Franchise, with the statement that this model is "Applicable to any major stadium program, e.g., Football, Baseball, Basketball, Hockey, Universities, etc."
A stadium complex can also be used for housing, jobs, education, etc. Good people, trying to do good things together, can make it happen.
I only recently learned of this marvelous exchange of politely, and thus joined only this weekend, and was delighted and encouraged to learn that this exchange re public financing of stadiums would be continued another week for the Minnesota group.
The debate as I have followed it today seems to center not so much on how to fund stadiums without public funds, as it does on either resisting public financing for stadiums, without any replacement method, or finding a way to finance it with "some", usually in the $100-200 million dollar range, with such "low" amounts perceived as if it were little. The attached model provides such a replacement.
The discussion has also centered on a timeless debate: whether a cities taxes that would otherwise fund schools, housing, social services, transportation systems, etc., should be sacrificed for the enjoyment of suburban ticket holders, i.e., providing for the well healed out of city folks at the expense of city kids. Also getting mixed up in the discussion is a huge antipathy against corporate profits interleaved with anger about perceived needless corporate welfare, again being at the expense of those in the city for whom the taxes should be spent, especially for education and moderate housing, job training, moving people productively off of welfare, etc. Again, the discussed model shows you can have stadiums without diverting tax dollars to stadiums and still get stadiums that serve both the team and the community as well. Appendix G of the model deals with the realities of dealing with "Utilizing Minority Business Enterprises (MBE) and Handling Minority Issue Management (MIM)."
The good news is that all seem to be genuinely sincere about their beliefs and positions. And yet there are some very diametrically opposed positions, the most basic being the topic of this discussion: to use public funds or not to build stadiums. The model I can send you (firstname.lastname@example.org) shows how to fund stadiums without public funds.
We got into this by accident. My friend Otis Courtney, of Eden Prairie, MN, began www.vikingsstadium.com two years ago to help generate support for the a new stadium for the Minnesota Vikings. Otis asked me to help put his dream together. Learning of the need by the 49ers as well, we first prepared a proposal to the 49ers and then later modified for the Vikings on how each could build new stadiums without public funding (other than the usual infrastructure of streets and sewers, etc.). To date, both the 49ers and the Vikings seem to believe they will get public funding. We don't share that view. We would love to work with them "if" (their viewpoint) or "when" (our viewpoint) the legislative approach doesn't work. There are more than 8 ways to fund stadiums. Indeed, Otis received many funding suggestions from fans to the www.vikingsstadium.com site, some very sophisticated, that could be integrated into any plan to finance the stadium. We recommend that teams seeking new stadiums should put up a similar website and hold a contest, offering a pair of season tickets, to the best idea submitted.
A stadium building friend of Otis asked us to develop our proposals as a generic piece, as he stated this should be every league's team model. That is what is attached. It was done in May. Perfect timing for our just learning of this Forum.
Briefly: government has always funded development of new industries and getting things started (shipping, banks, canals, trucking, rail roads, any transportation, tel-coms, even the 1st 25 years of the Internet, etc.). But, once established, the government butts out except for certain tax relief and other such programs or end of year Christmas tree legislation, and then they stand or fall on their own. It is worth noting that over half of the Fortune 500 companies of the 1970's no longer exist. Pro Sports risk losing out to other sports or activities or TV shows if they don't get their houses in order and begin celebrating the game and serving the fan rather than going on and on about how they need new stadiums at public expense so they can afford to attract free agents, or else they will move.
Teams and owners are not being evil. They are caught in what could be called "an old paradigm." Also, because so many other stadiums have been publicly funded, why can't theirs? Paraphrasing a political slogan, we could say "its the system, stupid." W. Edwards Deming, creator of the Deming Management Method, says "it is not bad people but bad systems that are the problem." When he approached Detroit regarding how to build a better quality car through TQM (total quality management), he was shooed out of town. He went to Japan, revitalized Japanese industry, including and especially their automobile industry. Kids raised on those better cars didn't even think of American cars, and thus in two generations, the U.S. auto industry lost a lot of market share to the Japanese (and Germans and Swedes).
Bill Gates and Steve Jobs were successful because the "old paradigm/lens of perceptions" of the likes of IBM, prevented them from staying ahead of "the event horizons", losing all of that value to Microsoft and Apple. Gates and Jobs came in with not only new visions, but new systems. Their new vision was for a desk top computer on everyone's desk, whether at work or at home. IBM and the computer establishment said not enough would buy them (indeed, the founder of IBM argued with his son and successor that IBM had no business getting into computers as the world would only need seven or so; needless to say, the son won).
As pointed out in the book FutureWealth, the great losers in the 60's and 70's were the BUNCH (Burroughs, Univac, NCR, Control Data, and Honeywell), whereas the losers in the 80's were the minicomputer makers: Wang, Datapoint, Data General, and DEC. Now we see consumer electronics suppliers, common carriers, and many tel-co's being brought to the brink (and we haven't even mentioned the dot.coms), although one could make the point that much of this is because government has not stepped in to enforce the 1996 Telecommunications Act, which was supposed to solve the problem of the bottleneck of the "last mile," by allowing competition from the CLECs (Competitive Local Exchange Carriers), so that new monopolies are being created, which is not competitive and which has dramatically slowed the expanding of broad band connections, which the dot.coms needed to deliver their services (I trust the irony is not lost on the reader that the new monopolies are the remaining Baby Bells who are becoming the monopolies AT&T was broken up to prevent).
Major sports leagues are run by good people with, at the most optimistic, a system that doesn't work well any more and prevents greater profits because of its structure, and, at worse and most pessimistically, a system which will implode on themselves if it is not fixed.
The "parity" principle of the NFL needs to be a part of all leagues. Indeed, the competition is not other teams but other sports, and if the teams of the Big Three (NFL, NBA, MLB ) don't stop fighting each other in terms of revenue and salaries (team management fighting team players and team managements fighting each other), they will lose to other sports, for if we accept that professional sports are entertainment, then we must take "an entertainment dollar" viewpoint, and in the end, the market will determine where people feel they will get the best bang for their buck, and how much they want to spend to be entertained. And if players keep jumping teams, fans will follow players, not teams, and make them even more apt to jump sports, to spend elsewhere while they follow their favorite two or three players, and when they move, that means no longer supporting the local team. Our proposed 12 part compensation plan for players covers this.
Things have changed for players too. In the "old days," when players didn't make much and had to get jobs in the off season (hence the need for training camps, which were really conditioning camps), communities and owners worked together. It made sense for local communities (states and or cities) to help foot some or a lot of the bill in those days for stadiums and arenas. Those days are passed. New stadiums are being promoted as needed not because they can't make money as now structured, but because without them billionaire owners can't afford to pay millionaire players more millions to keep them from leaving under free agency (bad system, remember?). What greater sign that times have changed. Personal anecdote: a family friend in the 1950's had a starting pitcher on the Chicago White Sox: his "fee" for advertising Lazy Boy Chairs was to get a free on delivered to him home. That is no longer the case. Fans are going "no mas."
There are backlashes out there. Canadians refused to allow Federal funding of $3 million for each team, and so their teams and players are heading for the states. Floridians just cheered their legislature refusing to consider building stadiums for the Marlins, and the Devil Rays would get the same. There is a wonderful piece on "Beware The Coming Corporate Backlash" at http://www.industryweek.com/CurrentArticles/asp/articles.asp?ArticleId=1006 . For those who don't want to wade through it, I can send you an attached a copy of it with emphasis added through bold and underlining (email me: email@example.com ).
Both owners and players and legislators and businessmen and fans, have to step back and out of the small box of "the old days," and figure out how to expand the box to include where they now must stand: "the new days," of no public funding per se, except for infrastructure streets and sewers and certain public-private partnerships (discussed in Part II.B. of our Model).
The good news: teams don't need public money (they want it, but that's different, and even though they can say "the other teams got it so we should", that doesn't count anymore either). Even the CEO of Archer Daniels Midland, G. A. Andreas, the largest Agribusiness in the world, admitted to the TV show 60 minutes, that ADM doesn't need government subsidies, but as long as others are taking them, they will too.
Our model shows how to build a new stadium without increasing team debt or having to use public funding other than the usual streets and sewers infrastructure. Our model also includes, as noted above, a 12 part compensation model to insure that both sides get what they need: teams not having to spend vast sums of cash in signing bonuses, etc., and players not winding up broke 5 years after playing, as happens with at least 50% of players (one estimate is 80%).
Teams need to see themselves as part of the "Sports Entertainment" industry, and think about year round revenues in doing so, not just seasonal ones. Within this context, our model shows, as noted, 40 ways in 26 categories of how to generate revenues using the complex year round.
An example of our simple thesis applied: Minnesota could fund ALL THREE STADIUMS they desire (news ones for NFL Vikings, MLB Twins, and U of MN Gophers) as well as take care of the Metrodome, with this model, and all four could and would be profitable.
Added for Minnesota:
Minnesota is in a unique situation: three groups want stadiums: the NFL Vikings, the MLB Twins, and the U of MN Gophers. It is said that Minnesota can't support three new stadiums, and therefore at least one team should leave town. My model suggests otherwise, based on this key statement: the Twins still get their fans out; the Vikings still get their fans out; and the Gophers still get their fans out. Therefore, all three are supported now and can be in the future. The Metrodome is not exactly the "odd man out." However as it is no longer "viable" in today's economics, and as it is paid for, it doesn't matter whether the kind of creative thinking of this model is turned to show how it can be sustained also, or whether it is torn down for a new kind of development.
What to do? When Red McCombs was asked this question, he said, I dont know. Show me. This models does so. Dave Jennings, CEO of the Minneapolis-Bloomington Chamber of Commerce, said, in the 8-10-00 Star Tribune on-line, that someone other than the teams have to create a public discussion about the future of the Twins and the Vikings in Minnesota. The teams are crying out for somebody to call the family meeting. So far, no one has stepped forward. Maybe the people of this Forum could do so.
Here are my thoughts about the three leagues, the new reality re stadiums, and then my thoughts about all four of these Minnesota entities.
About the NFL, NBA, MLB: I'm not an expert. My research as primarily been on stadium building/operating. But I've learned a little. The NFL has the most rational system, because of Pete Rozelle's leadership which led the owners to adopt "parity." This gives all teams a chance. Leagues without parity are hurting themselves. If only the teams in a few large cities can afford to buy the best athletes, they hurt the game and the league. George Steinbrenner is not a genius: but he is in the right place at the right time: the most populous nexus of three states (I worked in Manhattan for 5 years, and it is commonly called the Tri-State Area: NY, NJ, CT), with the most TV stations, and so he is "gifted" the revenues they generate simply by being there.
The reality of the "new" financing: with league-wide rules, etc., teams before didn't have much chance to be creative. By enabling teams to have larger stadiums with built in money making sources, good management has a chance to be successful, and not so good management exposes itself, and properly so, to the "creative destruction" of capitalism (as half the Fortune 500 in the 1970's) takes its effect and requires them to sell to someone who can or to change their way of doing business. When Jerry Jones took over the Cowboys, they were losing $1 million a month. He reversed that by creatively using his stadium as a base for other revenue generating activities.
The Vikings were sold because the former owners despaired that they could ever get a new stadium deal with tax money (they were correct) and therefore decided to sell before the team was no longer profitable. In five years it won't be profitable (see Appendix D of the Model). The Twins have hung on by following non-debt business practices and investing in its future with its farm clubs. The other side of the new reality is the fact that most teams in the NFL have new stadiums or have new ones approved and are on the drawing boards.
I believe only the Vikings, Saints and maybe a couple of others, are without new stadiums in hand or approved and under planning. Baseball's contraction is based on not having new, publicly funded stadiums. They need to use this model. Teams have to get new stadiums or go where they can. The problem with the question in Minnesota is that it is improperly phrased as an either/or question: either stadiums are public funded or the teams have to leave town (Viking, Twins) or be disbanded (Twins). It is odd that in the greatest democracy of the world with the greatest capitalist economic engine in history, that capitalists of so many sports teams are asking for non-capitalist solutions. Better is the both/and approach: both teams and communities can thrive and survive by cooperating together, so that each gets what it needs.
Remember from above regarding how the old industries got started: government subsidies. What the pro sports teams don't realize is that those days are gone. Some teams are trying other methods to survive. Several years ago, either Harpers or The Atlantic ran a piece on the MLB's San Diego Padres, who had opted out of the free agency race, and got rid of all of its highly paid players, in order to say financially sound. Fans could still enjoy a night out, ticket prices could be kept reasonable, and they could see all of the big name stars when they came to town on the other teams. Finally, "system wise," teams and players need to drop the anachronistic notion that they are management-union.
Hard working hard hats and other unionists struggling to provide for their families are done no favors and are demeaned when players say "we have a right to strike because we too need to put food on our family's table," as the then NY Knick Pat Ewing said. Player are not union workers. They are all senior executives and key performers of a major entertainment enterprise. Compensation so structured would enable costs to be kept down, enable teams to make more profits, and enable players to make more money.
Remember, it is not revenue that counts, but profits. Raising ticket prices and building new stadium only to turn the new revenue and then some (as some go into debt to do so) over to ever higher player salaries could eventually result in stadiums with full Suites and empty stands, as Joe Fan and his family migrate to the new sports and to the minor leagues of the majors. Again, the 12 part compensation plan in the Model addresses and resolves this issue.
Also, Appendix H is a two page summary of my recently written 30 page "Model of 10 Competitive Analysis Components for Long Term Profits," which if applied by these four entities would insure their staying out of the red in terms of revenues. Other trends supporting the Model are listed in Appendix B of the Model. Another key question is: will Minnesotans sit down to work it all out? Appendix K ("40 Models of Communications") and Appendix L ("14 Models of Conflict Resolution for use in Institutional or Wider Area Stakeholder Process to Bring Resolution and Consensus") are two sections of empirically proven methods for successfully resolving the issues faced by all four entities (and for those with a need for better/civil interpersonal communications styles to make such discussions successful, some are listed in Appendix M ("Table of Contents, 'Lists and Recipes for Success', featuring management as coaching and leading, not dictating and coercing, for goal setting/achieving, and overcoming adversity to succeed (use with Appendices K & L)".
MN Vikings: the new owner, Red McCombs, is correct: the Metrodome is now obsolete, just as the former owners also said, but could not solve the problem, so they sold the team. No local person bought it as they knew the former owners and all believed the same thing. They still need a new stadium. Charlie Walters, in the 5-24-01 Pioneer Press, points out the gamble in the rumor that he repeats that if the Vikings are not provided a new stadium, they will move to L.A., following the Minneapolis Lakers (note: the next day he repeats the rumor that Red will sell locally to someone who can get the stadium). The NFL wants the Vikings in Minnesota. And certainly the NFL wants a team in L.A. And certainly the Vikings and Saints, without modern stadium, seem likely candidates. But the NFL's integrity would be on the line, given their assurances the Vikings would not be moved. That leaves the Saints or an expansion club. But the sizeable revenues for the league from L.A. are currently lost. The NFL won't wait long. The Model discussed here would enable the Vikings to solve their stadium problem in Minnesota and provides the NFL with a new paradigm for more easily establishing an expansion club.
MN Twins: Carl Pohlad has resisted the foolish economics of many teams by refusing to go into debt to secure new players. Because the team remains economically sound, it is in an excellent position to adapt to the new realities. Also, it sometimes snows in October. It only makes sense for Minnesota to have a retractable roof. Contraction won't happen. Its too costly. And it turns down the revenues from one of the great cities and regions of the country. The model discussed here would solve the Twins' problems.
MN Gophers: a hobby of mine is teaching (and I have done so at the college, university, and business school levels, including in Minnesota). Universities are single minded and jealous of their independence. Does anyone really think the University of Minnesota is going to want 60,000 people tramping across its campus several times a week all year to share a stadium with the outside world? Or share its autonomy with a business entity? And yet, as Appendix A of the Model points out, universities across the country are obtaining new and bigger stadiums, some with state help, a lot with alumni support. The UM can read the papers, sees this and surely is quietly going along until the shared stadium idea goes away and they make their push to get their own stadium. The problem will be if they make the mistake of making it an either/or: either the Gophers or the Vikings get a stadium. The model discussed here would enable both of them to get their desired stadiums.
The Metrodome: what a place. Very impressive. I've seen the Vikings (last fall), Timberwolves (their first year), and Twins (earlier this month) play there. Its quite a place. But from a fan point of view, it no longer works. I've seen baseball before in the outdoors, and baseball needs sky (and a retractable roof when the sky sends rain, snow, or cold). The Timberwolves game with school kids in the rafter was worse than viewing a TV set. Football works the best there. As would other activities (see Part I of the Model). Too few restaurants.
Too few bathrooms (with an aging population growing so that there are now many more people who have to go to the bathroom more often than when it was built, the new stadiums with more bathrooms are a must). Too narrow of passageways: I'm surprised kids in strollers are stomped in the crowds. Minnesota is to be applauded for building it originally with a "perfect" public private partnership that enabled it to be paid off ahead of schedule. There are still many uses to which the Metrodome could be put to use (as discussed in the Model) until it too comes down and is replaced by a 21st century structure or complex. Minnesota can set itself up to be applauded again: showing how cities can fund more than one team and its stadium, and still provide for its citizens as well.
Minnesota needs to rephrase the question: ask not what the state can provide for the teams but what the state and teams working together can provide for the fans and communities of the Twin Cities and the state, using 21 century economic paradigms as well as new kinds of private-public partnerships that benefit both (for the latest regarding how many economic theories still hold to rules long proved false, see "The Fed's Faded Glory" in today's WSJ, p. A22, or read it at http://interactive.wsj.com/articles/SB993513383308253517.htm ).
It is a delight to join you in this very important and much needed discussion. This discussion counts. Hopefully it will contribute to the resolution all want: new stadiums for their favorite teams without having to do so at the expense of valid social issues like education, job training, houses, city services, etc. Sports have become the "enchantment" vehicle of choice (see Appendix C of the Model for a discussion of this) for most, and it is the one topic all can talk about at work, home, neighborhood, church/synagogue/mosque and not have to worry about stepping into one of a myriad of "politically correct" mine fields.
Communities love their teams. And if the pros don't stop harming the geese that lay the golden eggs, fans will move on to soccer, Lacrosse, Australian Football, and/or a whole host of other sports, and/or new TV programming as well as TV from around the world that could greatly effect the pro leagues/teams/owners/players. Communities are devastated emotionally when their favorite players leave, and are even more so when their teams are yanked (hence Baltimore heading off for Indianapolis in the dead of night). A new paradigm or model, if you will, is needed. We have it. It is attached. It is win-win for all.
I look forward to any and all comments on our "model" and to engaging you in discussing this most important, complex, and important topic. For "file" purposes, I have left the two attachments noted above attached to this Email. However, they will be dropped off when forward to you. So, if any of you want copies of the model or the piece on backlash, Email me and I will send it to you. Email me at firstname.lastname@example.org
Also, I will be town again some time during the last of July and the first part of August. If anyone wants to get together and have a discussion, especially in a group format, I would be glad to join the discussion, and to answer any questions about the Model.