U.S. Gaming and Sports Facility Financing

Abstract

1. The historical connection between gaming and professional sport Throughout their history, North American sports leagues have traditionally attempted to build up significant firewalls between themselves and any type of gaming operations. With regard to issues such as ownership, leagues have traditionally been fairly strict about ensuring that their members do not have ties to gaming operations. For example, in 1980, Major League Baseball (MLB) rejected the sale of the Chicago White Sox to Edward J. DeBartolo, Sr. reportedly because of his ownership of three horse racing tracks in (Durso, 1980). This conservative, zero-tolerance approach was also seen again early in 2008 when the National Football League (NFL) forced Tilman Fertitta to sell his minority stake in the Houston Texans because he is the Chairman of Landry's Restaurants, Inc. which had recently acquired the Golden Nugget Casino in Las Vegas, Nevada (Manfull, 2008). Sponsorships are another area where sports organizations placed stringent prohibitions against the connection between themselves and gaming entities. Early this decade, Major League Baseball's San Diego Padres were reportedly told by the league that they could not sell the naming rights to their new facility to the Sycuan Band of the Kumeyaay Nation because of the tribe's gaming interests. This occurred despite the fact that the tribe was allowed to be the presenting sponsor of the team's 2000 season (Rodrigues, 2000). The placement of teams has also been an area where sports organizations have traditionally tried to avoid any connections with gaming interests. In the mid-1990s, the expansion of the National Basketball Association (NBA) into the Toronto, Ontario market was threatened because the province offered a sports lottery game that featured NBA teams (Grange, 2007). The issue was resolved when the province pulled the league's games from the lottery (Grange). In addition, various league executives and observers have stated that Las Vegas has never secured a major league team despite demographics that are comparable to other major league cities because of that city's significant gaming presence (Kulin, 2006). This contribution will discuss how this firewall between gaming interests and professional sports in the United States is slowly going away because of the need for the professional sports industry to tap into the large revenues generated by gaming for items such as sponsorships, advertising, potential owners, and most importantly, the development of new sports facilities. Section two covers how sports facilities have traditionally been financed in the United States. Section three discusses the issues facing professional sports that are leading to the changing position toward gaming. Section four shows examples of how the professional sports industry is reducing its anti-gaming position. Section five illustrates how gaming revenues could be used to finance sports facilities. Finally, section six looks to the future and what might happen in this developing relationship. An item of note is that references to the gaming industry throughout this contribution will, in fact, be referred to as gaming. North American sports league have tended to use the term gaming, or occasionally entertainment, when referring to potential business or marketing partners that have connections to the gaming industry. The term gambling is often used by the industry and the media when there is a violation of the rules prohibiting a connection between the sports and gaming industry. 2. Historical Financing of Sports Facilities In contrast to the relatively consistent position of sports organizations toward gaming over the years, the financing of professional sports facilities in North America has seen many changes throughout the history of the industry. In the early 20th century it was common for sports teams to finance and construct their own facilities. …