Legendary businessman J. Paul Getty once said that he didn't believe in contracts. According to his reasoning, if you're dealing with a crook it doesn't help and if you are dealing with someone honest you don't need one.
This is how pastor Dwight McKissic of the Cornerstone Baptist Church in Arlington, Texas, is feeling these days. He's going up against the second-most-valuable NFL franchise, and what is happening tells us something about sports, business and government in America today.
McKissic thought he had a deal with Dallas Cowboys owner Jerry Jones regarding the contracting that would go to his community in building a new football stadium in Arlington for the team. The idea was that part of the pitch to gain community support for the tax initiative financing the stadium was that a good chunk of the contracting for building the facility would go to minorities. They comprise 40 percent of Arlington's population.
The initiative passed, but, according to McKissic, Jones is not holding up his end of the bargain. The Cowboys signed a fair-share agreement before the vote committing to direct 25 percent of the contracting to minorities. However, according to the pastor, to date only one contract has been directed to a local black firm.
Furthermore, says McKissic, who represents the Arlington Citizens for Community and Economic Empowerment, the spirit of the agreement has been violated. The group presented Jones a written list of terms, which included the Cowboys picking an Arlington-based black firm to joint venture with the general contractor. Jones wrote back that he will "... meet or exceed your expectations..." This hasn't happened.
The Cowboys say that no promise was made. Now, the Arlington City Council will seek a legal opinion on the nature of the commitment.
Such package deals are not unusual in these stadium-location schemes. The sports franchise pitches its business deal as a quasi-public-works enterprise. In exchange for the great privilege of having a local team, the community agrees to foot a good portion of the bill in the way of relocating displaced homes and businesses and subsidizing a major portion of the costs.
Why communities agree to these deals remains a mystery to me. They are driven by a recipe of public spiritedness and perceived economic benefit, fueled by super-salesmen like Jones. Citizens agree to smoke-and-mirrors arrangements that blur the line between public works and private business.
The new Cowboys Stadium is a $650 million project, half of which is to be financed by increases in sales taxes and taxes on hotels and rental cars. Jones has a personal net worth, according to Fortune magazine, in the neighborhood of $1 billion. The players earn millions in salaries. Why are taxpayers financing this?
Sales taxes are regressive taxes that hit low-income groups proportionally harder than higher-income groups. It's no wonder that Doug Bandow, a senior fellow of the Cato Institute in Washington, writes: "Stadium advocates have been amazingly successful in taking from the poor and giving to the rich."
In a paper called "Sports Pork: The Costly Relationship between Major League Sports and Government," Raymond Keating, chief economist of the Small Business & Entrepreneurship Council, points out that of $20 billion spent in the 20th century on stadiums, $14.7 billion came from government subsidies.
Regarding claims that sports teams generate a net positive impact on local economies, Keating reports "the results of studies on changes in the economy resulting from the presence of stadiums, arenas and sports teams show no positive economic impact." Basically, revenue going to the sports team is simply revenue transferred from other local uses. Families, for example, simply transfer spending from other forms of entertainment.
Arguably, the local pastor negotiating with Jones is like sending the local high-school team on the field against the Cowboys. But, quite frankly, the fact that Jones could convince a community to fork over $320 million in taxes to finance his business shows that his salesmanship goes well beyond pulling the wool over a pastor's eyes.
Stadium deals such as this tap into a certain community naivete about what is in its interest. I'd suggest that Jones would be no worse off to simply step over the line and satisfy the local community's requests. There can only be a pretense of business here. And a little good will in America cannot hurt anyone and would probably make us all a lot better off.