Royals Reserve Taxpayer Money for The Monarchy

           One of the biggest problems for sports organizations at all levels is the declining amount of public support for athletics from state, county, city, and local governments. Huge deficits and laws requiring balanced budgets make funding of athletic programs or organizations an easy target for budget cuts. This has caused colleges, high schools, and professional organizations to scale back or eliminate entire programs.

            In this tough economic environment, it would appear that sports organizations would be grateful to receive any type of public funding or subsidies. Certainly no sports organization would seemingly misappropriate funds or do something like using taxpayer funds to help pay their own taxes, right?

            Unfortunately, Sports Radio 810 WHB and the non-profit ThinkProgress organization are reporting that the Kansas City Royals are stealing from the poor to give to the rich – in a manner of speaking. According to Kevin Kietzman at 810 WHB, “The Royals have received at least $12.7 million from taxpayers that was approved by the Jackson County Sports Complex Authority as part of the RMMO provision of the team's lease with the county… By using the money for payroll taxes, the team literally collected taxpayer money to pay their own taxes.”

            The Royals have done nothing illegal in this situation. The team’s deal with Jackson County requires “reasonable written approval” by the Sports Complex Authority, which the team has secured before distributing its funds. Yet, the original intent of receiving this money starting in 2006 was to make improvements to Kaufman Stadium – particularly in the case of using the All-Star Game as showcase for the city and county in 2012. Yet, the team has only used 9% of the funds it has received on stadium improvements. The rest of the money has gone to pay for salaries, telephones, and taxes.

            In this blog, we have often argued that sports organizations should take steps necessary to enhance cash flow in non-traditional ways. This is one instance, however, where taking a different approach could be “penny wise and pound foolish.” Economic decisions cannot be made in a vacuum where sports decision makers only look at the best financial interest of their organization. By using taxpayer money in efforts to pay down the team’s tax obligations, the Royals have certainly engendered ill will from one of their target demographics – fans who live in Jackson County. More importantly, this type of action will certainly jeopardize the team’s ability to receive any type of public funding in the future, eliminating a source of cash flow critical to the organization.   

            Taking a more macro perspective, the Royals decision will likely jeopardize many other sports organizations’ chances for public funding. The team’s actions provide tangible evidence for what critics of public financing of sports organizations have argued for years is the main problem with this type of spending. The Royals actions show that at least some sports teams and owners have no interest in their communities or making improvements to infrastructure / stadiums that would benefit the public good. Rather, sports owners and teams are only looking after their own best interests in their bottom line.

            Block Six Analytics does believe that sports organizations as a whole do provide significant benefits to states, counties, cities, and towns. In addition, public financing of sports organizations does make sense in the right circumstances – even in the current tough economic environment. Yet, actions like those taken by the Royals organization will make it increasingly difficult to secure and justify future public funding for sports organizations.