- The Washington Times - Sunday, January 2, 2005

The public funding of professional sports stadiums is infuriating because it leaves the people who benefit the most from their construction off the hook. While owners see the value of their team rise markedly and longtime season ticket holders can earn hefty profits from scalping their tickets, the taxpayers pay the tab.

While it may be impossible in the monopolistic world of Major League Baseball to get owners to cough up any money, it isn’t that difficult to extract more money from the wealthy season-ticket holders, and this is where the city should start when attempting to come up with private financing. An aggressive use of personal seat licenses could generate nearly all of the revenue necessary to finance Washington’s baseball stadium.

Personal seat licenses, or PSLs, have been used for decades by teams at both the college and professional level. The premise is simple: fans that wish to buy season tickets must first buy the right to buy the season tickets for their particular seat. For instance, in 2000 the Green Bay Packers charged season ticket holders a one-time fee of $600 to $1400 for the right to keep their season tickets. Virtually no one declined the offer.

Personal seat licenses are a way for teams to recoup much of the revenue made from scalping tickets. It’s no secret that season-ticket holders and ticket agencies are making big bucks from reselling tickets and charging the going price. Web sites such as StubHub.com and eBay are replete with people charging hundreds of dollars for the best seats to even mediocre contests. Most teams are wary of playing directly in this market, presumably for fear of alienating their fans by appearing too greedy or because they have no great incentive to tap this money.

However, teams can indirectly capture the revenue going to the lucky season ticket holders by charging a price for the personal seat license that represents its economic value.

Thus far, no team has been bold enough to figure out the value that the market really places on PSLs. To do this an enterprising team would simply need to set up an auction and allow the market to set the price for the financial asset that is a season ticket. When people start bidding against each other in an open market, the true price will be revealed.

How much would personal seat licenses for the Nationals be worth? Here’s a ballpark figure, so to speak: Let’s say that the Nationals sold PSLs for the best 10,000 seats, and split them up into 4 packages of 20 games each. At the same time, they agreed to charge $25 for each ticket and guaranteed they would not raise prices for 15 years, after which the PSLs reverted back to the team to be re-sold. The holder of a 20-game package could reasonably assume he could re-sell each ticket for an average of anywhere from $75 to $100; since these are the best seats in the stadium and the boatload of lobbyists will doubtless want to be in this market, this seems conservative.

At these prices a season-ticket holder could earn between $1,000 to $1,500 in profit each year for 15 years. Given that no one can say for certain how good this team will be for the next decade and a half, a conservative estimate is that the market would establishapriceofaround $10,000 for this package. With 40,000personal seat licenses, an auction generates $400 million. Throw in naming rights andtheparking revenue and we’ve financed the entire stadium in 15years.Shouldbaseball promptly find a committed owner that demonstrates the willingness and ability to put a good team on the field (a good first start would be firing the monumentally inept General Manager Jim Bowden) the revenue generated from such an auction could be closer to $600 million.

There’s no good reason why the owners of the Nationals,whoeverthey might turn out to be, can’t pay for a new stadium. There’s also no good reason why those who stand to profit handsomely from the team can’t pay for the stadium. Both alternatives beat making the taxpayer foot the bill.

Ike Brannon is an economist in Washington.

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