Ohio AG Threatens Suit to Keep Publicly Financed Pro Soccer Team

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By Alex Ebert

Ohio law has an explicit home-field advantage against sports teams looking to leave the state—if a team takes public cash, it has to stay or sell to a local buyer, the Ohio Attorney General says.

Last week Attorney General Mike DeWine (R) threatened to sue the Columbus Crew Soccer Club using an obscure state law to stop the team from leaving town, signaling the state’s intent to intervene after the team’s recent statements about a possible relocation.

Though the law has never been used before, DeWine says public financing for parking around the team’s stadium means the state can stop a relocation unless the Crew gives Columbus or local buyers a right of first refusal. If Ohio is successful, similar laws could pop up around the country in an attempt to balance the power between franchises and local governments.

“Fundamentally what I see here is an establishment of at least an effort to have a greater control over franchise movement, and that would give the city or the state greater leverage,” Andrew Zimbalist, professor of economics at Smith College, told Bloomberg Tax. “The basic idea is that if you’re going to take public funding, you’re going to abide by our laws.”

The team’s owner, Precourt Sports Ventures LLC, declined to comment beyond a Dec. 7 statement saying the company has “great respect for the office of the Ohio Attorney General, however there is nothing to address as Crew SC prepares for the 2018 season.”

Team Received ‘Financial Assistance’?

After the Cleveland Browns rocked the Ohio sports scene by leaving for Baltimore in the 90s, the Ohio Legislature passed a law hoping to prohibit future abandonment. The 1996 provision requires that if a team receives “financial assistance,” it has to give six-months notice of a move and must offer the public or local buyers the opportunity to purchase the team.

“There are state funds involved, the state has put in I believe $4 to 5 million in parking, and they got subsidized rent that is below market,” DeWine said in a radio interview on Columbus 97.1, The Fan. “There are several ways we believe we can show in court that the language of this statute is applicable to this action.”

The Ohio Attorney General’s office considers “lease on state-owned, tax-exempt property, as well as state funding of improvements of parking facilities used by fans at Mapfre Stadium” to be examples of tax assistance to the team, Dan Tierney, spokesperson for the Ohio Attorney General, told Bloomberg Tax in an email.

State auditor records show that the Ohio Expositions Commission entered into a 25-year lease with the team through 2023 for the Ohio State Fair land upon which the Crew built its stadium. The team’s current rent payment is $72,000 a year, $39,000 beneath the “carrying value” for the 15-acre property. The rent increases periodically based on raises in the Consumer Price Index.

The team also must pay tiered amounts of parking revenue—starting at 30 percent of sales for the first $225,000 and less as revenue increases—during Crew events.

In 2005, the Ohio Tax Commissioner argued before the Board of Tax Appeals that the team wasn’t entitled to a personal property tax exemption because the stadium didn’t qualify as a publicly owned property. The BTA agreed in a decision that was later vacated when the parties mediated before the Ohio Supreme Court.

“To the contrary, we find the underlying land is not public property used exclusively for a public purpose because it is used by Crew Soccer Stadium LLC, a private for-profit entity, in furtherance of its own economic purposes,” the board said.

History of Pro-team Transfer Suits

Zimbalist said that Ohio’s law is an attempt to re-balance leverage between pro teams and cities, which tends to favor teams due to how leagues are set up.

“The basic idea is that these leagues are monopolies, they reduce the number of franchises that would exist in a free and open market,” he said. “So what happens is every so often there’s a city that becomes rich enough and big enough to get a team, and that puts cities in competition with each other over the teams.”

Ohio wouldn’t be the first to sue a team it lost. There was a suit in connection with the Baltimore Colts’ move to Indianapolis and more recently in connection with the St. Louis Rams’ move to Las Angeles.

Zimbalist said that often cities will try to control teams through long contract periods, or having provisions with a right of first refusal. The Crew’s lease agreement provides that the team has to attempt to get another similar sports team to take its place, should it leave.

But contracts also often include provisions that allow teams to exit, and some experts think Ohio would lose its suit, just as Baltimore lost its suit to keep the Colts.

“The law is not enforceable since ownership transfers must be approved by the league and, in any case, no court in the state where the team relocated would enforce the law,” Roger Noll, sports economics researcher and professor of economics, emeritus at Stanford University, told Bloomberg Tax in an email. “Other than to enforce a lease, I am not aware of a team ever losing such a suit.”

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com

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