This article originally appeared in Regulation. Click here to read the full article.
By Ike Brannon
Back around the turn of the century I was a newly minted economics professor living in Oshkosh, Wisc., a picturesque city 40 miles southwest of Green Bay and deep in the heart of Packerland. I was also (and remain to this day) a Chicago Bears fan, a fact that made the autumns there a bit uncomfortable. While the Pack reached two Super Bowls and made the playoffs every year I lived in Wisconsin, the Bears made the playoffs precisely once and lost to the Packers 13 of the 14 times they faced each other. A surfeit of Cheesehead friends and neighbors made sure I was aware of the imbalance.
One day, however, life in Packer country threatened more than my psyche: the team’s management wanted a renovated stadium and didn’t want to pay for it. Instead, they asked the local governments to impose a 1 percent sales tax to finance the project, and the counties affected were to include the one where I lived.
The government decided to hold a referendum on the matter, and it was clear that it would pass. The team’s excellent string of seasons meant that public support across the area for the team was high. But management wasn’t taking any chances; it engaged its lengthy list of former stars to help with the marketing campaign and hired a slick public relations firm to orchestrate things. There was no coordinated opposition.
To lessen the sting to taxpayers, the Packers offered to contribute to the renovations. Specifically, they offered to charge season ticket holders a one-time fee of $2,000 to maintain the ownership of each season ticket, in effect creating what is known as a personal seat license (PSL). Making those who actually use the stadium pay for its renovation seemed to me to be more sensible than taxing the schlubs who never set foot inside Lambeau Field, yet the PSL fee created more consternation among fans and the media than the sales tax. This outcry came despite the fact that a season ticket was a valuable commodity: at the time, reselling a season ticket to all 10 games would net the owner around $1,000 a year.
It didn’t take much economic rigor to deduce that a PSL was worth more than what the team wanted to charge for it. To make a guess as to how much more, I took the $1,000 net profit (a number I obtained from interviews with a number of ticket brokers), assumed a conservative 10 percent rate of return that an investor might insist upon to purchase such an income stream, and then multiplied it by the 70,000 seats in Lambeau Field. I arrived at a conservative estimate that the team could clear roughly $700 million if it let the market set prices for the PSL. Put another way, that was more than enough to finance the renovations.