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The great grift: Orlando Magic make millions off naming rights to arena taxpayers built | Commentary

This week I’m doing something different with a two-part column. Both parts deal with the same topic — taxpayer money. One looks at a way taxpayers get hosed. The other looks at a creative way to do right by them.

Let’s start with the former — a look at how the Orlando Magic took local taxpayers to the cleaners with the help of local politicians.

Just before the holidays, Orlando’s best-known arena got a name change. Hello, Kia Center.

I don’t know many Central Floridians lamenting that the Amway Center is no more. I always thought it was embarrassing to have Orlando’s most prominent building named after a multi-level-marketing scheme. Florida’s only cringier-named venue was the 1-800-ASK-GARY Amphitheater.

But largely overlooked in the hubbub was the fact that the Orlando Magic are making millions by selling naming rights to a building the team doesn’t even own.

Taxpayers funded, built and own the center. Yet the Magic get the lion’s share of the naming-rights revenues. This is one of the most whacked-out aspects of professional sports.

Magic’s home arena gets new name: Kia Center

Think about it. Imagine you wanted to start a business but didn’t feel like paying for your own business’s building.

So you go to a local government and say: Hi, I have a plan to make myself billions of dollars. But I don’t want to pay all the start-up costs. I’d like you to get taxpayers to do it for me.

Sounds nuts, right? Yet in professional sports, this is so common, people have largely stopped talking about how ridiculous it is.

“It’s insane that sports team owners get to sell the naming rights to buildings they don’t own,” said Neil deMause, the author of “Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.” “Just like it would be insane for me to sell billboard space on the roof of a house I rent.”

deMause went on to say: “The only justification seems to be ‘This is how it’s always been done,’ which is a terrible argument.”

He’s right. Naming rights are worth tens of millions of dollars. While the Sentinel reported that the Magic wouldn’t reveal how much Kia is paying to name the publicly owned building — secret-keeping that’s also ridiculous — teams fetch anywhere from $40 million for 10-year naming-rights deal to $175 million for 20-year ones.

There’s no denying the team provides much of the naming-rights value, since the arena’s moniker is most often uttered during sports broadcasts. But taxpayers were the primary investor in the city-owned building, to the tune of nearly 90%.

The city’s contract says the Magic pay about $3.5 million a year in rent and other payments, plus a small annual escalation, but get to keep everything from advertising to concession revenues. Naming rights alone more than cover the annual payments.

(Oh, and while the contract doesn’t ensure taxpayers benefit from naming rights, it does guarantee city and county officials get comped box seats “located at approximately the free throw line.”)

Naming rights, though, are just the start when it comes to how team owners profit off taxpayers. The biggest way is from their teams’ skyrocketing net worth.

Last month, NBA Commissioner Adam Silver bragged about how the average team value had increased over the last three decades from $70 million to $3.8 billion.

Forbes estimates the Magic franchise is worth about $3 billion — compared to the $85 million the DeVos family paid in 1991. And Forbes estimates that close to 40% of that value comes from the arena.

That means that when the DeVos family — which used to whine about operating losses — finally sells the team, they stand to make a profit of nearly $3 billion. (That’s like whining about tiny stock-management fees on a portfolio that’s increasing by 100% every few years.)

If taxpayers fund sports, they should share profit too

And keep in mind: When teams claim they need help making ends meet, that’s only because they pay ridiculously inflated salaries to players and execs. The NBA’s entire financial house of cards relies upon billionaire team owners, some of whom decry public assistance for individuals, getting hundreds of millions in corporate welfare to pad their own profit margins.

Taxpayers paid for more than 80% of the $480 million Orlando arena the team demanded. Yet the taxpayers’ share in the team is 0%.

State economists have also concluded pro sports earn a lousy return for taxpayers, returning just 30 cents for every $1 invested. That’s largely because sports venues don’t generate new spending as much as they cannibalize existing entertainment dollars. If a family spends $200 a basketball game, that’s usually just $200 Mom and Dad would’ve spent elsewhere.

And the “heads in beds” arguments are economic baloney. People don’t book trips to Orlando to catch Magic games. They come for Disney and other theme parks.

There are valid reasons for communities to invest in sports. But they’re quality-of-life reasons, not economic ones.

And the sports cheerleaders who claim taxpayers just have to pay for the venues because that’s just the way the business works are often full of it. You were fed the same load of malarkey about soccer — right up until Orlando City stepped up and paid for its own stadium. And did quite well.

The bottom line: When taxpayers invest in a for-profit venture, they should be cut in on the profits. And elected leaders should make sure that’s the case instead of rolling over and playing dead.

Tomorrow, we’ll look at an example of politicians striving to do better and cut taxpayers in on the investment action — down in Osceola County.

smaxwell@orlandosentinel.com