The Ethics of Stadium Funding: Naming Rights Schemes and the Public Good

Running head: STADIUM FUNDING, SPONSORSHIP, AND THE PUBLIC GOOD 1

The Ethics of Stadium Funding: Naming Rights Schemes and the Public Good

Erica L. Mauter

St. Catherine University

ORLD 7100, Professional and Organizational Ethics

July 26, 2013

STADIUM FUNDING, SPONSORSHIP, AND THE PUBLIC GOOD 2

The day outdoor Major League Baseball returned to Minnesota

The Minnesota state legislature passed legislation in 2006 authorizing

the construction of a new stadium for the Minnesota Twins Major League

Baseball team. The Twins began play at Target Field in 2010. The public

contributes financing for the stadium via a Hennepin County sales tax. The

Twins sold ballpark naming rights to the Target Corporation, subsidizing the

team’s contributions towards both construction and ongoing operations. The

Twins also sold an “environmental sponsorship” to Pentair, subsidizing some

infrastructure costs while helping the team to achieve LEED certification.

The intangible benefit of a sports team to its host community is often

described in terms of civic identity, creating a non-economic rationale for

public funding. Selling naming rights reduces the cost of stadium

construction to the team’s owner. Public discussion over stadium

construction and funding pits the intangible civic benefit to the community

against the economic benefit to the team attained at the expense of the

community. Michael Sandel, in his book “What Money Can’t Buy: The Moral

Limits of Markets,” posits that selling naming rights has an inherent

corruptive effect by applying market principles to something that previously

was valued in terms other than its utility (2012). However, if a stadium

sponsorship is sold to an entity that represents or provides a public benefit,

does that balance the corruptive effect of selling the sponsorship in the first

place? I will examine this valuation in the case of the Minnesota Twins and

the different sponsorships sold to Target and to Pentair.


The benefits of sports teams and the economics of stadiums

Tangible benefits

The argument in favor of a naming rights arrangement is one of

economic efficiency. As Sandel explains throughout his book, creating a

market and hence letting market forces dictate the allocation of resources is,

per an economist, the most efficient way to allocate those resources (2012).

In a free market scenario, each participant gets the greatest possible value

out of a transaction. When naming rights are for sale, both the property

owner and the advertiser freely participate in that market, and market forces

ensure that each party is properly compensated.

Jordan Rappaport and Chad Wilkerson from the Federal Reserve Bank

of Kansas City attempt to define the benefits of hosting a major league

sports franchise with economic data (2001). They estimate revenue from job

creation and taxes and compare that to the cost of stadium construction,

concluding that the cost to the public outstrips the benefit. Marc Edelman

cites a number of studies, “finding no positive correlation between facility

construction and economic development” and asserts that “the social

benefits of building public stadiums skew in favor of the wealthy, whereas

the costs skew in favor of the middle- and lower-class. In other words,

government spending on sports facilities fails to follow the benefits principle

of taxation - the principle that each taxpayer’s contribution to provide for a

public service should remain in proportion to the benefits received from that

service.” Edelman also notes the regressive nature of sales taxes and


lotteries, the most common sources of public funds for stadium construction,

and that the primary benefit of the subsidy—getting to attend games—is too

expensive and thus excludes some members of the community (2008).

In the specific case of Target Field, the legislation authorizing the

construction of the stadium contained requirements specifically designed to

benefit the public. One such requirement was LEED certification, a

standardized rating of sustainable building construction and operation.

Another requirement was to direct a portion of the new county sales tax to

Hennepin Youth Sports and to Hennepin County Libraries.

Intangible benefits

Rappaport and Wilkerson also attempt to quantify the quality of life

benefits derived from the presence of a major league sports team,

concluding that such benefits can potentially justify the public outlay (2001).

It should be noted that this is, as Sandel warns against, attempting to use

market principles to render a “nonjudgmental” valuation for something that

is typically valued by moral principles (2012). Additionally, this analysis does

not take into account the decision-making processes surrounding the public

outlay and the power (or lack thereof) of non-elite community members to

influence it.

Rick Eckstein and Kevin Delaney consider the alleged noneconomic

benefits of community self-esteem and community collective conscience to

be socially constructed by the powerful to achieve the goal of stadium

support despite community resistance to the weak economic case. They find


that these arguments have more resonance in some places than others, and

prey upon people’s fears that their city will some how become a lesser place

without this major league sports team (2002). It’s the “Cold Omaha”

argument, which has apparently been used not only in the Twin Cities, but

also in Denver and in St. Louis. Similarly, Phoenix is afraid of becoming

Tucson, and Cincinnati would hate to become Dayton.

This construction deliberately manipulates what Eckstein and Delaney

call internal self-esteem—Is this city “first-rate”?—and external self-esteem—

Can this city compete for talent against other cities? Eckstein and Delaney

describe the community collective conscience construction as a narrative

positioning sports enjoyment as “social glue” that used to be provided by

religion and/or the more frequent personal interactions typical of life in times

past (2002). Eckstein and Delaney use the Metrodome as an example of

economic development not following behind new stadium construction. They

also suggest that these narratives are used to purposely obfuscate inequality

issues and note that such issues typically persist even in the presence of a

successful team that enjoys good attendance (2002).

Naming rights

Target Field is funded by both the Twins and by public dollars. Per the

amended ballpark budget, additional infrastructure costs were borne by the

Minnesota Department of Transportation, the Minnesota Ballpark Authority,

and Target Corporation. (Minnesota Ballpark Authority, n.d.) Target’s

contribution to construction is separate from the cost of its naming rights


deal, in which Target pays the Twins to have the ballpark bear the Target

name. Selling naming rights offsets the cost to the team, but not the cost to

the public.

Sandel has two arguments against selling naming rights. Once is the

concept of coercion or fairness. In a coercion scenario, one party to the

transaction is not truly free to participate in the transaction. The conditions

of the transaction are unfair, often because one party is under economic

distress, which influences the choice to participate in the transaction or the

agreed-upon terms of the transaction (2012). Sandel’s second argument

against selling naming rights is the concept of corruption or degradation. In a

corruption scenario, creating a market for an item that was previously valued

solely on moral terms fundamentally changes the meaning of that item and

hence inherently devalues that item (2012).

Josh Boyd describes the corruptive effect of naming rights as

destruction of the commemorative function of place names, which alters for

the worse the community’s narrative of its team. Replacing commemorative

names with corporate ones signals that the sporting event is actually a

business transaction and re-positions fans as customers (2000). Additionally,

naming is an exercise of political power, is an opaque process, and usually

benefits wealthy white men, thus further bestowing them with public

goodwill (Bartow, 2007) while excluding large segments of the community.

Environmental sponsorships


If the availability of naming rights for sale is inherently degrading to

the object being named, can a name that represents or provides a public

good make up for that degradation? Cathy Hartman and Edwin Stafford

talked about the concept of Market-Based Environmentalism in the late

1990s. They described the objective as creating “market incentives that

make ecology strategically attractive to businesses,” stressing the

importance of integrating waste reduction and resource maximization goals

with social needs (1997). I will explore this more, using as an example the

company GreenMark, "the leading environmental marketing and green

sponsorship agency in sports and live entertainment” (GreenMark

Enterprises LLC, 2010) and an environmental sponsorship GreenMark

brokered between the Twins and Pentair, Inc.

Case study: The Twins, Pentair, and GreenMark

In addition to selling the naming rights of the ballpark to Target, the

Twins also sold an environmental sponsorship to Pentair. The GreenMark

Company facilitated this sponsorship. This sponsorship had the following

benefits: It helped achieve the required LEED certification, which in turn

ensures more environmentally friendly stadium operations; it directly offset

the cost of LEED certification for the Twins; and it benefits the Minneapolis

municipal water system and its other users due to significantly reduced

demand on the water system brought about by Pentair’s construction

contributions.


GreenMark purports to solve environmental problems in building

projects while repairing the public image of the entity undertaking the

project (GreenMark Enterprises LLC, 2010). GreenMark states that green

facility design, products, and practices provide both tangible and intangible

benefits. GreenMark refers to a sports and entertainment venue as a

“community icon” and states that building and operating such a venue with

environmental commitment provides a platform to “tell a sponsor’s

sustainability story” (GreenMark Enterprises LLC, 2010). Per this description,

one could categorize the green design, products, and practices as a tangible

benefit for both the public and the ownership, and the platform for

storytelling as an intangible benefit for the ownership and the sponsor.

GreenMark further describes intangible benefits for the sponsor as “category

exclusivity, earned news value, increased brand prestige, heartfelt brand

connections and community connections,” and tangible benefits for the

sponsor as “suites, tickets, hospitality, player appearances and media buys”

(GreenMark Enterprises LLC, 2010).

Indeed, GreenMark’s founder, Mark Andrew, said, “I was amazed to

learn that many sports venues the world over had significant sustainable

elements…. However, none had commercially exploited this stewardship…”

(GreenMark Enterprises LLC, 2010). In an interview with the Star Tribune,

Andrew again speaks to both the commercial and community aspects of a

sports venue. “Sports buildings are iconic structures, gigantic billboards that

can be testimony to commercialization. And they can be community assets,


setting an example to educate the public about the economics of green

buildings and environmental stewardship” (St. Anthony, 2010). Andrew also

acknowledges that, "At the end of the day, the industry will move only if

there's money to be made…. You can actually make a profit by doing right

by the environment" (The Associated Press, 2010).

To determine what goods and services are exchanged in a GreenMark

environmental sponsorship deal, we can examine GreenMark’s case study of

the partnership between the Twins and Pentair. (GreenMark Enterprises LLC,

2010).

Participant

Contributes Receives

Pentair • tap water filtration products in suites, admin offices, training rooms

• custom built rain water recycling system FOR FREE

• sponsorship fee• information about Pentair’s

products

• title of Official Sustainable Water Provider

• Target Field concourse display• 100 million media impressions

GreenMark • business services • sponsorship fee• 100 million media impressions

Minnesota Twins

• Target Field concourse display space

• sponsorship fee• credit toward LEED certification• massively reduced municipal

water bill• tap water filtration products• filtered water for staff, athletes,

suite-holders• free, custom-built rain water

recycling system• 100 million media impressions

Public • 100 million media impressions• continued support for the Twins

and Pentair

• reduced demand on municipal water system

• information about Pentair’s products

• signal from Twins and Pentair that sustainability is important


From this analysis, it’s clear how tangible and intangible benefits are

exchanged between the property owner (the Twins), the sponsor (Pentair),

the facilitator of the sponsorship (GreenMark), and the public (people who

live in Minneapolis, who see Minneapolis media, and/or who go to Twins

games). Let’s assume that these benefits were exchanged at the maximum

possible value according to the market at the time. In this environmental

sponsorship scheme, market efficiency was achieved according to utilitarian

principles.

Does Sandel’s coercion argument hold up under this environmental

sponsorship scheme? Each of those four entities is free to enter into

transactions in which they exchange money, goods, services, time, or

attention. It’s possible the Twins ownership group needed the sponsorship

money from Pentair to finance the overall Target Field project. Also, the

Twins may not have been able to achieve LEED certification without this

project. If these two things are true, you could argue that the conditions of

the transaction were unfair to the Twins organization. Given the fact that the

Twins and state and local government had to agree upon financing and

many other facets of this project, it is hard to tease out which entity, if any,

may have been coerced. However, if there was commitment and agreement

that the project would go forward regardless, and government has

committed public funds to help to finance the project, it is a benefit to the

both the government (and by proxy, the general public) and to the Twins


ownership to achieve market efficiency and lower the overall cost of the

project. Some citizens are constrained by the cost of attending a Twins

game. Some citizens may be exposed to embedded Pentair advertising

against their will, but their choice to attend a game–if they can afford it–is

voluntary. The coercion argument is weak.

Does Sandel’s corruption argument hold up under this environmental

sponsorship scheme? Sandel’s point is that market efficiency is not a virtue

in and of itself. An item covered with ads still works as built, but an item

covered with ads has new meaning. Sandel concedes that people may

disagree about the old meaning and the new meaning, but people can agree

that the meaning has changed. Agreeing that this change has occurred is, to

Sandel, the proof—the definition—of corruption (2012). However, if people

agree that the new meaning is more positive—that a demonstrably

sustainably built Target Field is a public benefit—then both tangible and

intangible value have been added. Sandel’s corruption argument is set up

such that the selling of naming rights (or environmental sponsorships) is

inherently degrading, but that depends on we as a community agreeing that

our sense of community is reduced or altered by showing up to a baseball

game where we’re treated to a commercial for Pentair while we’re standing

in line for a hot dog. Our collective opinion on this may change as the

sustainability movement evolves.

There is evidence that sustainable practices are highly valued by both

consumers and institutions. Albertville and the Savoie region of France


sustained significant environmental damage due to hosting the 1992

Olympic Winter Games. The Norwegians championed and implemented a

sustainable approach to the 1994 Lillehammer games. Following Norway’s

lead, the International Olympic Committee adopted environmental policy as

the third dimension of the Olympic movement, alongside sport and culture,

in time for the 1994 Winter Games (Cantelon & Letters, 2000). A study of the

effectiveness of environmental advertising in the hotel industry showed that

substantive claims around environmental practices elicited positive

responses from consumers (Hu, 2012). This finding suggests that Pentair’s

concourse display describing its rainwater recycling project and filtration

systems is critical to conveying such a message to consumers about Target

Field.

Ethics of funding sports stadiums

Further elaborating on the corruptive effect of advertising, Sandel

distinguishes between ads on stadium scoreboards and ads embedded in the

call of the game (2012). With that distinction, it’s fair to characterize

Pentair’s Target Field concourse display as more like a billboard than an

unexpected intrusion into the nature of the game itself. That the stadium

itself is named for a sponsor creates an expectation that there will be further

advertising inside. And while the commercialization of baseball may not be

the highest moral ideal, it has become the social norm. Sandel positions

municipal marketing—the selling of naming rights on public property—as

somewhat more objectionable because it “threatens to bring commercialism


into the heart of civic life” (2012), which leads one to circle back and

question two things: the impact of sponsorships inside a stadium where the

intangible benefit of the sporting event within is supposedly the bolstering of

civic life, and just how many public dollars need to go into a stadium for it to

be considered public property. All that said, while Sandel has arguments

against these practices, he does not go so far as to call them unethical.

Daniel Mason and Trevor Slack use stakeholder theory to identify the

host community as a primary stakeholder and hence frame team owner

behavior in terms of business ethics. If the relationship between the team

and the host community is reciprocal, then the moral thing to do is to

consider the community when making business decisions regarding the

team. One dimension Mason and Slack describe is the team in the small

market, which exploits government support instead of making business

decisions to mutually benefit all stakeholders, and in doing so further

burdens its primary stakeholder. This demonstrates a significant power

imbalance between a team and the community. Mason and Slack also

describe how relocation decisions by team owners undermine the health of

the league overall, which demonstrates how owners put their own profit

interest above the interests of both the league and the community (1997).

This behavior may make sense according to business and legal principles,

but per stakeholder theory, it is unethical. The opposite approach is

communitarian in nature; there’s a shared vision of common good and of

core values, cooperation is fostered, the sense of community is continuously


affirmed (perhaps through Boyd’s commemorative naming of places),

responsive and accountable government maintains the community, and

most importantly, leadership comes from every segment of society (Johnson,

2012).

Mason, this time writing with Ernest Buist, analyzed public discourse

around one stadium referendum. They found that the voices most heard in

the media were those of political and business elites and the media itself,

with little or no direct representation of private citizens (2013). Mark Andrew

articulated exactly Boyd’s description of the signaling effect of sponsored

naming, that sports are a business and fans are consumers. This indicates

that, from the sponsorship broker’s point of view, the primary stakeholder is

not the sports fan.

If a stadium is financed by both team ownership and public dollars,

then it could certainly be considered a public-private partnership.

Breitenstein and Roberts, writing on public-private partnerships, describe

corporations as “socially constructed entities, with socially constructed

property rights, playing a socially constructed game.” As such, they are not

merely entitled to a right to profit but may also reasonably bear other

obligations as co-constructed with their public partners (2002). This is where

a community benefits agreement has power. No such formal agreement is in

place, that I could find, for Target Field. This does not preclude the Twins

from acting in the interests of the community over their own profit, but it

does not require it, either.


While the end result of the construction of Target Field is a facility in

which Minnesotans take pride and enjoy for its tangible and intangible

benefits, the fact is the background conditions that led to the construction

and the public financing of the stadium still exist. The end does not justify

the means. Team ownership still holds leverage over politicians and business

leaders and over the hearts and minds of the community. Politicians and

business leaders are still the primary drivers of public narrative about

stadium funding. The business and legal environment still encourages team

owners to maximize profit at the expense of the league and the community.

The economic benefits of public stadium funding still skew in favor of the

wealthy and the costs still skew in favor of the lower- and middle-class.

Societal inequalities remain unchanged by the existence of a new stadium.

Consumers value environmental sustainability, and the environmental

sponsorship orchestrated by GreenMark has provided a community benefit.

But the corruptive nature of naming rights and the overall atmosphere of

commercialization has not been disrupted.


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Documents

The Ethics of Stadium Funding: Naming Rights Schemes and the Public Good