December 07, 2009

Blue Jackets bailout: What would taxpayers get?

It must be nice to be a sports team owner. If you're a normal person facing bankruptcy, it's not all that likely that the mayor of your town will hire a special consultant just to figure out how to give you enough money to keep you afloat. But if you're the owner of, say, the Columbus Blue Jackets, that's exactly what you get:

John Rosenberger, the former executive director of Capitol South Community Urban Redevelopment Corp., will lead an effort to shore up the finances of the Columbus Blue Jackets by reworking the hockey team's relationship with arena owners, Mayor Michael B. Coleman announced. ...

A report issued last month by the chamber listed about two dozen options -- the most likely involving public money -- to resolve structural problems with the lease that have contributed to the Blue Jackets' estimated losses of $12 million a year.

Leaving aside whether an NHL franchise really falls into the category of "too big to fail," the prospect of a Blue Jackets bailout raises some other familiar concerns. For one thing, is there a risk of moral hazard if sports teams can go into arena projects with unworkable finances, figuring, "Hey, if we're losing money once the place is built, we can always get the government to renegotiate our lease later"?

A bigger question now, though, might be: What, if anything, will Columbus get in exchange for any money it pours into the Blue Jackets' coffers? If the team doesn't have money to spare, the next most likely thing is equity — if the U.S. can become part-owner of AIG and General Motors, there's no reason Columbus can't demand a share of the Blue Jackets in exchange for any bailout money. And unlike the federal government, they already have plenty of experience in such things...