Should taxpayers pay for football clubs?

Q: I notice Coventry City Football Club has been involved in a long-running legal case to determine whether a £14.4 million Coventry City Council loan to the 32,000-seat Ricoh Arena operators ACL amounted to unlawful state aid. What’s all this about?
A: Coventry City was formed in 1883 by workers at Singers’ cycle factory and is now owned by a company called Sisu, which bought the financially troubled club in December 2007. Presumably, the company believed that the club could win promotion to the Premier League and would then start prospering. The club’s previous owners had sold the club’s old Highfield Road ground but then spent all the proceeds. So Sisu club rented the Ricoh stadium in Coventry, which is run jointly by Coventry City’s council with the Alan Edward Higgs Charity as Arena Coventry Limited (ACL). The council spent £14.4m of council taxpayers’ money building the arena. So all parties were satisfied with the arrangement: Sisu could afford the rent, the city got a revenue stream, and the citizens of Coventry got a club playing at a terrific brand new stadium. But things didn’t go according to plan and Sisu lost about £36m on players’ wages, transfer fees and other losses. Then worse: the club got relegated from the Championship. Then the £1.2m annual rent for using the Ricoh started to feel unaffordable and Sisu went back to the council to ask for a renegotiation. These took place with ACL and the Higgs charity, but no deal was done. Then in March 2012, Sisu said it couldn’t afford to pay the rent and just stopped paying it.  To stabilize the position, the council borrowed money to pay off ACL’s mortgage, effectively becoming ACL’s banker itself. Here’s where it gets complicated: Sisu actually sued the council, arguing it had acted illegally.  This claim was thrown out when the judge said Sisu “had caused rent to be withheld as a means of exerting pressure [on ACL] in their commercial negotiations”. ACL sued for the £600,000 owed; then, when Sisu still did not pay, applied for the club to go into administration. Sisu were by far the largest creditor due to the hedge fund millions they had put in as loans, and so were able to buy the club back from administration. Last year, ACL offered Sisu dramatic rent reductions, but Sisu refused and instead decided to move Coventry City to Northampton where it rents a smaller ground for its home games.
Q: Hang on! So Coventry City has been playing its home games in Northampton, which is 35-miles away?
A: Yes. And the fans have been boycotting them. With attendances plummeting from an average of 10,900 at the Ricoh Arena to 2,348 at Northampton, the financial losses are punishing. I hear the club has committed itself to playing at least two more seasons there.
Q: So the club will go under, right?
A: Not so quick: we’re now waiting for a legal decision that will determine the future of the club. Sisu have requested the judge orders another hearing to allow the club to seek damages from Coventry City Council. There’s just been a three-day hearing at Birmingham High Court to determine whether the £14.4million Coventry City Council loan to Ricoh Arena operators ACL amounted to unlawful state aid. Taxpayers could be hit with a bill for millions of pounds if the owners of the Sky Blues have successfully proved their case.
Q: But why should taxpayers get stung for the bill if the football club loses money?
A: Well perhaps they shouldn’t: if you think the club is just like any other business, it should stand on its own two feet. If, on the other hand, you think a football club is an organic part of the local community and contributes to the cultural life of the city, then you could argue that the residents should chip in.
Q: I’m guessing people who take the latter position would point to the jobs created by a football club, the tax revenues it generates and the civic pride it brings. Is this a legitimate argument?
A: Again, it depends on your perspective. In the USA, cities clamour for prestigious sports clubs and are often willing to build state-of-the-art stadiums and training facilities to attract them. And we’ve seen something like this in Manchester where the stadium built specifically for the Commonwealth Games was rented out to Manchester City at a knockdown rate. Nobody in Manchester has ever complained about this, presumably because the city has thrived and the club has won the Premier League title a couple of times. In fact, Manchester City are the current champions. You can imagine this row in Coventry wouldn’t be happening had the club gone from strength to strength. But it’s grown weaker. That’s happened in many American cities where taxpayers have discovered their hard-earned money has just been sucked into a black hole of debt. Aggravating the situation is the fact that the players, whether baseball, football, basketball or hockey players, all earn huge wages, whether the club loses money or not.
Q: I’m still not getting a straight answer from you. Should taxpayers contribute to a football club?
A: Sorry to be evasive. I guess my answer is: ask the citizens. We’re going to see a referendum in Scotland soon, so it seems logical to stage a vote among taxpayers for a direct decision. You could ask, for example, are you willing to have an extra £5 per week added to your council tax if we promise to spend it on the football club?
Q: A Sky Blues Tax?
A: Effectively, yes. You can’t assume everyone would vote in favour. Sport is popular, but maybe not as popular as we think. I mean, we all loved the London Olympics. But I wonder how we would have voted if, we had been asked in, say, 2002: are you prepared to pay £200 to bring the Olympics to London? That’s about what it cost taxpayers. I’d like Coventry to get its club back. I think the club has been part of the city’s identity and I can remember back in 1987 when the club won the FA Cup. But equally, I’m not from Coventry, I don’t live in Coventry and I don’t pay my taxes to the city; so I don’t count. I think it’s the responsibility of the club’s owners to run the club in a way that doesn’t lean on taxpayers. Equally, I think the Ricoh owners have to be realistic and realize that the club is struggling so badly that it needs an even bigger discount on the rent, even if only for the short term. One thing is for sure: the club can’t possibly survive for much longer if it continues to play its home games at Northampton. Fans are alienated already and are showing no signs of changing.                                                                                          Q: Knowing what a media whore you are, I’m surprised you haven’t been on tv talking about this subject.
A: Er, I’m afraid you spoke too soon. I’m on this week’s Sunday Politics at 11.00am on BBC One, Sunday 22 June 2014. Sorry about that.