What a great country.
In the midst of the worst economic meltdown since the Great Depression, Congress crafted a $700 billion bailout bill that, we were told, was designed to stem the bleeding in the financial markets and keep our 401K’s from morphing into 201K‘s.
But in keeping with political tradition, the bill that finally garnered enough support to become law included a number of provisions unrelated to Wall Street and our home mortgages. Buried deep in the fine print of the landmark legislation were provisions that benefited, among other special interest groups, the movie industry, toy-arrow manufacturers, and NASCAR. That’s right. Sports were front and center during deliberations that many lawmakers claimed were the most significant and difficult of their careers.
It would be nice to think the pork barrel provisions were what caused the House to reject the bill on its initial vote. But that would be too idealistic. In fact, the reverse is probably true: Lawmakers only came around to support the bill after it had been sufficiently larded up.
The tax break to NASCAR is estimated to be $140 million, which won’t make much of a dent in the $700 billion taxpayers are on the hook for. Technically, the legislation provides a two-year extension of a statute that allows motorsports racetracks to depreciate their investment at a faster rate, over seven years instead of 15. Track owners will have less taxable income in the early years, which will result in paying lower taxes. In theory, postponing taxes means more money is currently available for investment, which is how the provision was sold to lawmakers.
The biggest potential beneficiary of the bill appears to be International Speedway Corporation (ISC), owner of 12 tracks - including the Daytona International Speedway - that host 19 Sprint Cup races. An ISC spokesperson told USA TODAY the company has plans to spend $80-100 million on various tracks in each of the next two years on such things as lights, which would allow tracks to hold night races.
ISC, although a publicly traded corporation, is controlled by the France family which is also the company’s major shareholder. The Frances – both branches of the family – are billionaires. But, hey, even rich people need tax breaks. And politicians like nothing better than to sidle up to sports owners.
And who could blame NASCAR for bellying up to the trough? Times are tough throughout the sports world, and motorsports is no exception. NASCAR has had a rough year, and the signs don’t bode well for a quick turnaround. The high cost of gas – not to mention tickets – has resulted in thousands of empty seats at previously sold-out tracks. By some estimates, attendance at the October 5 Talladega race was 50,000 less than previous races at the famed track.
Sponsorships for car owners are becoming more difficult to obtain. At $20-30 million annually for a primary sponsorship, corporations are thinking twice about the benefits of motorsports as traveling billboards.
NASCAR’s biggest supporter, the automobile industry, has been one of the hardest hit segments of the economy. In an effort to stave off bankruptcy, General Motors is reputed to be engaged in merger discussions with Chrysler after being rebuffed by Ford last summer, according to The New York Times. Any consolidation of Detroit automakers will have negative implications for NASCAR.
Even Toyota, which entered Cup racing just last year, sent an ominous message to the motorsports industry. Toyota Racing Development President & GM Lee White recently told ESPN.com, “Our racing budgets are being reviewed and certainly are not being increased. A lot of our special racing projects are year to year, and those are under review.”
Given the bleak economic picture prevailing in motorsports, any help – even a handout from taxpayers – was welcome news at ISC corporate headquarters. Whether the accelerated depreciation rules will aid the failing economy is another matter.
They say you should never watch laws or sausages being made. Having been present for the birth of both, I’ll take the sausages. The initial view in both instances can lead to heartburn, but there’s less indigestion from eating a sausage than there is in the aftereffects of laws. And sausages definitely taste better at a sporting event.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at email@example.com.