Rapper Jay-Z Gets Major Criticism for Taking Homes to Build Stadium

I curiously watched the press conference held last week to celebrate the New Jersey Nets (well, not quite New Jersey anymore) stadium set to be built in Brooklyn. A group of investors, led by Bruce Ratner, were joined by many prominent New York public figures to celebrate the ground-breaking of one of the highest impact economic endeavors in the history of Brooklyn. Jay-Z is part of the group of investors who bought the Nets, so of course he attended the ceremony.

The excitement of bringing a professional sports team to a city is overwhelming. Teams can bring out a sense of community spirit and unity which ultimately helps provide a little meaning in a complex world. Cities compete to bring teams to their town because the fans want them. Cities give teams extensive tax subsidies and even offer to use eminent domain to take property away from residents who are not willing to sell their homes in order to have the stadium built. Sounds terrible, doesn't it? Well, sometimes it can be.

When I was asked whether or not it's a good idea for Jay-Z, Ratner and their investment group to build the stadium in Brooklyn, my response was simple: It depends. Should the government give subsidies or be allowed to use eminent domain to take over the property of residents who don't want to sell? Again, it depends. What does it depend on? Let me count the ways:

1) City governments give up a great deal of money in order to obtain professional sports teams: Government subsidies can make sense, given that investment must be made in order to improve the long-term tax base for the city. If the subsidies exceed the amount of the revenue increase, then you've got a problem. The truth is that many cities overpay for professional sports teams, mainly because residents are incredibly irrational about the idea of having a team in their city. A pro sports team is a tremendous source of pride and excitement, leading some cities to make nasty deals with the devil.

2) Eminent domain might be necessary to use in some cases, but is now in danger of being abused: Whether we like it or not, eminent domain can be a good thing for a community. When massive projects are underway, there are always going to be some residents who choose to hold out no matter what. If they are standing in the way of progress, an argument can be made that the resident should be paid for their home and asked to move for the benefit of the community. The big problem, however, is at least two-fold. First, residents are not always paid fair market value: Jay-Z and his investment group have been accused of taking advantage of eminent domain in order to buy homes at below fair market price. The second problem with eminent domain is that private business interests, such as this one, can use eminent domain (through city officials) to maximize their own profits. It's one thing if eminent domain is being used to build a school, courthouse or non-profit entity. It's another thing when it's being used to build a for-profit business that will help the rich get richer and kick the poor out into the street. In that regard, Jay-Z has a serious image problem, as even I am trying to determine if he is good for urban America or not.

3) Pro sports teams are not like other businesses: You see, the NBA, NFL, NCAA, NHL, etc. are not like other businesses. They have a tremendous amount of oligopolistic power supported by the federal government. You can't just create an NBA team in your city and find your own players. You have to buy one of the few teams available from the league and they have to choose you. This creates an imbalance of supply and demand, since there are fewer teams available than there are cities that want them. Teams take advantage of this imbalance by playing the cities off each other, and the winning city can become the big financial loser. Whether the city of Brooklyn wins or loses in the Jay-z/Ratner/Nets deal will depend on the degree of diligence public officials and community leaders have when it comes to monitoring the return to the community from the presence of this team.

4) Is Jay-Z really a player in all this or is his urban following being used to persuade city residents? Some have argued that Jay-Z is part of this investment group for strategic reasons. They claim that his name and face are being used to lend credibility to those who might be skeptical of a pack of wealthy white guys coming in and buying up homes from poor people on the cheap. The critics are probably right on some level. The truth is that Jay-Z's visibility is certainly a valuable asset that will help the group achieve it's objectives. Additionally, there is the added risk that Jay-Z is yet another urban icon used to convince the public to do something they don't need to do, similar to Montel Williams selling payday loans, Magic Johnson's Rent-a-Center commercials and Russell Simmons' sale of the Rush Card to those who don't have bank accounts. I am not sure if Jay-Z is being manipulated or not, but I am hopeful that if his image is being used to convince people to support this project, he and other guardians of the community do not open the door for mass exploitation in exchange for personal gain. That would put Jay at risk of becoming yet another slum lord.

Do I think Brooklyn should get an NBA team? Sure, why not? I like sports and I don't blame residents who are excited about this project. Additionally, government and business interests become risky, yet necessary bedfellows in a capitalist society. If this project works out well, it certainly may help the city in the long-run. Simultaneously, for those who are in love with the idea of Jay-Z and Ratner bringing this team to Brooklyn, it is important to remember that many professional sports teams have financially violated the residents of cities across America. Citizens are on the weak side of the negotiation, since the residents have far more loyalty to the team than the owners have to the city. So, if Ratner and company hold the city hostage for more money in a few years, the citizens of Brooklyn will only have themselves and their elected leaders to blame.

The Jay-Z/Ratner/Nets saga is to be continued. We won't know if this was a good decision for another 10 years.