Back in early December, Sportico’s Brendan Coffey reported that nearly 4,000 sports-related businesses had received “more than $1.7 billion through the federal government’s Payroll Protection Program,” including 473 teams, conferences and halls of fame. The PPP money was part of the record $2 trillion CARES Act stimulus package Congress approved last March. With President Trump having recently signed a second COVID-19 relief bill—this one worth $900 billion—we spoke to a pair of economists as well as the CEO of the Sports Events & Tourism Association to find out how the latest round of government aid is likely to affect the sports ecosystem.
Our Take: To be clear, the legislators behind the CARES Act didn’t intentionally set out to prop up the sports industry. The original PPP loan program was a “huge multibillion-dollar program designed and implemented in less than six weeks,” said Victor Matheson, a sports economics professor at College of the Holy Cross. “It was meant to be fast rather than accurate.” That helps to explain how the Pittsburgh Penguins, a trio of MLS clubs (Washington D.C., Seattle and Orlando) and several large motorsports teams (including Richard Childress Racing, Chip Ganassi Racing and Roush Fenway Racing) all managed to take in millions of dollars designed for small businesses.
Congress’ decision to prioritize delivering financial assistance quickly over taking the necessary time to safeguard against the undeserving claiming funds certainly contributed to the vast number of teams, athletic conferences and halls of fame that have collected PPP money to date. But the lawmakers’ “extremely broad definition of what it means to be a small business” (i.e., under 500 employees) was also a factor. Remember, despite their billion-dollar valuations, even the most robust pro sports organizations employ fewer than 500 people on a full-time, year-round basis.
Sports organizations are going to find PPP money harder to come by the second time around. Last time, Congress was “extremely generous with who qualified,” said Matheson, noting that all a company really had to do was declare a need for the support. The latest bill limits federal aid to companies with under 300 employees that are capable of proving a year-over-year revenue decline of at least 25% during the first, second or third quarter of 2020.
But that doesn’t mean the latest pandemic relief bill won’t have a positive impact on the sports world. Like the original CARES Act, the $900 billion stimulus package includes the weekly enhancement ($300 a week through March 14) and extension of unemployment benefits (the Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation programs)—both of which are beneficial to those who earn their living in sports. “Anything that keeps consumer spending up, like the stimulus checks, is a big deal [for sports-centric businesses hurting for revenues],” Matheson said. “And the [extended] unemployment benefits provide a real lifeline for the huge number of people that have lost their jobs within the live entertainment sector, because those jobs haven’t come back in any significant way and aren’t going to come back for the next several months at a minimum.”
Matheson suggested that widespread immunity would be the ticket to jobs within the live events sector returning. So, the fact that the legislation includes $20 billion for the purchase of vaccines and another $8 billion for their distribution is positive news for businesses tied to sports. As the sports economist said, “We’re not getting back into packed 50,000-seat stadiums until a large portion of the population is vaccinated.” And many of the jobs lost won’t return until the fans do.
In the original CARES Act, entities formed as 501(c)(3)s were entitled to Payroll Protection Program funds. But the convention and visitors bureaus which stage youth events and bring marquee sporting events to town—typically registered as 501(c)(6)s—were excluded from the legislation. “As a result, 60% of destination management companies and convention and visitors bureaus were forced to lay people off,” said Sports Events & Tourism Association CEO Al Kidd. “And when we’re talking layoffs, we’re talking from 35 people down to two.” With 501(c)(6)s entitled to payroll relief this time around, CVBs will be able to rehire their staffs and start to rebuild their events pipelines with everything from AAU tournaments to bowl games. (Of course, they can’t begin hosting events again until their respective states say so.)
Stadiums and arenas, largely excluded from the original CARES Act, are also covered in the latest stimulus package. The bill includes a $15 billion grant program specifically for live venues that have lost at least 25% of their revenues to the pandemic.
The $900 billion bill includes $82 million for schools—and any money that makes its way to higher education will inevitably benefit collegiate athletics, said Matheson: “All money is fungible. Even if you say, ‘Hey, this is money for the English department,’ that really is money for the athletic department. Because if [a school] no longer needs to fund their English department [thanks to] this new funding stream, the money that would have been spent on the English department can be redirected.”
One final sports-related note: A provision within the 5,593-page bill assigns the U.S. Anti-Doping Agency with the task of regulating the thoroughbred racing industry (effective July 2022). The Horseracing Integrity and Safety Act is meant to clean up a sport fraught with doping and cheating.