The Wealth Gap and Miller Park’s Deal

Pro sports has become a key driver of the wealth gap in America, but you would never know it from how the press covers the industry. 

A case in point is the recent news that Miller Park will get a new name, because American Family Insurance has won the naming rights to the stadium from MillerCoors. Miller had paid $40 million to the Milwaukee Brewers for the rights for 20 years, through the 2020 season, but American Family made an offer for 15 years that will apparently pay far more per year. A spokesperson for MillerCoors called it an “incredibly rich” offer. 

Yet American Family CEO Jack Salzwedel cried poor, telling the media his company lacks the “mega-advertising budget of other large insurance companies,” but saw this as a unique opportunity.

In reality American Family, a once modest company, has been growing like Topsy in recent decades. The Madison-based insurance firm now ranks number 311 on Forbes list of the top 500 companies, with $9.5 billion in revenues and $156 million in profits. And the key to that growth is its agents. As the company’s website noted, “its sales force of nearly 3,500 agents provide industry-leading service to customers… No matter how life changes, your American Family agent will be there, providing the caring support and dependable service you deserve.”

But beginning in the mid-1990s the company began squeezing the compensation of agents, cutting their commissions while handing fat raises to its executives, as I’ve previously reported. This trend continued, and by 2014 company’s top 10 officers earned $23.6 million, led by top dog Salzwedel with $8.1 million. Salzwedel’s pay that year was 12-times higher than the company CEO earned back in 1994.

“We are totally startled at the HUGE increases the AmFam officers took for 2014. Absolutely FLOORED! “wrote an analyst for the NAAFA, which represents insurance agents nationally. “The average increase for the top ten officers was 27.81%. …Our top ten officers cost the company 34.4% more in 2014 than they did in 2013.”

By 2017, the company’s top 10 executives were getting $26.8 million in compensation, led by Salzwedel’s $9.6 million.

Meanwhile the company was not providing any retirement benefits for its employees. In April 2017 a jury found the company had violated the federal Employee Retirement Income Security Act and owed some $1 billion to 6,978 current and former American Family agents across the country, including about 700 based in Wisconsin.

“This plan offered a lifetime annuity, and was described to the agents as a retirement plan” and as a “defined benefit,” as Federal Judge Donald Nugent wrote. Yet as Milwaukee attorney Erin Dickinson told Urban Milwaukee, the company hasn’t put “a dime” into the plan. 

American Family claims the agents it touts as so critical to the company are actually “independent contractors” who needn’t be paid these benefits. But Dickinson noted they are “captive agents” who cannot shop around for insurance from other companies for their customers, and can only sell American Family policies.

In August 2017, four months after the jury’s decision, Judge Nugent affirmed its conclusion, ruling that the company’s agents are employees and not independent contractors. The case is now being appealed to the U.S. Court of Appeals for the 6th District. 

No one knows how much American Family is paying the Brewers for naming rights. It will likely be much more than the $2 million per year Miller paid and much less than the $10 million annual payment the Atlanta Braves get for their park. Odds are it’s at least $60 million for 15 years, but that’s a drop in the bucket compared to the estimated $1 billion in retirement benefits that American Family’s agents were denied. 

Some may argue this is capitalism at work, but the payment is really part of an ever-growing form of monopoly capitalism. Here’s how it works: Pro sports leagues are monopolies that threaten to move and thereby blackmail cities into providing tax subsidies paid for by average taxpayers to enrich (mostly) millionaire ballplayers and billionaire owners.  

In the 1990s, when Miller Park was being built, the legislation specified that $250 million would be spent for construction, with $90 million coming from the Brewers. But it turned out the Brewers couldn’t come up with any money, so there was a scramble to throw in more money, with $15 million coming from the city’s Milwaukee Economic Development Corporation and the Bradley Foundation chipping in as well.

Ultimately the stadium cost taxpayers in excess of $1 billion when all the tax subsidies and giveaways were included, and the Brewers paid nothing other than the $40 million in naming rights from Miller, which was really money the taxpayers should have gotten, as they paid for the stadium.

The stadium has been paid for by a five-county sales tax that was initially supposed to sunset as early as 2010, but has gone on and on. It is now supposed to sunset by 2020 which sounds like the tax subsidy will end. But really it has just been pre-collected: the public stadium authority has been building a reserve fund that was up to $52 million by 2016 and has probably continued to grow since then. This will help assure that tax money will continue to subsidize the stadium’s operations through 2040. Meaning the new naming rights deal from American Family will be for a stadium paid for by taxpayers and whose annual maintenance costs are heavily subsidized by them. 

The sales tax is a regressive tax that falls hardest on the poor and lightest on the wealthy. Yet the new stadium is all about the rich. County Stadium was the old fashioned ballpark with lots of plain ordinary seats, whereas Miller Park, like all pro venues, separates people by class with the luxury suites for the rich. These new pleasure palaces for the plutocrats are paid for by average taxpayers, with the newly generated revenue helping subsidize the salaries of wealthy ball players and the net worth of an owner like Mark Attanasio, currently estimated at $700 million. Attanasio may have a few money-losing years, but will ultimately sell the team at a massive profit, with the local tax subsidy accounting for much of the value, along with naming rights contracts from companies whose average employees continue to fall further behind the executive suite in earnings.  

For those keeping score on corporate naming rights, the latest news may tell us that MillerCoors is increasingly focused on its other “home” office in Chicago, with Milwaukee becoming increasingly less important to the company. The bid by American Family — and its plan to build an office building in Milwaukee — shows it is broadening its footprint in Wisconsin. 

But those are small changes in the far bigger story of America’s continuing wealth transfer from the poor and middle class to the super rich. In every locality with the vaunted designation of a Major League City, the cost is high and the biggest beneficiaries are the wealthy.  

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