House of Cards, Eminent Domain, and the Ghost of Bob Irsay
One of the biggest and most controversial issues that has faced the General Assembly this legislative session has been tax credits for television and film production. The major player in all of this of course is House of Cards, whose production team has been pulling out all of the stops in an effort to extend and expand the tax credit.
Delegate Bill Frick, with hs profound respect for property rights, snuck an amendment into the tax credit that actually allows the state to seize the assets of production companies that leave the state:
The amendment does not actually mention “House of Cards.” It simply states that the Department of Business and Economic Development “under certain circumstances” can “exercise certain powers of eminent domain” to acquire the property of a film production company that has claimed more than $10 million in tax credits and then ceases filming in the state.
It’s interesting of course that the House of Delegates railroaded this amendment to the tax credit through this particular week. Because this week in history shows where threatening the use of eminent domain can go wrong.
Thirty years ago today, residents of Baltimore found themselves heartbroken. The dastardly Bob Irsay had move their Colts out of town in the middle of the night, hoping that nobody would notice the Mayflower trucks packing up their gear and heading west for Indianapolis. And as my colleague Mark Newgent wrote about several years ago, one of the reasons that the Colts left when they did was because of the threat of….eminent domain.
Mark quoted report which has this to say on the subject:
One final, emotionally wrenching example of the consequences of Baltimore’s reflexive use of eminent domain merits mention: the March 1984 departure of the city’s beloved Colts, winners of three National Football League championships from the late 1950s through the early 1970s. By the 1980s, however, the team had fallen on hard times, posting six straight losing seasons from 1978 to 1983. Fans blamed owner Robert Irsay for being tightfisted with the team payroll and generally incompetent; both charges were doubtless true. Irsay pointed at a city-run stadium that was below league standards in revenue-generating potential, another undeniable fact. He alternately begged local public officials to build him a state-of-the-art facility with taxpayers’ money and threatened to move the franchise to other cities that would. At various times, Memphis, Indianapolis, Jacksonville, Los Angeles and Phoenix all played roles as leverage-enhancing suitors.
In the dead of winter, 1984, this sordid drama reached its climax. Indianapolis had built an $80 million domed stadium without any tenant; desperate, the city offered Irsayirresistible rental terms that included a subsidized loan, attendance guarantees, and a free practice facility. Irsay also met with Arizona Governor Bruce Babbitt and Phoenix officials and pocketed a similar offer. Recognizing that this time the Colts’ owner probably was not bluffing, Baltimore Mayor William Donald Schaefer partnered with officials from the surrounding county and Maryland’s economic development agency to put together a stadium package that met all of Irsay’s demands. They even sweetened the deal when they learned that Indianapolis and Phoenix had upped their bids.
But Irsay did not feel triumphant. The problem was that while some Baltimore pols were offering him gifts, others were threatening to take the Colts away from him. On March 26, 1984 (the day after Mayor Schaefer pitched the city’s improved offer to Irsay), two bills were introduced for study in the Maryland legislature. One called for the state to buy the team and sell it to local investors for $40 million—about $83 million in today’s dollars, or less than a tenth of the franchise’s current estimated value. The other authorized the state to use eminent domain proceedings to condemn the team and operate it “in the public interest.” Such proposals would have made any property owner nervous, but they should not have been a surprise. Over the previous couple of decades, Baltimore’s habit of taking private property—often on the cheap—had taken firm root. Invoking a public interest in seizing a football team (which, after three consecutive last place finishes, was clearly a “blighted” property!) struck few leaders or pundits as outrageous or even an unusual exercise of government power. On March 27, Maryland’s Senate passed the second bill. It was like a gun to Irsay’s head.
The Colts were unlike previous targets of eminent domain seizures, however. Owners of bricks-and-mortar properties could only complain and litigate when confronted with condemnation threats; the Colts could get their assets out of town. And so they did. The very next day after the Senate voted, on the evening of March 28—Irsay had worried that if the move began during business hours officials would hurriedly finalize the legislation and obtain a court order to padlock the team’s rented offices—moving vans arrived and staffers packed up contracts, medical files, uniforms and other equipment. Under cover of darkness and with snowflakes swirling among a few somber onlookers, 22 vans rumbled away from the Colts’ rented facilities; by dawn, everything associated with the team was well down the highway to Indianapolis.
Baltimore hurriedly played its eminent domain trump card, but it was too late. On March 29, Maryland’s House of Delegates passed and Governor Harry Hughes signed the pending seizure legislation and city officials wired a $40 million purchase “offer” to Irsay. On March 30, the city filed a formal condemnation suit. A year and a half and $500,000 in legal fees later, U.S. District Court Judge Walter E. Black, Jr. ruled that the Colts had moved beyond Baltimore’s legal reach by the time the city had formally begun its seizure proceedings. Ever since, the Irsay name has been an expletive among Baltimore football fans. A local treasure had been stolen under cover of darkness, and anger was directed almost entirely at the thief. Little thought was given—then or now— to the repulsive power of eminent domain and other threats to the security of private property rights in the city. In the view of most policy- and opinion-makers, the episode was a tragic anomaly. Because the targets of such seizures are almost always immobile, their assets can be taken without much controversy and converted to “better” uses—case closed.
Thirty yeas later and the ghost of Bob Irsay lives…
Now of course House of Cards and other film productions do not have the cache or the historical association with the state of Maryland that the Colts did. But the story of the Colts and how they picked up and left town in a hurry when faced with the threat of eminent domain should serve as a historical warning for members of the General Assembly. Bill Frick clearly does not know his history when it comes to the General Assembly attempting to abuse their powers in this area, and clearly is ignorant of the harm that can be done when the state tries to throw its weight around in places that it doesn’t belong.
Clearly the folks at Media Rights Capital, the producers of House of Cards, know the stakes and they know how this game is played. They also know that they are in the business of making money and making sure that their investments and assets are protected. While it is unlikely that Frick’s Amendment is going to surivive the State Senate, the fact that such an amendment can be passed by voice vote in the House should be a warning shot to Media Rights Capital and other production companies that their assets may not be safe here. What Frick may have accomplished is ensuring that film and telvision production work goes elsewhere instead of Maryland, which will of course bring about fewer jobs and fewer economic opportunities for those businesses who work with these production companies.
Hopefully Democrats will learn their lesson this time around.