It's best thought of as the city providing a huge subsidy to lure the team (or keep the team from leaving). In this vein it's akin to the tax credits and other kickbacks that companies like Microsoft or Ford get when they move to "lower tier" cities.
The exact nature of the transaction is different, but the net result is that it's part of the "package" that cities use to lure in a sports team in the same way they lure in businesses.
I'd never argue for my tax money being spent on such frivolous things, but if you think about this from an "up and coming" city perspective - especially in a place where professional sports are popular with the locals - you can understand why they might be willing to accept a loss leader on the hopes of some kind of nebulous "real city" cred that comes with having a team in town.
