U.S. government losing estimated $4B from tax-exempt stadium bonds

In Stadium Building Spree, U.S. Taxpayers Lose $4 Billion” is the headline in today’s BloombergBusinessweek, which is one of those headlines that leaves more questions than it answers. Stadium building spree over how long? Lose $4 billion over how long? Is that how much money the public is putting out, how much it’s putting out without getting back, what?

None of the above, it turns out. The $4 billion figure is actually total tax revenues lost to the federal government because of the use of tax-exempt bonds on sports facilities, according to Businessweek. Since 1986, $17 billion in tax-exempt bonds have been issued for stadiums and arenas, they report, costing the U.S. Treasury $146 million a year, or a total of $4 billion by the year 2047.

But, of course, tax-exempt bonds are usually only a small part of stadium subsidies, as most buildings also get other tax revenue, property tax breaks, and the like to pay off their construction debt. There’s no good summary of how much all this amounts to — at least not until Judith Grant Long finishes writing her damn book, hint hint — but counting minor-league stadiums and hidden subsidies, it almost certainly amounts to more than $1 billion a year.

Still, knowing that the U.S. Treasury is out $146 million a year solely from the use of tax-exempt bonds for stadiums — something that Congress tried to eliminate in 1986, but ended up leaving a giant loophole in — will come in handy for testimony next time Congress holds one of these. Not that I’m holding my breath.

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19 comments on “U.S. government losing estimated $4B from tax-exempt stadium bonds

  1. Oooo, but look at all the stimulus those stadiums and arenas produce.

    I actually said that with a straight face.

  2. Mike, I don’t think we should discount the economic impact in certain sectors… divorce lawyers for the extraordinarily wealthy, Bentley dealerships, and the incredible growth in low paying part time seasonal concession company McJobs.

    The stadium tax exempt bond rulings may have produced many construction jobs (which do have an impact), but aside from that short term benefit for the relatively few, they represent an incentive that enables massive tax revenue transfers from ordinary tax paying Americans to the extraordinarily wealthy.

    Mission accomplished. I guess.

  3. So how much have the local taxpayers lost through stadium subsidies, across the country? Isn’t that more than what the Feds have lost on interest? How much have local communities lost in property taxes through giving property tax breaks to stadiums, or by owning the land under the stadiums? I suspect that amount in total is more than what the Feds have lost from tax-exempt bonds.

  4. This leads one to wonder if professional sports leagues are nothing but the front groups for arena/stadium development corporations, wealthy tax avoiders, and financial sector corporations.

    An Arena/Stadium Industrial Complex.

  5. Now what are the rules for issuing tax exempt bonds? I read on the Fidelity website a couple years ago that stadium debt is not [generally] tax exempt because it isn’t considered as benefitting the greater [public] good–like a bridge or airport or community college.

    Maybe we shouldn’t complain too much though. A shiny new arena is probably more fun and useful than a B-1 bomber.

  6. The 1986 Tax Reform Act set up a “10-10” test — if more than 10% of the bonds are for a private business use, and more than 10% of the bond payments are from a private source, then it’s not eligible for tax exemption.

    Unfortunately, municipalities immediately responded to this by reducing the amount of money coming from the teams to less than 10%. Who’da thunk it?

  7. $4 billion? That’s about how much the national debt goes up in a single day. (not that I’m favor of stadium subsidies, I’m just pointing out that it’s not much in the grand scheme of things these days)

  8. Neil,
    So if most of the $950 million in Stadium Authority loans for the 49ers stadium in Santa Clara need to be refinanced when the loans come due in 2 years (and even the pro-stadium SJ Merc thinks that $600 million -700 million will need to be refinanced, that psl’s and naming rights won’t bring in more than $250 million to $350 million), what does this mean in terms of refinancing with bonds? Will they try to stick the SA with the bonds to attempt to make the bonds tax-exempt? What do you think will happen? BTW state law specifically allows voters to have a referendum when a city or its agencies issue bonds.

  9. And with people running for 3 open Santa Clara city council seats right now, not one of the candidates running for office has addressed the issue of the $950 million in loans that will come due in 2 years.

  10. What does it say in the bond prospectus? Somebody has to be committing to pay off the short-term paper, right?

  11. Prospectus? Is such a document available? Yeah, what happens if there isn’t enough money for refinancing loans? I mean it’s a realistic possibility, yet there’s no discussion in the council campaign.

    Side note, a member of my department has a hairdresser whose husband is a plumber who was working on the stadium more than full time most of the summer. The hairdresser reports that work on the stadium has come to a halt for some reason now.

  12. ^^^^^^
    Lets all hope that the “new” Santa Clara Stadium has hit a major logistical hurdle at the site, and can’t be completed by the douche-bag Yorks…smh. I’ve heard once that the labors already hit Salt Water in building the York’s Palace of Doom.

  13. Neil – there is no ‘bond prospectus.’ The people here haven’t been told how the short term construction loans will be paid off. And no one running for city council has any answers. Look at their websites – not one candidate even addresses the stadium loans as an issue. And current council members aren’t talking about it.

    I think they’re planning two years from now when the loans come due to all hold hands and sing ‘Kum-ba-yah’ and hope that manna falls from heaven to pay off the loans.

    I’m actually serious. They. Have. No. Plan. There is no bond prospectus (at least there’s nothing that’s publicly available. Our city council tends to operate in secret behind closed doors on stadium issues, hiding behind the Brown Act ‘lease negotiation’ clause. The ‘lease negotiation’ clause has been used to negotiate all sorts of stuff unrelated to an actual lease- including the SA’s $950 million in construction loans for the stadium.)

    And they wouldn’t allow the people here the chance to vote on whether or not it would be a good idea for a city agency to take on $950 million in loans for a NFL stadium. FPPC political committee filings for the Yes on Measure J 49ers stadium Santa Clarans for Economic Progress (funded by Jed York) show that the 49ers spent $94,000 trying to stop people here from even signing the petitions. Failing that, after the petitions were certified by the Registrar of Voters as having enough signatures to give us the right to vote on the loans, the 49ers took the people of Santa Clara to court to once again deny us the right to vote.

  14. When the 49ers took the citizens to court a judge (who lives in upscale Los Gatos) cheerfully agreed that any deviations from what was in Measure J were merely “administrative” and hence no re-vote.

    I conclude having a white, male, middle aged judge who grew up in the area and who probably has good memories of the glory years is really an ill omen if one gets to rule on 49ers issues.

    That said, I think the 49ers could have easily bought another election in
    Santa Clara (whose voters will not strike anyone as being an especially astute group).

  15. Okay, so going over the documents again, it looks like we won’t know how the new 2015 bonds will be repaid until they get sold, i.e., closer to 2015. It won’t be $950m, though — the short-term loans are just $450m, so the amount that needs to be refinanced is just that less whatever is paid off by naming rights, etc. Could still be a significant “just,” though.

  16. Neil – The DDA said $850 million in loans split into $450 million and $400 million – one of which funnels through Stadco. Then 3 months after they passed the DDA, the council added another $100 million, so the total the SA is responsible for is now $950 million, all of which will need to be paid off somehow.

    Recall that the Term Sheet anticipated $330 million in loans or bonds from the SA, and the 49ers together with our pro-stadium council members successfully kept that amount off of the ballot, probably fearing that people would vote ‘no’ if they saw that amount of debt. And the 49ers and our pro-stadium council members working for the 49ers campaign (and former council members who were at the helm of that campaign, and are now back on council) put out a false pie chart of costs that showed the 49ers paying for 88% of the stadium construction costs. The SA didn’t even appear in that false pie chart.
    So much deception plus $5 million from the 49ers to get this ballot measure passed, the taking away of our right to vote on letting the 49ers override our city charter, the purposeful hiding of the SA loans by keeping them off of the ballot materials, suing of the Santa Clara people to deny us the right to vote on the loans, and the closed door dealings to sign the SA up for $950 million in loans, does not bode well for our city. If this was a good deal for us, there would have been no reason to hide information from the voters and pull a bait and switch after Measure J passed.

  17. These facilities seem to always be pushed by scoundrels, and there always seems to be backroom meetings with government.

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