Obama’s bond rules could slow stadium subsidies down, but it’s not going to stop them

So USA Today ran an article yesterday about the Obama plan to outlaw the use of tax-exempt bonds for sports stadiums, the proposal that was floated back in early February and covered here (and elsewhere) then. The article blew up all over social media, though, and you know how come? Clickbaity headlines, that’s how come:

Is Obama proposal the end of taxpayer-subsidized sports stadiums?

The answer: NO. Ian Betteridge, come collect your royalty check.

I’m not going to go over this all again (click the second link above for the full story), but the basics of this are: The Obama plan, which faces uncertain at best passage in a Republican Congress, would force sports team owners to use taxable bonds for stadium projects, rather than having cities sell federally tax-exempt bonds. This would close a major loophole that’s been allowing teams and cities to push off a portion of stadium costs onto the federal government — no more Red Sox fans having to help subsidize a new stadium for the Yankees! — and save the feds a few hundred million dollars in coming years. But taxable bonds work just as well for stadiums as tax-exempt ones; they’re just more expensive (by about a point and a half of interest, if I remember right), meaning teams and cities would just need to figure out how to raise more money to pay them off.

Now, is it possible that once federal subsidies are no longer available, more cities and teams will look at stadium and arena price tags and go, “Hell with that, let’s just stay in the old place”? Sure, maybe. But the Obama plan would be at best a moderate speed bump to stadium subsidies, not an actual roadblock.

13 comments on “Obama’s bond rules could slow stadium subsidies down, but it’s not going to stop them

  1. Well, to be fair to Obama, is there anything else he could do as head of the Federal government to help the situation?

  2. Sure — he could push for a huge excise tax on municipal subsidies to corporations, so that any company (or sports team) that gets $300 million in local money for a new building would have to turn around and pay most or all of it to the IRS. A Minnesota Congressman named David Minge proposed a bill to do just this years ago.

    Not that I’m expecting Obama would do that — if this plan probably isn’t going to make it through Congress, the Minge plan would have no hope at all. Obama’s proposal is a great low-hanging-fruit first step, and props to him for proposing it, but that USA Today headline makes it sound like the revolution is at hand, and it’s really not.

  3. Well, a “huge excise tax” just adds an unnecessary layer of government involvement. Easier to have Congress use the commerce clause of the constitution to ban the subsidies. They warp the free flow of interstate commerce, the reason state import taxes aren’t allowed.

  4. This article did not appear to make the print edition of USA Today either yesterday or today. Instead, there are some large articles in USA Today and the Dayton Daily News about Dayton’s economic impact with the first four – all “good”, of course. The taxpayers subsidize the money in college sports, as well, because we all know making college coaches rich is in the public interest. I hope the O’Bannon trial appeal going on today (mentioned in yesterday’s USA Today) has a positive impact ultimately for the public good.

  5. Keith: An excise tax would be more likely to hold up in court, though. The Commerce Clause is always dicey.

  6. One of the claims here in Sacramento is that instead of the City subsidizing a privately-held building, it’s actually a private company subsidizing a public building (never mind that the private company controls the building for 100% of its events).

    Wouldn’t that be a way around the proposed change? To say that the building is publicly-owned with a private company subsidizing the government’s building?

    (I’m not saying this is a privately subsidized public building, by the way. I think that’s a ludicrous claim, but this is, in fact, what they’ve told us.)

  7. No, because if the building is used more than 10% of the time by a private entity, it’s ineligible.

  8. Neil: Okay, you’re on. Let’s have Congress try both methods and see which gets by the Supremes ;)

    The sad thing is that some induhviduals would inevitably attack both as being “anti-business”.

  9. It made a difference in the past when tax exempt municipal bonds could be offered at significantly lower rates. Financing rates are so low across the board now that it’s irrelevant. The interest rate on GS’s 25 yr bonds for Levis stadium was 5%, it was only 2.19% on the 3 year $450 million loans.


  10. How about a federal law that reduces federal subsidies to any local government that finances professional sports stadiums by the exact amount the local government gives to the sports owner billionaires? If the local government can afford to give money to billionaires, surely they have already more than taken care of all the legitimate needs of its citizens, right?

  11. Scott: That wouldn’t stop the incentive for owners to demand subsidies, though. It would just double the cost of them to local governments.

  12. Neil,
    And doubling the cost to the local governments would put citizens ‘hair on fire’.

  13. Something to keep in mind: Even if this proposal passes, there will be very few proposed facilities that will be affected ( anything in Oakland comes to mind), because Stadiums and Arenas that have broke ground will not be impacted.