Buried deep in the hand grenade of a tax bill proposed by the House of Representatives is a clause that a lot of people have been waiting a long time for:
No tax exempt bonds for professional stadiums. pic.twitter.com/MkALqF8Uyn
— Phil Kerpen (@kerpen) November 2, 2017
To recap briefly for anyone who hasn’t been reading this site: In 1986, Congress tried to rein in the use of federally tax-exempt state and municipal bonds — basically a funding mechanism by which local governments can get lower interest rates by fobbing off some costs onto the federal government — by prohibiting their use for any projects where more than 10% of the use would be by a private entity, and more than 10% of the cost would be paid for with private dollars. The idea was to allow tax-exempt bonds for projects that genuinely needed the help — public parks, say — but preventing cities from just sticking federal taxpayers with part of the bill for private projects that could pay their own way.
To say that this failed would be a massive understatement. Local governments immediately started upping their public contributions to stadium and arena projects to keep the private share under that 10% limit — and where that wasn’t possible, they resorted to shenanigans like accepting private payments but pretending they were public tax money. The result has been $3.7 billion in federal subsidies to sports facilities since 2000, according to a Brookings Institution study; it’s this provision that has meant that Red Sox fans living in Boston helped pay for a share of the New York Yankees‘ new stadium.
Rep. Dennis Kucinich proposed prohibiting sports stadiums from using the tax-exempy bond dodge a decade ago, then President Obama did the same in 2015, then Senators Cory Booker and James Lankford did it earlier this year, and finally President Trump hinted at it (in retaliation for NFL players taking a knee during the national anthem) last month. But only now are we seeing actual legislative language for outlawing tax-exempt stadium bonds in a bill that might actually be passed.
Whether it will, in this form, is anybody’s guess: The House could still strip the stadium language before passing the tax plan, or it could be eliminated in the Senate version of a tax bill; you have to figure that sports league lobbyists are working the phones hard this morning. Even if it does pass, it won’t eliminate sports subsidies by any means — state and local governments will still be welcome to throw their own money at team owners, and they would almost certainly seek out loopholes by, say, trying to use tax-exempt bonds to finance all the parts of a stadium project not used for sports. (An attached food court isn’t really “used for games,” right?) But it would at the very least close a 31-year-old loophole that even the guy who wrote it into law wanted repealed, which would be a start, anyway.