It’s been public knowledge for decades that the federal government spends billions of dollars subsidizing private sports stadiums through tax-free bonds for no good reason: Sen. Daniel Patrick Moynihan tried (and failed) to address it in 1986 through the Tax Reform Act and again ten years later, Congress has held hearings about it where myself and others testified, and President Obama has proposed eliminating the tax-exempt bond loophole in his annual budget.
Still, that’s not the same as a major think tank actually itemizing the cost to U.S. taxpayers of allowing tax-exempt bonds to be used for sports facilities: $3.7 billion since 2000, according to a new Brookings Institution study (full PDF here).
All together, the federal government has subsidized newly constructed or majorly renovated professional sports stadiums to the tune of $3.2 billion federal taxpayer dollars since 2000. But because high-income bond holders receive a windfall gain for holding municipal bonds, the resulting loss in total revenue to the federal government is even larger at $3.7 billion.
Those two numbers require a little explanation. When a stadium or arena is built with tax-exempt bonds, the bondholders don’t pay taxes (duh) on the bond payments. That means that they’ll accept a lower interest rate, so stadium builders get to save money on construction financing — about $3.2 billion worth over the past 16 years. But stadium builders can’t precisely enough calibrate interest rates to extract all that savings for themselves, so bondholders end up getting part of the windfall as well — about $500 million since 2000.
That $3.7 billion number is a whopping big figure, but the Brookings report goes on to itemize the cost for every sports facility built in the U.S. since the turn of the millennium:
Somebody at Brookings clearly understands how the media works, because a chart like this is crack for local journalists looking for a good news hook. Already this morning there have been stories in the Denver Post on the Broncos‘ federal subsidy (“shortchanged federal tax collectors by $54 million”), in the Pittsburgh Post-Gazette on that city’s three new venues (“The Penguins received the second biggest subsidy among National Hockey League teams, topped only by the New York Islanders at $122 million”), and in the San Diego Union-Tribune on the Padres‘ federal subsidy, and that’s just what Google alerted me to when I woke up.
Moreover, the study makes clear, these tax breaks have been provided for no real reason at all: Unlike local-level subsidies, which are dumb but at least if you squint can be seen as keeping the team in town or boosting the local economy a smidge or something, federal stadium subsidies don’t benefit the U.S. as a whole even one iota.
Decades of academic studies consistently find no discernible positive relationship between sports facilities and local economic development, income growth, or job creation. And local benefits aside, there is clearly no economic justification for federal subsidies for sports stadiums. Residents of, say, Wyoming, Maine, or Alaska have nothing to gain from the Washington-area football team’s decision to locate in Virginia, Maryland, or the District of Columbia.
Whether all this attention results in anything being done about the situation is another story: When Moynihan tried to pass a bill in the ’90s to rein in federal stadium subsidies, the New York Times reported that he’d been forced to “retreat under a hail of lobbying fire,” and matters aren’t likely to be much different today. (Obama’s budget plan to do the same thing never got seriously considered in Congress.) I’d like to say that maybe there’s a chance for change if the Democrats retake both houses of Congress in January — after all, their putative leader for the last eight years has declared that this is something that needs reform — but given sports leagues’ lobbying power with both parties, I’m not holding my breath. Still, drops of water turn a mill, right? Maybe one of these decades…