Now that we’re all finally starting to come to grips with the presidential election ending in a landscaping company parking lot because Rudy Giuliani wanted to be away from jeering crowds and near an on-ramp to the highway back to New York, no doubt many of you are wondering: What, if anything, will the end of the Trump era mean for sports stadium subsidies? Or if you weren’t before, you are now, since literally the last words you read were those exact ones, in the headline that I just typed.
The answer, in all likelihood, is not much. Oh, sure, there may be dramatic changes in some federal policies impacting spending — for starters, a Biden Administration is far more likely to bail out local governments suffering from Covid-spawned deficits than a second Trump Administration would have been, meaning the trains may keep running. But public sports venue spending is mostly a local game, and it’s surprisingly resilient to ups and downs in local government finances: When times are flush, team owners argue that it’s a good time to spend on stadiums because taxpayers can afford it, and when times are tight, they argue that it’s a good time to spend on stadiums because the economy needs a boost.
The main way that the federal government underwrites private stadium costs is with tax-exempt bonds, which save team owners money by allowing them to get low interest rates on construction debt, at the expense of the federal treasury forgoing collecting income taxes on money earned by bondholders. Congress, realizing it was dumb for the IRS to let cities and states stick the feds with part of the bill for their stadium spending, tried to eliminate this loophole way back in 1986; that effort failed, spectacularly. Ever since then, the tax-exempt bond scheme has chipped in federal dollars on top of local dollars for the vast majority of stadium and arena deals — when the Brookings Institution last looked into how much this was costing, it determined that federal taxpayers had lost $3.7 billion just in the years 2000 to 2016 thanks to tax-exempt bond subsidies for sports venues.
There have, over the tax law’s 34-year history, been sporadic attempts to close the loophole; none have made it very far. Back in 2015, Barack Obama proposed prohibiting tax-exempt bonds for any building whose use would be more than 10% private (currently projects can be less than 10% in either private use or in private financing, which leads to tons of shenanigans); the then-Republican Congress wanted nothing to do with his proposal, and it withered and died. Two years later, as part of its 2017 tax bill, the still-then-Republican House of Representatives included a provision for eliminating tax-exempt sports bonds; the Senate version didn’t include it, though, and neither did the final compromise bill that was passed into law. Trump, who had previously criticized “the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country,” reportedly made restoring the tax-exempt bond dodge a priority in the wording of the final bill.
Senators Cory Booker of New Jersey and James Lankford of Oklahoma have been annually introducing a bipartisan bill to ban tax-exempt stadium bonds, but as you can see from the above about the 2017 Senate, they haven’t even gotten many of their colleagues to sign on. And while that 2017 House Republican action may seem promising — that year’s House included somewhat more drown-it-in-the-bathtub types than the more do-whatever-the-lobbyists-want GOP Senate leadership — as I wrote at the time, “A cynical mind would be tempted to speculate that the whole House bill to crack down on stadium tax breaks was just red meat to throw to libertarian types in the GOP and anyone else who’s pissed off about sports subsidies, and House Republicans knew that their Senate counterparts would rescue them by eliminating the bill so they wouldn’t have to answer to an angry Roger Goodell.”
So, while Booker and Lankford will no doubt be looking to Joe Biden to take up Obama’s push to end federal stadium subsidies, don’t expect it to be a priority, especially not while NFL lobbyists are still out there terrorizing the citizens. And, of course, even if one day the federal bond-subsidy tap is finally shut off, that’s a relatively small amount of money compared to the couple billion dollars a year that state and local government continue to throw at sports projects. To end that, we’d need something akin to Rep. David Minge’s bill to tax stadium subsidies to the point where they’re no longer lucrative to team owners. Given that Minge first proposed it way back in 1995 and it never got significant backing from either party, I really wouldn’t hold your breath on that one, but it’s a nice reminder that the feds could put an end to the entire three-decade-long scam that has made this site necessary, if it really wanted to.