Missouri governor tries to pass last-second bill to pay for 50% of all stadiums with state tax money

access_time personNeil deMause

Hey, remember way back yesterday morning when a Missouri state senator was trying to sneak through a last-minute bill to provide Kansas City Royals owner John Sherman with $200 million toward a new stadium? Well, forget all that, because yesterday afternoon, Missouri Gov. Mike Kehoe proposed an even laster-minute plan to pay for half of any and all major stadium projects with state money, and it just got crazier from there:

  • Kehoe’s “Show Me Sports Investment Act” would authorize the state to issue bonds to pay for up to 50% of any and all stadium construction or renovations, provided the project cost at least $500 million and the venues contained at least 30,000 seats.
  • The money would come from the state’s general fund, and would be calculated as the amount of tax revenue that the team “generated” for Missouri — not just the additional tax revenue associated with a new stadium, as in a TIF, but every dollar in any kind of taxes “historically generated by the teams.”
  • The measure would also allow pro sports teams to receive additional tax credits of up to $50 million apiece.
  • Kehoe said the total value of the package was more than $3 billion, which he called “huge,” without elaborating on where that number came from or what it meant.
  • The Missouri house immediately passed the measure, which was not introduced as a separate bill but was added as an amendment to a Senate bill related to student athletes, with no notice or public hearings.
  • As of last night, the Missouri senate had tabled the bill without a vote amid bipartisan opposition, with senators especially peeved that the state house had passed this right after refusing to consider a bill to spend $500 million on health care, education and law enforcement: “They wouldn’t spend $1.2 million for a rural hospital in Pemmiscot County. That was a bridge too far,” said Republican state Sen. Lincoln Hough.“Now they want to spend hundreds of millions building stadiums? Seems a little hypocritical to me.”

That is a lot for one afternoon! Especially for a proposal that would, for the first time ever to my knowledge, allow team owners to add up every dollar in any kind of state taxes paid by fans, players, and presumably hot dog vendors, and submit a bill to the state for that amount, to be used to pay for any major stadium work. That’s deserving of a name bigger than tax increment financing, maybe … tax excrement financing? Still workshopping this one, check back later.

The bill isn’t technically dead, so there’s still a possibility that Kehoe could try to revive it before the state legislature adjourns by the end of the the week. (Though as with the previous Royals funding bill, even if 18 votes could be found in the 34-member senate, opposition senators could potentially filibuster it until the clock ran out.) Submitting surprise legislation without even running it past the legislators who have to vote on it is usually more grandstanding than a serious attempt at passage, and maybe Kehoe just wants credit here for saying he tried to do something to “keep the Royals and Chiefs,” as the headlines dutifully put it; if he’s serious, though, we could be about to embark on a whole new level of stadium subsidies, and that’s saying something in a month that has already seen the record for a single subsidy proposal go from under $2 billion to over $7 billion.

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How Denver’s $70m expense for an NWSL stadium could turn into $200m+ in tax money

access_time personNeil deMause

The Denver city council voted 11-1 yesterday to approve spending $70 million on land for a stadium for an NWSL women’s soccer team … sort of. The land purchase will move forward, but the stadium itself will face several additional votes in the fall after the council gets more details about the plans and about whether the economy has gone in the crapper by then:

“It’s a dicey time,” said Councilman Paul Kashmann, who voted yes. “We may find things ease up over the next six months, or it may be doom and gloom — and we will have to make some very dire decisions.”…

“We’d be investing in a large parcel that we wouldn’t otherwise be buying just to assist a private ownership group to have a place to build a private stadium,” said Councilwoman Sarah Parady, who voted no.

But this is really — stop me if you’ve heard this one before — a significantly pricier subsidy once you get into hidden tax breaks: a full property tax exemption on the stadium land, a TIF that would potentially kick back property taxes on the stadium itself to pay for the team’s costs, plus whatever tax money the TIF would divert from any surrounding development. University of Colorado Denver sports economist Geoffrey Propheter estimates the total public cost as “definitely less than $300 million but definitely more than $175 million,” which could end up covering the entirety of the as-yet-unnamed team owners’ $200 million cost of building the stadium, if you want to look at it that way. (The team is unnamed, that is, not the owners; the owners are very much named, as is the billionaire husband of one of them.)

So this is definitely something that Denver councilmembers might want more details on, yes. In the meantime, we’re left with just the vague shape of a stadium plan, plus vaportecture featuring a weirdly asymmetrical roof canopy and what appears to be a game underway between two seven-player teams wearing the same color kits. It’s a dicey time for everyone, renderers included.

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Last-minute bill would fund $200m worth of North KC stadium that Royals owner may not even want

access_time personNeil deMause

The Missouri state legislature is “facing a Friday deadline to approve a plan to keep the Kansas City Royals’ new ballpark on the Missouri side,” reports KMBC, and wait, what? Last we heard, Royals owner John Sherman was still kicking the tires on whether to look at a stadium site in North Kansas City or one in downtown Kansas City that the giant QR code wants or maybe something across the state line in Kansas somewhere, and now there’s suddenly a deadline this Friday? For what, exactly?

A bill already approved by the state Senate proposes $300 million in funding for the ballpark, allocating $15 million annually over 20 years.

The state House must approve the plan by 6 p.m. Friday to advance it to Governor Mike Kehoe.

Oh, okay, it’s just a deadline for approving one particular Royals stadium funding plan. This one would create a stadium authority in Clay County and fund it with $15 million a year in state money for 20 years, which would actually only be enough money to pay off less than $200 million worth of up-front stadium costs, because interest is a thing that exists. That would leave at least several hundred million dollars more still to come from somewhere; the Missouri Independent paraphrases bill sponsor state Sen. Kurtis Gregory as saying “some sort of local support would likely still be needed,” so this would only be a first small step toward building a North Kansas City stadium, if Sherman decides that’s something he’s even interested in.

And if your attention isn’t wandering off already, add that the bill is a last-minute addition to the legislative calendar that is pretty unlikely to pass, given that it has to pass both the state house and senate by Friday, and opposition senators can always run out the clock by filibustering it. Let’s all keep one collective eye half on this as the week progresses, and check back in on Friday night — or really Monday morning, we all deserve a nice weekend off — to see if there’s anything more to this than some weak vaportecture fireworks.

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How many billions of dollars would a Commanders stadium subsidy be? An investimagation

access_time personNeil deMause

I had a long chat with University of Colorado Denver economist Geoffrey Propheter on Friday to try to nail down exactly how much the total subsidy — in government cash, discounted land, and tax breaks — would be for D.C.’s proposed Washington Commanders stadium. While “exactly” is a hopeless cause at this stage of the game, with so many unknowns about both the project and what else could otherwise be built on the RFK Stadium site, what follows is the best accounting to date of all the ways that D.C. would be enriching Commanders owner Josh Harris at the expense of taxpayers:

  • $1.058 billion for stadium construction, garages, and site infrastructure. This would all be direct city spending, and has been well established since day one of Mayor Muriel Bowser’s plan. (That some of the money would be used for actual construction of the stadium foundation and not just infrastructure wasn’t revealed until day two.) It’s the basis of the $850 million public cost figure that much of the media and pollsters have settled on, though that number leaves out either one of the garages or one of the site infrastructure items, hard to say which as the media sources generally fail to cite specifics.
  • $429 million in property tax breaks for the stadium, plus an unknown amount of property tax breaks for the surrounding commercial development. The $429 million estimate is from Propheter, and includes only the stadium itself, not the land or any additional development. How to calculate the cost of giving Harris a 90-year lease on tax-free land is a bit tricky: The RFK land is owned by the federal government and leased to D.C., so it wouldn’t be subject to property taxes regardless, though the district could conceivably ask Congress for permission to charge payments in lieu of taxes to a site developer. And even if you consider that far-fetched, there’s still a benefit to Harris here from getting non-taxable land — an added value that under normal circumstances a developer might pay for in additional rent. Which brings us to…
  • Somewhere between $6 billion and $25 billion in free rent. The Commanders stadium itself, it’s becoming clear, is only an amuse-bouche for the far bigger subsidy Harris is set to receive via rent-free use of city-controlled property for private commercial development. Harris’s deal would give him a 90-year lease on 24 acres of land, for which he would pay no rent for the first 26 years and a reduced price thereafter. Guessing at what fair market value for that land would be is, well, guesswork, but Propheter used two different comparable tracts of D.C. commercial property and a bunch of different assumptions about the value of future money and came up with a low-end estimate of $6 billion in rent discounts for Harris, and a high-end one of $25 billion.

[Ed. note: All numbers above are in present value.]

The absolute minimum cost to D.C. taxpayers for Harris’s RFK Stadium site project, then, is $7.5 billion, and if the land turns out to be more valuable than expected, it could be more than three times that. Some of this would be out-of-pocket costs that would come out of D.C.’s existing budget and some of it would be money that the district would be leaving on the table by handing over the land to Harris rather than seeking a developer who would pay real rent; all of it, though, puts the lie to the notion that Harris would be paying for most of the stadium costs out of his own pocket, since he’d be getting benefits from D.C. that would repay his construction bill many times over.

And even if we stick with the most conservative $7.5 billion figure, that is a whole hell of a lot of money — by far the biggest public subsidy for any stadium project the world has seen. Maybe the Washington Post’s pollsters should consider going back to D.C. residents and asking them “Would you favor or oppose the District government using about eight hundred fifty million dollars in city funds, plus several billion dollars of free rent and exemption from property taxes, to help finance development for a new football stadium for the Washington Commanders where RFK Stadium now stands in D.C.?” and see what the results show? I’ll wait here.

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Friday roundup: D.C. poll shows public support for spending fraction of what Commanders stadium would actually cost

access_time personNeil deMause

It’s been another long week in what feels like an endless series of long weeks, complete with the most expensive stadium subsidy demand ever and whatever the hell this was and a new pope, so let’s all take a moment to relax by watching a major league baseball player get hit on the head with a pop fly. I watched it four times in a row before writing this post, there’s something remarkably soothing about it, provided you’re not Chase Meidroth or his team physician.

And now there’s no avoiding it: the remaining news of the week!

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Commanders stadium could cost D.C. taxpayers $13B including land discount, this is getting ridiculous

access_time personNeil deMause

What’s been going on with D.C. Mayor Muriel Bowser’s proposed Washington Commanders deal since we last checked in a week ago, you ask? Let’s recap recent developments.

  • After I guesstimated the total subsidy including tax breaks and free land at between $2.5 billion and $3 billion, sports economist and property tax expert Geoffrey Propheter did his own calculations and projected that the land discount alone could be worth $11 billion. That would make the total public subsidy for Commanders owner Josh Harris’s stadium-plus-other-development project around $13 billion, which is starting to get into some real money.
  • Harris and NFL commissioner Roger Goodell attended an “informal meet and greet” with Bowser and nearly the entire city council on Monday, which is to say they were allowed to lobby elected representatives over cheese plates. (Homes Not Stadiums, please let us know when you get invited to have equal time with the mayor and the council.)
  • D.C. council chair Phil Mendelson, who opposed the Nationals stadium plan when it was passed 20 years ago, has been carefully hedging his statements on the proposed Commanders deal, saying “I expect something will go forward” but “I expect that we will make the deal even better for taxpayers, to the tune of millions, probably tens of millions of dollars,” which seems to leave off a couple of necessary zeroes. “The end goal should be … not stadium at any price. That would be stadium at a reasonable price,” he added.
  • Several other councilmembers remain undecided, though they may end up taking their lead from Mendelson. Councilmember Zachary Parker has scheduled a community listening session next Wednesday, stating, “The current deal was negotiated without input from the Council or neighbors, and it is vital that we shape the future of these 180 acres at RFK together.”

This is going to come down to haggling, obviously, and it looks like one key to the outcome will be whether Mendelson intends to actually seek a good deal — which, given the numbers so far, would take mammoth changes to get to any price that can be considered reasonable — or just one that he can point to as marginally better than the current record-costly plan. Anchoring is not healthy for children and other living things.

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Vikings execs want $20m a year in tax money for upgrades of 9-year-old stadium

access_time personNeil deMause

Hey, remember how the state of Minnesota approved using revenues from electronic pulltab gambling (basically bingo apps on iPads) to help fund $500 million in Vikings stadium expenses back in 2012, and then e-pulltab gambling initially didn’t get off the ground, so state legislators had to raid a fund of tobacco tax money instead? Well, good thing people finally started using e-pulltabs, and the state used the resulting revenue to pay off the stadium early, and now can use that to backfill what it would have spent the tobacco money on otherwi—

The Minnesota Vikings want state lawmakers to put up to $20 million a year in tax revenue from electronic pulltab gambling toward the future upkeep of U.S. Bank Stadium.

The Minnesota Sports Facilities Authority (MSFA), which operates the state-owned stadium, estimates the nine-year-old facility will need nearly $300 million in maintenance over the coming decade.

Yes, Vikings execs say that their nine-year-old stadium is in such dire shape that it needs $300 million in upgrades (no details provided on what), so it needs a steady flow of tax money to pay for it. What else is an NFL franchise worth $5 billion that turns an annual $111 million profit to do?

The Vikings subsidy bill is co-sponsored by Democratic state Sen. Nick Frentz and Republican state Sen. Jeremy Miller, who argued “Do we want to have to come back to the Legislature every time there is a capital need?” (Frentz) and “This is an asset of the state of Minnesota and it is our responsibility to maintain the stadium” (Miller). No one appears to be arguing “If the Vikings owners wanted to get a guaranteed stream of upgrade revenue, they should have put it in their initial stadium agreement, but then they probably figured that never would have passed the legislature at the time and instead they’d wait 13 years and see if they could get the state to throw good money after bad, as one does” — maybe once this enters the legislative debates over how to pass a budget to fill in for federal cuts and keep the state government from shutting down at the end of June, we’ll get more diversity of opinion.

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D-Backs rep says MLB could pull spring training from Arizona if no stadium deal, then says that’s not what he meant

access_time personNeil deMause

Arizona Diamondbacks execs have been putting a full-court press on state legislators to secure their desired $500 million stadium renovation subsidy, as the legislative session enters its final weeks. And shit? It be getting weird:

Notes taken by one participant and obtained by The Arizona Republic … said one of the team’s representatives “insinuated (threatened)” that the MLB would pull spring training from Arizona if a deal were not reached…

Andrew Cohn, who made the statements, said it was “a fiction” to characterize his words as a threat. He said his comments came after a discussion about what would happen if there was no funding agreement. He confirmed he had spoken to the former commissioner [Bud Selig], who he considers a friend, about the Diamondbacks’ situation. He said he did not speak with current Commissioner [Rob] Manfred.

“The comment was that it’s a terrible look to have such a commitment to the Cactus League, and spring training in Arizona, and not have a hometown team here,” he told The Republic.

That is 100% a threat that the Diamondbacks could leave without a new stadium, obviously. Whether it’s really a threat that MLB would pull spring training entirely is slightly fuzzier — if it’s not a warning of the “it’d be a shame for something to happen to those paratroopers” type, then what is it, exactly? A sad reflection on how MLB could never show its face among the other sports leagues again? An acknowledgment that MLB wouldn’t allow the Diamondbacks to move in the first place, because it needs them as the face of Arizona spring training? Arizona spring training, mind you, that started 69 years before the Diamondbacks came into existence? Maybe “insinuation” is a better term after all, since he was certainly saying something bad in an indirect way.

As for Cohn himself, he doesn’t actually work for the Diamondbacks, but is a real estate developer who has previously been an intermediary between the team and the county, even after one interaction ended with him yelling at the chair of the county board of supervisors. (His wife is also on the board of the team’s charitable foundation.) Cohn says Phoenix Mayor Kate Gallego invited him to last week’s meeting; a spokesperson for Gallego says she did nothing of the sort.

The actual terms of the proposed stadium deal are still shifting, and it’s not entirely clear as of yet whether the proposal will be rolled into the state budget or get a separate vote. The idea that MLB would shift half of its spring training sites in a fit of pique (and regardless of any ongoing leases for spring training stadiums) is way too vague and implausible to be taken seriously; and yet, here we are talking about it. Sometimes having a guy in the room to say the quiet stuff loud can work out okay, if you want people to focus more on vaporthreats and less on reality.

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Royals’ expiring lease may not be the stadium leverage John Sherman pretends it is

access_time personNeil deMause

Kansas City Royals owner John Sherman has been publicly demanding a new stadium for two and a half years now, and one argument he has made is that the team’s future needs to be resolved by the time its lease runs out after the 2030 season.

The traditional way for news outlets to address this is with one line somewhere deep in every article warning that the city faces a “deadline” in the form of the expiring lease. The less common one is to actually look into who really holds leverage around the lease expiration and what might happen as it approaches, and the Kansas City Business Journal, to its credit, took that path less traveled and found:

  • Sherman can simply extend his lease for two additional five-year terms, something that “some current and former officials” think he may end up doing.
  • Cities like Nashville and Salt Lake City are already saddled with big public debts for other sports venues, and so aren’t likely to lavish money on a baseball stadium as well, says Holy Cross economist Victor Matheson: “It’s not like there is city after city after city that’s just clamoring to hand out a billion dollars to a billionaire ownership group and a bunch of millionaire players. The A’s are the best example (of) saying that we will not play here beyond a certain date, and that’s turned out to really backfire on them. … Playing hardball only works if you really do hold the cards.”
  • Even without those five-year lease extensions, says University of Colorado-Denver economist Geoffrey Propheter, there would be nothing stopping the Royals from going year-to-year on their lease, making any deadline totally illusory: “It’s a knee-jerk reaction to get fixated on this end point … and all of a sudden, all decisions are revolving around this point, as though something bad happens at this point. Nothing bad happens at this point. This point just means your current agreement ends, and you need to crap or get off the pot.”
  • Former K.C. councilmember Becky Nace, who is now an activist against public subsidies for a new Royals stadium, says team execs are “just hoping that the city government leaders will somehow blink and offer them a better deal, but the problem is, we’re beating the best deal on the table if we do that. We’re bidding against ourselves.”

All this is true, and important: Yes, an expiring lease makes it easier for a team to threaten to leave town, but it then has to have somewhere to leave town for; if the only option is “if you don’t build us a new stadium we’ll go play in the street” — or in Sacramento — that’s not much of a threat. Government officials need to learn that they have leverage, too: There may be a limited number of pro sports teams to go around, but there are also a limited number of major metro areas, so team owners need cities as much as or more than cities need teams.

The one catch that the Business Journal did not mention, of course, is that “metro areas” can include a lot of different jurisdictions, which is precisely what Sherman is trying to do with the Kansas City metro area: The neighboring state of Kansas last summer approved a potentially bottomless pool of tax money for stadiums for both the Royals and Chiefs, and if the teams’ owners haven’t leaped to take it yet, they’re certainly going to remind Missouri politicians at every opportunity that it’s an option. Again, it’s questionable how much of a threat that should really be: Royals and Chiefs fans could still go to games if they were just across the state line, and any Missouri tax losses from being cut out of team sales and income taxes would be more than offset by not having to shell out a couple billion dollars for stadium construction —  and that’s if Sherman and Clark Hunt even really want to move their teams to Kansas. Maybe this would be a good topic for a followup article: “Would K.C.’s best option be calling Chiefs’ and Royals’ move threat bluff?” You can have the headline, K.C. Business Journal, that’s a freebie.

 

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Friday roundup: Ohio senate leader says damn the analysts’ warnings, full speed ahead on Browns’ $1.2B subsidy

access_time personNeil deMause

Nothing like a week that starts out with a plan for a $1.147 billion stadium subsidy deal and ends with it somewhere well north of $2 billion. But the Washington Commanders horror show wasn’t the only news of the week, so let’s dive in and see what else has been going down:

  • How are Ohio state legislative leaders taking the news that two different state budget analysts have said that the numbers on a proposed $1.2 billion Cleveland Browns stadium subsidy look terrible? “When the Browns put forward those numbers, they’re not putting forward numbers that they grabbed out of a hat. They’ve hired professionals on their side, too,” retorted state senate president Rob McColley. Professional economists on one side, professional clowns on the other, the truth must lie somewhere in the middle! McColley added that senators are “going to make sure that those numbers add up” and will include a “fail-safe” to ensure the state gets its money back, can’t wait to see how that goes.
  • Meanwhile, Cuyahoga County Executive Chris Ronayne has asked the state legislature for $350 million to renovate the Browns’ current stadium instead, calling it a “better, and less expensive option,” which is both true and a perfect example of the anchoring cognitive bias. Cleveland Mayor Justin Bibb has already offered $240 million in city money toward renovations; this now makes three different official plans for giving upwards of half a billion dollars to Browns owner Jimmy Haslam and none for not giving him any.
  • Here’s a handy chart of where D.C. councilmembers stand on the proposed Commanders stadium deal, with the current tally being four yes, four no, three undecided, and one did not answer. There’s also a special election to fill the Ward 8 seat left vacant by the expulsion of councilmember Trayon White for bribery charges, which is expected to be won by none other than Trayon White, but that’s not till July 15 and the stadium deal has to be voted on by then (quelle coincidence!) so it won’t count, meaning Commanders owner Josh Harris and Mayor Muriel Bowser need to collect three more yes votes from the four remaining swing votes; staffers in those offices might want to take their phones off the hook for the next 11 weeks, because the full-court press lobbying campaign is doubtless going to be brutal.
  • Concessionaire Aramark is reportedly in “talks” with (Your City Name Here) Athletics owner John Fisher about investing $100 million in a Las Vegas stadium project and another $100 million in the team, if by invest you mean pre-paying concession fees that Fisher would get anyway.
  • New soccer stadiums may sound like a great idea to boost team revenues and revitalize cities, writes Aaron Timms in the Guardian, but they often don’t work out that way, leaving fans unhappy at sterile new buildings and teams struggling to repay construction costs. Unless you’re in the U.S., where it’s cities that are on the hook for much of the costs and struggling to repay them: “Stadium-led revitalization is the myth that will survive the apocalypse. New stadiums, as a vast body of academic literature shows, bring few of the economic benefits that developers, team owners, and local politicians promise. Whatever stimulus they offer to economic activity in their immediate vicinity is invariably offset by a corresponding depression in spending and investment in other areas of the same city.”
  • The people who want to bring an MLB team to Orlando say they have close to $1.5 billion lined up to buy a team, which sounds impressive until you realize MLB wants $2 billion for expansion franchises and somebody would have to build a new stadium in Orlando too, but “Orlando rich people happy to pay $1.5 billion toward a team and stadium worth double that” didn’t look as good atop the press release.
  • How’s the economic boom in Green Bay from hosting the NFL draft going? “Sales were down maybe 50%,” Cold Stone Creamery Green Bay owner Amin Elhalw said. “Gradually the closer we got to the draft, the sales were decreasing, the percentage.” Local businesses blamed draft traffic and road closures for keeping away regular customers, funny how that happens.
  • The developer of the Ybor City site in Tampa where Rays owner Stu Sternberg was at one point considering building a stadium (until it turned out nobody wanted to pay to build it for him) now says there’s no room for one, “unless the Rays can build a very tiny stadium.” Turns out building apartments and shopping pencils out better, funny how that happens.
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