The Tennessee state legislature passed a bill yesterday allowing the city of Knoxville to siphon off local and state sales taxes from a swath of downtown and give them to the Tennessee Smokies owner for a new stadium, otherwise known as tax increment financing, or a TIF. (Actually a STIF in this case, since it involves sales taxes and not just the more usual property-tax siphoning.) This answers our question from a month ago as to what the bill’s chances were in the state senate. (The Senate vote was 27-0 in favor; in the House it was 71-10.)
I’d been referring to the STIF as a $65 million subsidy, but now city and county officials say it would cover “up to 30%” of the estimated $65 million in construction costs, so that’s more like $22 million, tops. There would also be sales tax kickbacks from the stadium itself, which don’t require new legislation, and Tennessee Gov. Mike Lee has allocated $13.5 million in his state budget, while the rest would be paid for by $1 million a year in rent from the team, property-tax kickbacks (i.e., a regular TIF), and the ever-popular “non-property tax revenues of city and county,” which appears to just mean “other public funds, we’ll find it somewhere.”
The run-up to the legislative vote provided lots of opportunities for those stumping for a yes vote — lord knows why they felt the need to with margins like those, but I guess you can never have too big a lead — to present some creative arguments for why spending public money on a minor-league baseball stadium to get a team to move a few miles over would be terrific for Tennessee:
- State Rep. Jason Zachary, who just happens to be co-sponsor of the STIF bill, was given op-ed space in the Knox News to argue that “there is no development, no jobs and no tax base at the vacant site today” so getting anything would be a plus, something both I and State Sen. Bo Watson debunked earlier this month. (Watson apparently ended up voting for the bill anyway.)
- Theotis Robinson Jr., who as a student in 1960 integrated the University of Tennessee and later served on the Knoxville city council, said the stadium could help “increase the Black middle class” by … something about promising to use Black-owned contractors, which seems more likely to increase the wealth of certain Black business owners, but okay.
Uncertainties over exactly how the last sliver of stadium costs will be paid for aside, this project definitely appears to be all over but the shouting, especially with all levels of government strongly behind it. That’s kind of disappointing given how just four months ago Knox County’s mayor was saying he would only approve it if it “will not put any additional tax burdens on Knox Countians,” but between the pressure of MLB’s minor-league contraction scheme and the Smokies being owned by the local rich guy who is also president of the local state university, this one was probably in the bag from the start.
“STIF” what a great acronym.
We should just add an additional letter to ensure the taxpayers better understand:
STIFf
verb INFORMAL
cheat (someone) out of something, especially money.
Sales Tax Increment Financing for Fantastical Economic Development
This doesn’t quite meet my personal subsidy limit for minor league sports (IE: not more than 25% in public funds for any facility that will be privately owned or controlled)… but it appears to be closer than most of these types of projects are.
Is anyone confident that the team will actually pay the $1m a year in rent in cash or equivalents?
Of course this is still not good news. The swath of downtown covered by the STIF that used to pay taxes to the general fund will now have to have (all or some of) it’s “government services” borne by someone else, as those funds are going to be used to pay for the stadium.
And, speaking of the general fund… it seems like it has already been identified as a likely source of extra funds if needed going forward.
What I didn’t see was any up front money from the team’s owner going in to his new stadium (apart from the land he bought years ago, though there are plenty of loopholes available to pass that through to the project as well). I guess I must have just missed that part…
$1m a year covers about $15m in present value. So you’re still looking at >75% public funds.
True.
There are a bunch of unknowns still out there. Is Boyd “donating” the $6m worth of land he bought to the project? Is the project buying it (as well as at least 5 acres more) off him? I assumed he was contributing it as capital equivalent but I could well be wrong about that.
Is there an agreement on cost overruns? Does the STIF just syphon off any net increases in property tax within the district or does it cannibalize the existing tax base?
When the proponents of the STIF say it will cover a “maximum” of 30%, are they talking about stadium construction only? Engineering as well? What about infrastructure improvements and land/assembly?
30% caps are routinely nothing like 30% where subsidies are concerned.
Most importantly, will the stadium still feature the iconic 60′ wide right field warning track shown in the early renderings?
If not, I say they should scrap the whole thing. If it ain’t iconic, it ain’t you-know-what…
Not a surprise. With your first posting on August 12, 2020, you just knew this was a done deal.
Tennessee Smokies. Baseball. Private-Public Partnership. Ballpark “AND” Mixed-Use Development (very big words). Baseball! UT President Randy Boyd. UT in Knoxville. Baseball!! Drumbeat begins. WBIR-TV, WATE-TV, Knox News, retired Knoxville Chamber of Commerce President Mike Edwards. Economic and other benefits. Jobs. Boyd’s “donating” 11 acres of vacant land. And putting up $140 million for a ballpark. Baseball!!! Knoxville City County, Knox County Commission, Knox County Mayor Glenn Jacobs flip flops. Baseball!!!! Tennessee State Senate and House of Representatives are overwhelmingly approve Knoxville City Council approved STIF. Knoxville, don’t think to deep on this, it’s the economy people (sales tax dollars increment financing district. Sales tax meet tif. Boyd donates 11 acres to Knoxville City Council and Knox County Commission approved Sports Authority. He no longer owns the land, however, he gets to use it. Thus avoiding property taxes). WHAT ABOUT THE GREAT AMERICAN GAME OF BASEBALL DO YOU NOT UNDERSTAND!!!!!
Now if you wouldn’t mind, please pass me the Tennessee smoked ham.
Really. Really, really.
Knoxville City Council (not County).