Virginia’s $1B Commanders stadium subsidy could actually be an infinite blank check, fine print reveals

As reported here three weeks ago, the Virginia state house and senate each have each passed bills providing up to $1 billion in funding for a new Washington Commanders stadium, to be located somewhere TBD, though there are some guesses. The senate bill would kick back $34 million a year in state sales and income taxes; the house bill would kick back only sales taxes, plus require the team to kick in half of naming-rights revenues to cover the difference.

According to a subsidy expert contacted by the Washington Post, however, the actual funding stream provided by the bills is slightly more than $1 billion and is, in fact, infinite:

Neither bill caps the amount of money that can be raised. And while the House bill limits the bonds to 20 years, the Senate version would allow the stadium authority to issue new bonds in perpetuity — and collect the tax revenue to pay them down — to finance new construction, expansion, repairs and maintenance.

“It’s an endless gravy train of subsidies,” said [George Mason University Mercatus Center senior research fellow Michael D.] Farren, whose research focuses on the effects of government favoritism toward individual businesses and industries.

Ah, the old rolling bond trick. This will be familiar to any fan of Robert Caro’s The Power Broker, in which he describes Robert Moses’ realization that, though he had only been appointed to head, say, the authority to build and operate the Triboro Bridge until the bonds for the bridge were paid off, there was nothing stopping him from going out and selling more bonds backed by bridge tolls for other pet projects, without going back to the legislature for fresh approval. By piggybacking new bonds atop old ones, Moses was able to make himself the most powerful man in New York City — there’s a reason Caro’s book is called what it is — for three decades, able to override elected officials because he had his own personal funding base.

Nearly a century later, the Commanders stadium authority couldn’t be that blatant about its chicanery, obviously. But would the Senate version actually give team owner Daniel Snyder access to an endless series of blank checks? Let’s take a look at the bill language, starting with the house legislation:

The Authority may at any time and from time to time issue bonds to carry out any of the purposes of this chapter; provided that the Authority may issue bonds to finance the facility only at the request or with the consent of the primary team. … The bonds of any issue shall be payable solely from the property or receipts of the Authority, or other security specifically pledged by the Authority to the payment thereof.

In fact, there’s no mention of $1 billion, or of any dollar amount at all, in the house bill. The only limitation, as Farren notes, is that the stadium authority only gets to collect all sales tax revenues from the “facility and on the campus” (where the “campus” is defined as “the facility and parcels proximate to the facility on which development is to occur,” so really there’s no effective limit on its size) for 20 years after the Commanders’ first home game at the new stadium. It also can receive any kind of tax revenues from the “local governing body” (presumably the county) that that body decides to pour into the project. So if that total tax stream turns out to be more than enough to pay off the stadium subsidy, the money keeps flowing to the authority, and there’s nothing stopping it from going and spending it on more stuff for the team above and beyond the initial $1 billion.

How do things look over in the senate bill? It has the exact same language as cited above from the house version, and the same tax revenues, with the addition of “all personal income tax revenues” from “the facility and any performing arts venue” on the campus. As with the house bill, if this is more than what’s needed to pay off the initial bonds, the authority gets to keep the excess and spend it on new bonds. And since there’s no time limit here, it would effectively be a perpetual stream of tax money that could be used for whatever the stadium authority wants — or rather, since the bonds can only be sold “with the consent of the primary team,” anything the Commanders owner wants, meaning it would be a slush fund that could only be used on stadium-related stuff, making it all the easier for future authority officials to argue that this isn’t money that could be spent on other public needs, so may as well give it to Snyder and his successors, right?

The two bills still need to be reconciled in conference committee, and team lobbyist Mark Bowles told the post he had “prepared language to ensure that nothing other than a portion of the stadium can be funded.” (Yes, the lobbyist for the team is helping write the legislation. This may help explain where the unlimited funding stream came from in the first place.) It’s not clear if that would preclude tax money being spent on future stadium upgrades, though, a la the Atlanta Falcons‘ infamous “waterfall fund“; Senate Majority Leader Richard Saslaw, a prime sponsor of the stadium funding bill, vowed to the Post that he would ensure the bonds can only be issued once and only for the stadium: “When the bill comes out of conference, it will be drawn tight as a drum.” We’ll see, but for now, “don’t worry, that blank check I left on the table will be removed eventually” isn’t exactly the most reassuring statement.