If you want an example of how to actually use research to fact-check claims by elected officials (and disgraced former ones) about stadium deals instead of parroting their claims, all props to the Philadelphia Inquirer, which ran an excellent analysis this morning of the tax subsidy plan being considered for a new 76ers arena.
The total subsidy amount for the Sixers arena has been really hard to pin down, in part because it’s not a direct cash subsidy but rather a property tax exemption — meaning it would depend on the assessed value of a future arena on the site of a failing mall near Chinatown — and in part because nobody is saying yet if it would be a full exemption or if Sixers owners Josh Harris and David Adelman would be offsetting the cost by providing the city with some payments in lieu of property taxes, or PILOTs.
Adelman told the Inquirer that the financing mechanism, in which he and Harris would hand over ownership of the arena to the city in order to get out of paying property taxes, but then pay a (presumably smaller) PILOT instead, is needed because it’s too hard to properly assess the value of sports venues. But the Inquirer then did something unusual in these journalistic end times: It asked a property tax expert.
That is not true, said Geoffrey Propheter, a professor of public affairs at the University of Colorado-Denver and the author of Major League Sports and the Property Tax. While assessing the value of arenas is complex, it is not impossible, and 13 venues for American professional sports teams are on the tax rolls, he said.
He noted that the newest NBA arena — the Chase Center in San Francisco — was developed without any PILOTs or any other public subsidies, including none of the state and federal programs the 76ers remain open to. The Golden State Warriors own the real estate for the Chase Center, which opened in 2019, and their property tax bill this year is about $19.5 million, he said.
For Propheter, the real motivation for teams to donate their real estate to municipalities is to save money.
Propheter went on to calculate exactly how much money Harris and Adelman would save: between $48.8 million and $181 million over 30 years. (Their total tax savings would actually be about 30% more, but they would get that additional chunk automatically thanks to another tax-break program that kicks back 90% of commercial property taxes for the first ten years.) That would come to between $25 million and $90 million in present value cost for the city — though Propheter notes if the Sixers owners want a more exact tax kickback estimate, they need to release more details of how much they plan to spend on various aspects of the arena, and which bits they would pay PILOTs on.
The Inquirer article doesn’t go into it, but there’s also the question of opportunity costs: How much tax money could Philadelphia be bringing in if it didn’t go through the disruption of tearing down the mall and building a tax-exempt arena? A real estate professor previously estimated this as leaving as much as $900 million on the table, though using some extremely back-of-the-envelope math. It’d be great if the Inquirer or another Philadelphia news outlet could conduct a thorough report on all the possible arena costs to the public — preferably before the city council takes up arena legislation this fall.
It is the end times when the Inquirer is lauded for picking up a phone and calling an expert…..
The article also went into significant detail into the value of the existing property tax breaks for the football stadium, the baseball stadium, and the hockey arena. The 76ers aren’t going to let that go unmentioned while they fight the NIMBYs
How is a TIF supposed to work for the RFK campus? There is literally like 2 convenience stores and 4 restaurants within 1.5 km of the site and while I doing well I don’t think they generate hundred of millions in tax revenue. It’s all residential or the river otherwise.
Sorry wrong article.
There are merits to the notion of PILOTs as applied to sports facilities (at least those portions of them that are used for the sport itself, not the mallpark/commercial development side).
As noted previously if you spend $500m on a big box store subdivision, those stores will be open anywhere from 12-18hrs a day and probably north of 350 days a year on average. None of that is true on a sports stadium (which could be serving the public as little as 50-300 hours a year) specifically designed to house one or two professional teams.
Cities really should refuse outright to accept ownership of these types of “gifts” from team owners. If you want to build it, build it. We can talk about whether (and how much) of a property tax exemption you might deserve based on what you build and how much of it is sports related vs ordinary commercial real estate. But ‘we’ aren’t interested in owning it no matter how many times you tell us you are ‘giving’ us a $1bn facility. Hard no.
As owners, the city would likely be responsible for operation, upkeep and repairs. Then, about twenty years down the line would come the inevitable ask from the team for necessary “improvements” costing many millions of dollars, accompanied by the obligatory threat to leave. The “gift” that keeps on giving, indeed.
And if the team doesn’t own the venue, they don’t have anything to lose by ditching town. When a team owns the arena or stadium, they’d be cutting off their nose to spite their face if they moved out the biggest tenant to their building. Nothing keeps a team anchored to a city more than the owner being forced to eat the losses from their venue if they left.
Someone needs to explain this to the Salt Lake City Council whenever Ryan Smith whines about building an arena in Draper…that would cannibalize all of the business that currently goes to his current arena in the Delta Center. It’d be fucking stupid if he did that, but he has plenty of experience doing that with Qualtrics.