Hidden subsidies cost taxpayers billions of dollars a year, yet elected officials keep pretending they’re not real money

University of Colorado Denver sports economist Geoffrey Propheter, who readers here should be very familiar with as it seems like I cite him every day or so, has an essay up today at The Conversation on how “privately funded” stadium and arena deals can often cost the public big money through subsidies that aren’t counted on the official cost ledger. Propheter estimates, for example, that property tax breaks — his specialty — “have cost state and local governments US$20 billion cumulatively over the life of teams’ leases, 42% of which would have gone to K-12 education.” Likewise, taxpayer spending on infrastructure and operating costs is often discounted, while counting team rent payments as private money ignores the value of the land or property that is being rented.

Put it all together, and you get all-time hidden-subsidy champions like the Washington Commanders stadium deal:

By way of example, the Council of the District of Columbia approved a subsidy agreement last year with the NFL’s Commanders. The stadium would be financed, constructed and operated by the team owner, who would pay $1 in rent per year and remit no property taxes. In exchange for financing the stadium privately, the owner receives exclusive development rights to 20 acres of land adjacent to the stadium for the next 90 years.

The stadium is expected to cost the owner $2.5 billion, with the city contributing $1.3 billion for infrastructure.

But the city also gives up market rental income between $6 billion and $25 billion,depending on future land appreciation rates, that it could make on the 20 acres.

In other words, the rent discount alone means the city gives up revenue equal to multiple stadiums in exchange for the Commanders providing one. It is as if the council has a Lamborghini, traded it straight up for a Honda Civic, and then praised themselves for their negotiation acumen that resulted in a “free” Civic.

The Lamborghini Effect is a great image, and one that really should be drilled into the heads of all elected officials who are faced with negotiating sports deals — which sooner or later is pretty much all elected officials. Already just this week, we’ve seen a bunch of political leaders who seem to be in need of reading Propheter’s warnings:

• The Sacramento city council approved new city digital billboards whose revenue will all be siphoned off and given to the Republic FC owners to help pay for a new soccer stadium, even though nobody has any idea how much that will be. “These billboard leases are a giant hidden subsidy for the railyards developers,” UNITE HERE Local 49 Aamir Deen told CBS News. “It’s absurd to vote on this billboard deal without even knowing what you’re giving away.”
• Illinois Gov. JB Pritzker, who in the ongoing Chicago Bears stadium talks has mostly been holding a hard line against “propping up what now is an $8.5 billion-valued business” with taxpayer dollars, reiterated that he doesn’t count infrastructure spending as a subsidy, because “we help private businesses all the time in the state, and I want to help” and “some of the infrastructure needs that the Bears are identifying” for their proposed Arlington Heights stadium are “projects that we were going to build at one point or another.”
• Kansas Gov. Laura Kelly, in her final state of the state speech, gushed about her new Chiefs stadium deal that could end up costing state taxpayers a second-only-to-the-Commanders-record $4.1 billion according to Propheter’s projections, on the grounds that it won’t raise taxes or divert money from existing budget priorities — ignoring how it will divert billions of dollars from future budget priorities as tax revenue from a 300-square-mile swath of the state gets directed to Chiefs owner Clark Hunt’s bank account instead of the state treasury.

Some of these actions are more worrying than others: It’s still unclear whether Pritzker, in particular, will really be okay with the $855 million in infrastructure demands the Bears owners have levied, or if he’s just telegraphing that he’s open to the state covering a few minor expenses, so please don’t play footsie with Indiana without continuing to haggle with him. Either way, though, they’re all concerning signs that political leaders are continuing to divide public spending on private sports venues into two buckets, one marked “real tax dollars” and one “not really tax dollars because reasons” — and the latter can include pretty much anything from spending on everything around the stadium to handing over selected public revenue streams to just straight-up checks from the public treasury so long as they can be termed “no new taxes.” With elected antagonists like these, team owners don’t need friends — as we’re seeing when the largest stadium subsidies in history are being justified as not costing taxpayers anything. Not like that’s anything new, but when Propheter and I and a lot of other people have been pointing out the pitfalls of hidden sports subsidies for decades now, it’d be nice a few more people started at least acknowledging that public costs are public costs, now matter how team owners attempt to launder them.