Search Results for: Jerry Brown's RDA threat could blow up A's stadium plans

Everybody likes round numbers. If we have the choice between reading about a stadium that will cost taxpayers $600 million and one that will cost “hundreds of millions,” we know which one we’ll prefer, and for good reason: Specific numbers stick in your head, and you can repeat it to your friends and on the socials, whereas just providing the number of zeroes at the end feels vague and unsatisfying. It’s one reason why so many of us are attracted to LLM chatbots that can give us confident, definitive answers, even if those answers are very often wrong.

On this site, I’m always striving to provide numbers where I can, while acknowledging where we don’t really know for sure. It’s why yesterday, I cited the proposed Tampa Bay Rays stadium project as having a minimum taxpayer price tag of $2.1 billion, but noted that it “could” be billions more. That’s a huge range — can we narrow it down any more?

To that end, I spent a chunk of yesterday messaging with Michael Bishop of the Tampa Monitor and University of Colorado Denver economist Geoff Propheter, trying to suss out more of the knotting financial details of the Rays deal. And while there remains a lot we don’t know — spoiler alert, you’re still not getting one nice, satisfying round number at the end of this — we were able to determine more than we knew yesterday:

• On the central question posed yesterday — will the Rays pay property taxes on their mixed-use “stadium district” — the answer appears to be: yes, but not necessarily 100% of what they’d normally pay. In the city of Tampa’s feedback summary attached to the Rays’ proposed MOU, it’s noted that team owner Patrick Zalupski intends to pay enough in property taxes to cover payments on Community Redevelopment Agency bonds being used for the stadium. If the property taxes fall short, the Rays owner will pay “rent” (scare quores in original) to make up the difference. (Note: These “rent” payments are likely meant to assuage concerns that the city would be selling CRA bonds and counting on the property taxes from potential future development to pay them off; this way, Zalupski covers the bond payments even if he never erects a single building in the stadium district.)
• The CRA bonds have previously been reported to be for only $224 million, and full property taxes on an $8 billion development should generate a lot more than that. And there’s no guarantee in the MOU that the Rays will make tax payments equal what a private developer would pay on private land, so there could still be tax breaks involved here.
• The stadium district would be built in the Drew Park CRA — a TIF district, basically, that siphons off increased property taxes and uses them for development costs — so the city would already get no new tax revenues from that area through the expiration of the CRA, currently scheduled for 2034. Rays officials want to extend the CRA through 2056, meaning, yep, additional tax breaks.
• How big would the additional tax breaks on the Rays’ mixed-use development be? The state-owned land under it would not be taxed; Propheter estimates about $21 million worth of foregone property taxes there, starting in 2034. The real value, though, is in whatever the Rays build on top of the land, and one of the many unknowns about the project is that team execs still haven’t committed to what that would be. Propheter, at least, guesses that any foregone property taxes there would likely be more in the hundreds of millions of dollars than the billions, though without more details about what would be built and when, he can’t be sure.

So where does that leave us? The Rays calling their project “fully taxable,” it appears, is misdirection: They’ll be paying some property taxes, but they’ll be paying them to themselves, to pay off bonds for their own stadium. The good news, such as it is, is that that $224 million worth of future money is already accounted for in the team’s initial $1 billion subsidy ask, so it’s not an additional public cost on top of that. Any property taxes they get to skip out on in addition to the CRA bond payments would indeed be a new cost, likely in the tens to hundreds of millions of dollars. Plus there’s still at least $1.1 billion in free land and tax breaks on the stadium itself — which would be owned outright by the county, and so completely tax-free — to contend with.

All of which is an extremely long but hopefully instructive way of saying that the conclusion of yesterday’s post still stands: Tampa and Hillsborough county officials need to decide whether to commit upwards of $2.1 billion to a project with many unknowns in order to avoid even the possibility of the Rays moving down the road to Orlando, maybe. Given that even $2.1 billion would be easily the most expensive MLB stadium subsidy in history — at least until the next one — that number should be good enough for government work.

The Tampa City Council held the first of two scheduled workshops on a Rays stadium development yesterday, with both councilmembers and members of the general public asking whether a proposed deal isn’t being rushed through too fast before all the details have been spelled out. Whether or not to use money from the Community Investment Tax sales tax surcharge that officials had promised wouldn’t be used for stadiums is one open question, as is whether the CIT would even raise enough money and which sofa cushions to look under if it doesn’t.

Meanwhile, Axios, in one of its trademark fusillades of bullet points, raises yet another known unknown:

• It’s still unclear how much of the new stadium’s total footprint, including the surrounding mixed-use district, would be subject to property taxes. [Rays CEO Ken] Babby declined to address the question, as it’s still being negotiated.
• Yes, but: The Rays told the county that they intend for the planned mixed-use district surrounding the stadium to be “fully taxable,” while the stadium would be county-owned and therefore tax-exempt.

Those are two different answers! If the ancillary development around the stadium will be fully taxable, then that’s not still being negotiated; if it’s still being negotiated, we don’t know if it’ll be fully taxable. Furthermore, the college campus where the development would take place is state-owned, so that normally wouldn’t pay property taxes unless there’s a payment in lieu of taxes agreement.* Or maybe Rays execs are willing to allow it to be fully taxable, but only in exchange for some other concession, like the property taxes (or PILOTs) going to fund some part of the development? Totally speculating here, which is all we can do when team officials won’t answer questions directly.

How much of a difference would the Rays paying property taxes on their surrounding development make in terms of total public costs? What exactly team owner Patrick Zalupski would build around the stadium and when is another question team officials won’t answer, but there has been talk of it costing $8 billion. Property tax expert Geoffrey Propheter has already estimated that the cost of a full property tax exemption on a $2.3 billion stadium would be $742 million; while there’s no way to know what the tax valuation of a mixed-use development would be without knowing exactly what uses would be in the mix, it’s reasonable to expect that exempting it from taxes could cost a fair bit more than the stadium tax break, which could get us into the billions.

The total taxpayer shopping list for the Rays stadium-and-other-stuff project, then, now stands at:

• $750 million in county cash toward ballpark construction
• $250 million in city cash toward ballpark construction
• Between $250 million and $1.7 billion worth of free state land
• $742 million in property tax breaks on the stadium
• $97 million in foregone parcel fees on the stadium
• Between $0 and $??? in property tax breaks on the surrounding property, plus possibly other costs of that bigger project, given there’s still no memorandum of understanding covering it

That leaves the total public cost at $2.1 billion, minimum, and possibly billions more, maximum. It’s a ginormous error bar, and a huge pile of tax money either way, so you can see why Tampa and Hillsborough County officials might not want to rush into anything. Though on the other hand:

“People know the cost of everything but the value of nothing,” supporter Christopher Palermo said during public comment, primarily directing his remarks at [councilmember Charlie] Miranda. “If we lose this team, let’s not forget one thing: this is a competition to be the preeminent city in Central Florida. Orlando wants what we’ve got.”

(Palermo, for the record, is a construction and personal injury attorney who once spent $9,000 running ads telling then-Rays owner Stu Sternberg not to move half the team’s games to Montreal, something that turned out to be either a bluff or something that he’d failed to run past the league office.)

There is presumably a value to being the preeminent city in Central Florida — assuming the presence of a baseball team is how that crown is awarded — but is it $2.1 billion, let alone potentially billions more? That’s for Tampa and Hillsborough legislators to determine, and so far they seem content to wait for Zalupski’s side to cough up more info first.

*UPDATE 12:27 pm ET: Florida does have a provision for taxing leased property, though what rate it’s taxed at depends on a whole bunch of factors. (Thanks to Michael Bishop of the Tampa Monitor for pointing out the clauses in the proposed Rays MOU — see the tax memo at the end — governing this.) More to follow, eventually, on what exactly this would mean in terms of the possible value of any tax breaks for the mixed-use development.

Among the many issues being raised by Hillsborough County officials about Tampa Bay Rays owner Patrick Zalupski’s proposed multibillion-dollar stadium complex deal — which includes not actually knowing what additional development Zalupski actually wants to build atop what’s currently a community college campus and when — is the question of whether it’s kosher to use money from a 0.5% sales tax surcharge approved by voters in 2024 after elected officials specifically promised it wouldn’t be used for stadiums. Worse yet, the initial $467 million in projected tax revenues proposed by Rays-lovin’ county commissioner Ken Hagan turned out to be drastically inflated from reasonable expectations, blowing a $200 million hole in the proposed stadium budget that led to the dog’s breakfast of funding ideas that is currently up for consideration.

The Tampa Bay Times ran through the problems with some of the current stadium funding sources this weekend, including:

• More than $100 million in rainy day money, “reserves set aside as a cushion against hard times and that largely come from property tax dollars,” would drain funds that Hillsborough County “would likely look to if a hurricane strikes, the economy takes a downturn or state lawmakers roll back property taxes.”
• $20 million could be diverted from other projects that get scrapped or come in under budget.
• The county has $24 million in its economic development reserve, $10 million in a building maintenance fund, and $10 million in unallocated 2027 budget dollars, all of which could be used for a stadium.

That’s a lot of numbers and a lot of bureaucratic fund-shuffling, and the Times article spends much of its time focusing on how these proposals would use more money raised by property taxes and less by sales taxes to provide Zalupski’s desired $1 billion in county and city cash for his $2.3 billion stadium. (Free land and tax breaks would likely add another $1 billion or more.) But while it’s fun to point out exactly which funds would be drained — “county to steal from disaster relief money to pay for Rays stadium” is an irresistible headline — it’s also ultimately kind of beside the point.

If there’s one truism about government money, it’s that it’s fungible: If you take money from one place, you can always move money from somewhere else to cover the resulting budget hole. (Yes, sometimes there are particular funds that are earmarked for certain uses — hotel taxes that can only go to pay for tourism promotion are a popular one — but there’s almost always enough wiggle room that a local government can take from one budget line to replenish another.) And as a corollary, there’s no such thing as “leftover money”: Any funds that aren’t needed elsewhere can be used to offset other budget needs or, if you prefer, to keep taxes from being as high they would be otherwise. So unless you’re talking about new taxes that are specifically being imposed to fund a stadium project — which wouldn’t be the case for the Rays deal so far — deciding which pocket the public money is coming from is less important than the fact that Hillsborough County and the city of Tampa would be handing over public funds that it then wouldn’t have available for other uses.

And this isn’t just an academic consideration. Rays officials are hard at work trying to make the case that the issue isn’t whether Zalupski should receive $1 billion in tax money, but rather which $1 billion he should pocket:

“Certain funds and forms of funds are more probable than others, and I think that’s what the public officials are working day and night to figure out, which is: What is the right composition of those ingredients?” said Rays CEO Ken Babby.

“How those ingredients are used, and how much of them, I’m going to leave that for the public officials to comment on,” he said. “But I can tell you there is great appetite and desire from all sides to figure this out.”

This is, fundamentally, misdirection, and the Times isn’t doing anyone any favors by focusing on the budget trees and ignoring the overall subsidy forest. (It’s not as bad as the misdirection in the recent column by the Times’ official Rays stenographer Marc Topkin arguing that a new Rays stadium would lead the team to spend more on winning teams, which isn’t how it’s ever worked for any other team before, but it’s still not great.) Tampa and Hillsborough taxpayers and elected officials would do well to stay focused on how much of the bag the public will be left holding, not to mention what the overall size of the bag will be, something that county commissioner Christine Miller noted is still very much a moving target:

“As of today, we have no facts — we have bits and pieces of what those facts might be,” she said. “The absurd amount of ‘what-ifs’ directed to policymakers before we have a deal to opine on does no one in our community any good.”

It’s almost like voting on a multibillion-dollar stadium development project before knowing all the details isn’t a great idea! Rays team execs continue to try to assure county and city officials that that’s crazy talk and this is totally how responsible business deals are done, and they’d better hurry up and approve or else the team will “evaluate alternatives.” This is the choice county and city officials now face: Agree by the end of this month to pay an unknown amount of money for an undetermined project, or else face an unspecified threat to move the Rays to an unknown locale, maybe. Extortion threats used to be so much simpler in the old days.