Search Results for: Portland has a plan

Oregon okays $800m in stadium bonds for MLB team, to be paid for with player income taxes that may not exist

access_time personNeil deMause

The votes are starting to come fast and furious now, as state legislative sessions wind down and lawmakers finalize work on stadium and arena bills. The latest yesterday was Oregon, where the state house voted 46-6 to approve using tax money to fund a new MLB baseball stadium, should Portland be awarded a team:

The bill authorizes $800 million in bonds to help fund the construction of a professional baseball stadium on Portland’s South Waterfront.

Instead of pulling from current state revenue, the bill calls for paying off the bonds through income taxes on players and staff. Proponents say it would be on the team to figure out how to fund the rest of the stadium, expected to cost $2 billion.

That $800 million figure is a little uncertain: While the bill authorizes the state to sell $800 million worth of bonds toward a stadium, it proposes paying it off with state income taxes paid by players, team staff, and their families. (A lot of the reporting is calling this a “jock tax,” as if it’s a special surcharge, but it’s not: While Oregon does charge income tax on visiting players, everyone on both teams in games played in Portland would still pay the usual maximum 9.9% Oregon income tax rate.) If baseball salaries keep soaring — and if a Portland team has close to an average MLB payroll, which is questionable given the behavior of some other expansion teams in low-revenue markets — then this could amount to enough money to pay off $800 million. If they stay flat as they have in recent years, though, the stadium fund could end $600 million short — even the bill’s own projections of a 3% annual rise in salaries would seem to leave the state about $200 million in the red.

So what happens if Portland gets a team, Oregon sells $800 million in bonds, and then there isn’t enough income tax revenue to pay it off? Advocates for the stadium subsidy say the owners of the as-yet-imaginary team would have to cover the difference — but that’s not at all how bonds work. It’s conceivable that Oregon could try to get team owners to agree to cover any shortfall in tax revenue in their lease, but that would be a really tough negotiating point, especially since MLB could easily just step in and say “cover the full $800 million or else we don’t give you an expansion team,” at which point Oregon would have to roll the dice on future salaries soaring or give up on its MLB dreams.

Not that the exact amount of future player income tax revenue matters that much: Even if it enough does come in to pay off the state’s share of stadium bonds, 1) it’s not all new money to Oregon, since a large chunk of it comes from local residents spending money on baseball in place of other things, and 2) it’s not a great idea to kick back taxes to local businesses because soon everyone will want one. But with pay-your-taxes-and-eat-them-too plans all the rage, it is still somewhat worthwhile to look at whether the tax money being promised will actually exist, and in Oregon’s case the answer seems to be “let’s all pretend and hope for the best.”

But anyway, Portland baseball boosters finally have an $800 million IOU from the state that they can wave in MLB’s face to try to get an expansion team if and when MLB actually expands, so it should be smooth sailing from—

Organizers floated several possible locations before settling on the former Zidell Yards shipbuilding site on a narrow strip of land between the Ross Island Bridge and the Tilikum Crossing.

The property offers terrific views of the Willamette River and great access to public transit, but few routes to the ballpark for private vehicles. Beyond that, backers have acknowledged the soil may be toxic on the former industrial property. And the site is in a liquefaction zone, meaning the ballpark would need expensive supports to ensure it could survive a major earthquake.

Toxic soil! Could fall down in an earthquake! Questionable finances! Just go ahead, Oregon, and plan your stadium on a haunted burial ground, might as well go for the clean sweep.

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Friday roundup: Bengals reno plan called “PR stunt,” plus the return of the Rays two-stadium plan

access_time personNeil deMause

Thanks to everyone who generously donated (and in some cases more than generously, you know who you are) to the Field of Schemes spring supporter drive — I have a whole lot of fridge magnets to send out! But first, there’s a weekly news roundup to get to:

  • That Hamilton County agreement to spend $80.5 million on Cincinnati Bengals stadium upgrades and repairs in exchange for no lease agreement at all turns out to be not so popular with the Hamilton County Commission, where commissioner Alicia “hugging the zero down” Reece called it “a PR stunt” because there’s no new lease while commission president Denise Driehaus countered (?) that “No one at that meeting ever said this was related to the final lease.” The county commission only has three members and the third, Stephanie Summerow Dumas, didn’t show up to yesterday’s meeting, so it’s hard to say what this means for the stadium proposal’s ultimate fate.
  • Hey, what if the Tampa Bay Rays built two stadiums, asks Tampa Bay Times opinion editor Graham Brink, one outdoors and one a refurbished Tropicana Field? Would that be cheaper or better? Probably not? Too bad, I already wrote the op-ed, and anyway this is just “back of the napkin” stuff. (Or envelope, which actually has two distinct sides. NAPKINS GOT BACKS!)
  • WAMU-FM reports that “a source familiar with [Washington Commanders stadium] talks” says funding “will likely involve the city borrowing against new tax revenues expected to be generated by any new development,” i.e., tax increment financing. The station cites a 2020 study claiming that D.C. has turned a profit on average on TIF districts — on first look it appears that the study’s authors guesstimated that development would still happen in the districts without the TIF but would take longer, which is probably a reasonable assumption but could create huge swings in the revenue numbers depending on what you mean by “longer.” I have emails out to a couple of TIF experts, I’ll update here if they have anything instructive to add.*
  • Former Cleveland Plain Dealer editorial director Brent Larkin says the Cleveland Browns stadium plans should be submitted to a public referendum, arguing that Ohio voters usually approve sports subsidy referendums anyway, so where’s the harm? Oh, and also it would be “a wildly generous gift to billionaire professional sports team owners at the same time those same elected officials are cutting aid to schools, food banks, libraries and programs for poor kids.” But anyway, it’ll probably win, so let the voters feel like they’re having a say, that’s democracy!
  • St. Petersburg Mayor Ken Welch has issued a proposal for redeveloping the waterfront that would include demolishing Al Lang Stadium, the old spring training ballpark that is currently home to the Tampa Bay Rowdies USL team. City councilmembers don’t sound too enthused about this, but also Welch’s managing director of city development said the Rowdies owners are “involved and they’re aware” of the plan, so maybe there’s a new soccer stadium proposal in the works? Worth keeping an eye on, if nothing else.
  • A group of downtown Kansas City businesses put up a giant sign with a giant QR code asking that a Royals stadium be built downtown. Chair of the Downtown Council of Kansas City: Gibb Kerr, managing director of the K.C. office of Cushman and Wakefield, a major developer, who surely would not be in position to profit from a downtown stadium, the Kansas City Star would certainly tell us if it were.
  • Work has begun at the proposed Las Vegas A’s stadium site on making it even flatter, this is what passes for progress these days.
  • Los Angeles Dodgers ticket prices are going up, and so is their payroll, and Forbes “contributor” Dan Schlossberg (author of “41 books and more than 25,000 articles about baseball”) concludes that the payroll must be driving up the ticket prices — sorry, Dan, that’s not how it works, there’s a book you might want to read if you have time between writing them.
  • Economist Joe Cortright has done his own analysis of the Portland baseball stadium income tax diversion proposal that I estimated could leave Oregon taxpayers hundreds of millions of dollars in the hole and determined that the total hole would be more than $600 million.
  • I was on WOSU’s “All Sides with Amy Juravich” on Wednesday to discuss the Browns and Bengals situations, and you can listen to it here. For those who are wondering: Yes, Andy Zimbalist and I did run into each other on the Zoom call as my segment ended and his began, and no, there were no punches thrown.
  • You can buy a piece of the shredded Tropicana Field roof at Tampa Bay Rays games for $15, with the money going to a Rays charity, and doesn’t the city own the roof remnants, shouldn’t the money be going to the general fund? Anyway, if anyone in the Tampa area has been looking for a National Hairball Awareness Day present for me, hint, hint!

*UPDATE: Eight minutes after I hit publish on this post, sports economist and tax expert Geoffrey Propheter replied to my question about the D.C. TIF study. Propheter said it “falls short of academic standards for economic policy analysis” because it doesn’t try to analyze how tax revenue from TIF developments compares to comparable plots of land, but rather just compares actual developments to hypothetical ones that would (according to the study’s assumptions) see different kinds of development take place. He concludes: “I don’t understand how anyone would use this study to justify a TIF for a Commanders stadium.”

And while I was writing the above, Greg LeRoy of Good Jobs First (disclosure: I’m doing some paid work for them, not on the subject of stadiums or TIFs) chimed in to note that D.C. TIF districts like the one for Gallery Place have had to be expanded to siphon off sales taxes from other nearby neighborhoods in order to break even.

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Can a Portland MLB stadium pay for itself with “no impact” to Oregon? Ha, ha, it is to laugh

access_time personNeil deMause

With the Oregon senate moving forward with plans to approve up to $800 million in stadium bonds for a potential MLB expansion team, to be funded with player income taxes — it just passed its last committee vote and is headed for the full senate — the Portland Business Journal asked a “Portland economist” to explain it. And while ECONorthwest’s Michael Wilkerson is indeed an actual economist, Ph.D. and everything, I only got as far as this sentence before I had to stop reading:

“The state is not looking at how they could spend this known, certain new income that would be generated. They’re saying this revenue will only happen if the state and PDP is successful in getting a team, and if PDP is successful in getting a team, you will then have the player income to fund the stadium. But if the team doesn’t come, that revenue goes away, and there’s no impact to the state.”

That is indeed the argument being made by wannabe MLB owner Craig Cheek: Without a baseball team, those income taxes — not a special “tax on players,” as some news outlets are reporting, but their regular Oregon state income tax that tops out at 9.9% — would not exist, so it’s free money. But is it true?

I’ve spent years beating my head against that wall — here I am doing it ten years ago regarding the Milwaukee Bucks owners plan to use a similar financing scheme — and frankly I’m tired of saying the same thing over and over again. So I asked some other actual economists who will be attending this week’s second annual sports economics conference at the University of Maryland-Baltimore County (yes, you’ll be seeing at least one more liveblog, likely on Friday’s session), and Geoffrey Propheter, who will be presenting his paper on “Determinants of Lawmaker Support for Sports Facility Subsidies: Inching Towards a Predictive Model?”, replied like so:

Player (and non-player staff too presumably) salaries come from, in part, residents spending money on tickets, concessions, parking, etc. In order for people to buy tickets, concessions, parking etc, they stop spending money on other goods and services. The businesses that would have received that consumer spending now don’t, and it instead accrues to the team owner as revenue and to players/staff as wages. This includes media revenue from things like TV rights — you used to go to the movies once a month but now you buy a monthly local TV subscription for the team, that sort of thing.

The part of the income tax stream that is new is the chunk paid by non-residents via MLB revenue sharing agreements.

So basically: No, when a Portland resident goes to an Orcas game instead of a Trail Blazers game, that doesn’t create new income taxes for the state. Yes, when a resident of South Carolina watches an Orcas game on Fox and part of the proceeds go to Portland ballplayers, that results in new income tax revenue for Oregon. But that’s not what the Senate bill does: Rather, it just adds up all the income tax revenue that was ever touched by baseball team employees, declare it an isosceles triangle, and sells $800 million in bonds on the proceeds.

And how did the state senate and Cheek come up with that $800 million number, anyway? J.C. Bradbury, whose conference paper is on “Franchise Relocation and Stadium Subsidies: Credible Threats or Cheap Talk,” chimed in that it’s worth looking at the projected Portland income tax revenues needed to pay off the bonds, which are, he said, “bananas.” but let’s go with “optimistic, to say the least.” The projections used a variety of scenarios, but mostly assumed average MLB payrolls would keep rising by 3% a year, as they have on average since 1989:

(Yes, that chart was put together by ECONorthwest, the company that employs Michael Wilkerson, the economist consulted by Portland Business Journal for his unbiased analysis back at the beginning of his post, who have actually been paid by Cheek’s prospective ownership group to work on its analysis, something the Journal didn’t divulge in its article.)

If you look closely at that chart, average player payroll relative to inflation has actually fallen since about 2017. That could be a temporary dip, or it could be an indicator of things like the popping of the cable bubble that could cause MLB revenues to flatten or decline.

And how you project future baseball revenues, it turns out, matters a lot to the $800 million stadium bond plan. The average MLB payroll right now is about $180 million a year, and the bill assumes that non-player payroll is about the same.* The Oregon bill assumes that players would pay 8.62% of their salaries in state income taxes and non-players 6.36%, which comes to $27 million a year — only enough to cover around $400 million in bonds. If baseball salaries rise by 3% a year, meaning the average player would be earning $14 million a year by the 2050s, then you could pay off around $600 million in bonds, by my back-of-the-envelope math — but if salaries are flat or fall, the state of Oregon could end up hundreds of millions of dollars in the hole. And when you take into account that much of those “new” income tax revenues wouldn’t actually be new, this looks like a guaranteed money loser for taxpayers in at least the half-a-billion-dollar range.

All of which any economist not in the employ of the Portland Diamond Project could have explained to Oregon readers, if they’d had the chance. This should make for some lively dinner conversation in Maryland this week, I expect.

*UPDATE: This bothered me when I read it, and bothered Bradbury even more, so I’ve spent a bit of time trying to track down where it came from, and … I still have no idea. My best guess is that it’s based on a bunch of figures showing that when you subtract out profits from income to get expenses, about half of that is player payroll, so then the other half has to be non-player payroll … which isn’t how “expenses” work at all, I know, but could ECONorthwest be that dumb? Don’t answer that.

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