It’s been a year since I excitedly got my copy of Geoffrey Propheter’s book Major League Sports and the Property Tax, so I figure it’s maybe time that I actually review it. (What can I say, a lot of shit happened last year.) Propheter is one of the most active researchers and commenters on sports venue deals, and was a property tax analyst for the New York City Independent Budget Office for three years, so he’s the perfect person to investigate the knotty question of how much exactly local governments are subsidizing sports team owners via property tax breaks.
As Propheter says at the outset, “property tax exemptions are government spending by another name”: There’s no functional difference between a government cutting a sports team owner a $100 million check and one granting them $100 million in tax breaks. (Propheter notes one economist’s quip that you could easily eliminate the entire defense budget by replacing it with a “Weapons Supply Tax Credit.”) But where it’s easy to calculate cash allocations, it’s a lot more contentious to establish how much taxpayers are giving up in tax money they would have gotten, if a stadium or arena had been subject to normal tax rates.
Previous attempts at coming up with property tax subsidy numbers — most notably by Rod Fort and Roger Noll and by Judith Grant Long — were general estimates without delving into the nuances of tax assessment. Assessments are more art than science at the best of times, as they require figuring out how much a building is worth to its owner; for sports venues, it’s doubly problematic given the problem of finding other examples to use for comparison, thanks to each city only having a handful of stadiums and arenas, and most of those being tax-exempt.
As of 2022, 79% of the 126 stadiums and arenas for the NFL, MLB, NBA, NHL, and MLS were fully exempt from real property taxes, according to Propheter, the same as in 2000 and up only slightly from 1970. After running through a whole lot of math, he concludes that the 105 current stadiums and arenas receiving tax breaks would have owed an additional $654.3 million in property taxes in 2022 if they’d paid like normal property owners. Topping the list by far: the Minnesota Vikings‘ stadium ($25.1 million in property tax breaks in 2021) and the New York Yankees‘ stadium ($24.2 million) — the latter of which double-dipped on its tax savings by then calling the team’s own bond payments “payments in lieu of taxes” in order to get access to cheap loans.
When Propheter extends those exemptions over the life of the buildings’ current leases, he comes up with a total public cost of about $18 billion (using a 3% discount rate for future value; it’s a bit less if you bump that up a couple points) that governments are handing over to sports team owners by letting them off the hook for full property tax payments on their current stadiums and arenas. The average sports venue that gets property tax breaks, then, gets about $171 million in public money from that source alone, on top of any actual budgeted cash, diverted tax revenues, free land, operating subsidies, or development rights that a team owner is likely to rake in.
So, what’s that to you, if you’re not a team owner or a city budget analyst? As Propheter explains, “Like all spending decisions, allocating $1 to good X means not allocating that dollar to good Y.” In this case, the opportunity cost of giving up that tax money is far from theoretical: Of that $18 billion in tax breaks, he calculates that $7.5 billion comes straight out of money for K-12 education, the most common use for property tax revenues.
There’s lots more in the book to sink your teeth into, especially if you love lots of charts and tables laying out the tax status of each stadium and arena. (You know I do.) It is admittedly priced for the academic market, so if you just want some distilled wisdom from Propheter, follow him on Twitter, where just in the last week he’s written a thread of top research insights on tax increment financing and reported that Virginia’s “72% privately financed” Washington Capitals and Wizards arena actually comes in at 63% public, for a final taxpayer bill of $1.64 billion. Did he include a spreadsheet? Of course he did.