Category: tax-exempt bonds

Friday roundup: Voters hate stadium subsidies, business leaders love ’em, the truth must lie somewhere in the middle

access_time personNeil deMause

Thanks for sticking around to the end of the week! As a reward, you get more news items to stick around through! This is the information economy you signed up for, sorry, no refunds!

  • The folks at No Home Run in Tampa Bay have commissioned a poll on the Rays stadium plans, and say it shows that while 51% of voters supported them initially, that figure fell to 38% after respondents heard “key financial details.” This turns out to be: that Rays owner Stu Sternberg would get stadium land at a price that appears to be below market value, that he wouldn’t pay property taxes, that the city would be on the hook for $494 million (including interest) while Sternberg would keep all revenues from the stadium including non-baseball revenue, and that he would not share profits on the sale of the team with the city, all of which are undeniably accurate — all polls are hot garbage, it’s true, but this one seems as legit as any.
  • What do people in Charlotte think of the plan to spend $650 million in public money on Carolina Panthers stadium upgrades? “Leaders say” that it’s necessary for Charlotte to remain a “big-league city,” according to the Charlotte Observer, at least if by “leaders” you mean the Charlotte Regional Business Alliance, that’s how representative democracy works, right, the only important people are the ones who own businesses? When not reporting on what the bosses think, the Observer also asked, “Could the Panthers leave Charlotte if they don’t get $650 million from the city?”, answering its own question by saying that sure, “the Panthers don’t appear to be interested in moving” and team owner David Tepper has made “no outward statements about wanting to relocate,” but they could, and other NFL teams have, are you $650 million worth of scared yet, huh, huh?
  • The Jacksonville city council seems prepared to rubber-stamp the city’s plan to spend $775 million in public money on Jaguars stadium renovations, with no councilmembers at a Wednesday workshop expressing major misgivings about the deal. There will be a single public hearing on June 17 for Jacksonville residents to weigh in — it remains to be seen how many councilmembers will show up for that, and how many will listen as opposed to just playing with their phones.
  • The Indianapolis City-County Council on Monday approved Mayor Joe Hogsett’s plan to create a TIF district to kick back taxes for a new MLS team and dissolve the one previously approved for the USL’s Indy Eleven. Indy Eleven fans are displeased, and some councilmembers questioned whether dedicating tax money to a team and ownership group that don’t even exist yet is the best move, but Hogsett countered that the Eleven plans were too financially risky and also the stadium was going to be built on a damn African-American graveyard, so good points on both sides, really!
  • Illinois House Speaker Emanuel “Chris” Welch has become the latest state official to tell the Chicago Bears and White Sox owners to pound sand on their subsidy requests: “Even after the election, I just think it’s, things we have to focus on: the kitchen table issues. People want to make sure their groceries are affordable, their rent is affordable, you know, that they have a roof over their head. The last thing they want us to be talking about is stadiums for sports teams. … As we’ve said to the Bears over and over again, to the White Sox, and also to the Chicago Red Stars, there’s just no appetite to use taxpayer funding to fund stadiums for billionaires.”
  • The Chicago Reader, meanwhile, has a good article on Chicago Mayor Brandon Johnson’s weird obsession with building the Bears a new stadium with tax money, which is even better since they fixed the part where the coining of the term “vaportecture” was credited to my old Deadspin editor Barry Petchesky. (It’s not the Reader’s fault — the new Deadspin owners broke a bunch of bylines when they did a site redesign, though they’re fixing them now.) I get quoted some in the piece, but the best line, as is often the case, goes to University of Chicago sports economist Allen Sanderson: “There’s a better chance of Brandon Johnson being drafted number one by the Bears than that stadium making a dollar.”
  • Janet Marie Smith, who worked on the design of the Baltimore Orioles‘ Camden Yards but is not involved with its current renovation, was asked by the Baltimore Banner to comment on what the O’s owners could possibly be spending $600 million or more of public money on, and mentioned various things that reflect a “more fluid way of watching a game,” including more standing room and bar areas, which is certainly one way of describing giving fans fewer places to sit.
  • The NFL is ramping up lobbying efforts to protect the use of federally tax-exempt bonds for stadiums, holding a briefing for Congressional aides during the draft in April. None of the recent attempts to rein in this practice went beyond a committee hearing, but since it saves sports team owners about $230 million a year in taxes for absolutely no benefit to the U.S. as a whole, may as well throw a few lobbyists at making sure no one even thinks about touching it, that’s the sports league way.
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Congressional bill would outlaw stadium tax breaks, except for most stadium tax breaks

access_time personNeil deMause

If you were reading pretty much anywhere last night, you probably saw a headline like this:

Lawmakers introduce bill to eliminate subsidies for pro stadium construction, citing in part Washington Commanders probe

As juicy as “eliminate subsidies for pro stadium construction” may sound, let’s cut to the chase: This bill would leave the vast majority of stadium tax breaks and other subsidies intact, it’s not new, and if history is any guide, it’s not going to pass. Other than that, break out the champagne!

The new news, in brief: Three Democratic Congressional representatives, Reps. Jackie Speier of California, Don Beyer of Virginia, and Earl Blumenauer of Oregon, introduced a bill yesterday called the No Tax Subsidies for Stadiums Act. The bill would amend the U.S. tax code by making taxable any bonds that are used to “finance or refinance capital expenditures allocable to a facility (or appurtenant real property) which, during at least 5 days during any calendar year, is used as a stadium or arena for professional sports exhibitions, games, or training.”

The particular subsidy this is meant to eliminate is the use of federally tax-exempt bonds for sports venues, a loophole with a long history dating back to the 1986 Tax Reform Act. That was the first time Congress noted that cities building new stadiums for sports teams were using their ability to finance projects with tax-exempt bonds — meant to be a way to cheaply raise money for non-profit-making municipal projects like parks or libraries — and thereby passing along a chunk of the cost to federal taxpayers, since bondholders wouldn’t owe federal taxes on the bond proceeds, meaning they would accept lower interest rates, meaning effectively the IRS was underwriting … the math gets complicated, but let’s go with as much as 20% of all stadium construction costs.

What happened next, as related in Field of Schemes the book:

By the early ’80s, so-called private activity bonds were everywhere — amounting to nearly 80 percent of all government bonds issued, and soaking up so much capital that there was little left over for genuine public interest projects. So Congress made a point of eliminating this subsidy as part of the 1986 Tax Reform Act, making private-activity bonds [i.e., those for projects either funded by or benefitting private companies] subject to the usual taxes. And in what was intended as a death blow to public-stadium deals, lawmakers specifically declared sports-construction projects to be private activity and thus taxable.

The 1986 law left two loopholes, however. First off, all projects already in progress were exempted from the new restriction. And second, it left one way to declare your sports construction bonds still tax-free, albeit at a tremendous cost to local governments:

The Tax Reform Act had redrawn the definition of private-activity bonds to be exceedingly strict: If more than 10 percent of the facility’s use was to be by a private entity, and more than 10 percent of the bonds would be paid off by revenue from the private project, the bonds were considered taxable. But what if the stadium lease were drawn so that total government revenues — whether from lease payments, ticket surcharges, parking fees, or whatever — were held below that 10 percent threshold? The local government issuing the bonds would take a bath on them, for sure. But if a city’s political leaders were willing to go along, teams could still have the use of tax-exempt bonds — and a guaranteed 90 percent of the resulting revenues to boot.

This 10%-test loophole got pricey in a hurry. In 2012, Businessweek estimated that the federal government was set to kick back $4 billion in taxes from 1986 through 2047 on stadium and arena bonds that had already been approved. In 2016, the Brookings Institution calculated $3.7 billion in tax-exempt bond subsidies on sports projects approved since 2000 alone.

Meanwhile, efforts to close the loophole appeared regularly on Capitol Hill:

Needless to say, aside from the language in the 2017 House tax bill — which probably only passed because House Republicans knew their Senate comrades would remove it, keeping their fellow millionaires’ tax breaks intact — none of those bills went anywhere, and the tax-exempt bond loophole remains intact today. That seems the likely fate of this latest bill as well, though it’s always possible that rage over the numerous sexual harassment allegations against Daniel Snyder will create more support for repeal than billions of dollars of lost federal tax money has.

As I discussed a few years back for Vice, if Congress really wanted to kill sports stadium subsidies dead rather than just talk about it, they would not only close the 1986 tax-exempt bond loophole, but go after all the other subsidies, tax and otherwise, that provide more than a billion dollars a year in public money toward pro sports facilities. And there’s a relatively easy way to do so, too:

Back in 1999, a U.S. Congressmember from Minnesota, David Minge, introduced a bill that would have taken on not only sports subsidies, but all local corporate subsidies in one fell swoop: The Distorting Subsidies Limitation Act would have established a new excise tax on all special benefits that private corporations got from state or local governments. In other words, you can have your $1.8 billion, Steinbrenners and Wilpons, but you’re going to owe tax payments to the IRS on that full amount.

Minge’s bill died immediately, of course. But it’s worth remembering that Congress does have the power to eliminate some or all stadium subsidies with the stroke of a pen — it simply chooses not to.

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What, if anything, will the end of the Trump era mean for sports stadium subsidies?

access_time personNeil deMause

Now that we’re all finally starting to come to grips with the presidential election ending in a landscaping company parking lot because Rudy Giuliani wanted to be away from jeering crowds and near an on-ramp to the highway back to New York, no doubt many of you are wondering: What, if anything, will the end of the Trump era mean for sports stadium subsidies? Or if you weren’t before, you are now, since literally the last words you read were those exact ones, in the headline that I just typed.

The answer, in all likelihood, is not much. Oh, sure, there may be dramatic changes in some federal policies impacting spending — for starters, a Biden Administration is far more likely to bail out local governments suffering from Covid-spawned deficits than a second Trump Administration would have been, meaning the trains may keep running. But public sports venue spending is mostly a local game, and it’s surprisingly resilient to ups and downs in local government finances: When times are flush, team owners argue that it’s a good time to spend on stadiums because taxpayers can afford it, and when times are tight, they argue that it’s a good time to spend on stadiums because the economy needs a boost.

The main way that the federal government underwrites private stadium costs is with tax-exempt bonds, which save team owners money by allowing them to get low interest rates on construction debt, at the expense of the federal treasury forgoing collecting income taxes on money earned by bondholders. Congress, realizing it was dumb for the IRS to let cities and states stick the feds with part of the bill for their stadium spending, tried to eliminate this loophole way back in 1986; that effort failed, spectacularly. Ever since then, the tax-exempt bond scheme has chipped in federal dollars on top of local dollars for the vast majority of stadium and arena deals — when the Brookings Institution last looked into how much this was costing, it determined that federal taxpayers had lost $3.7 billion just in the years 2000 to 2016 thanks to tax-exempt bond subsidies for sports venues.

There have, over the tax law’s 34-year history, been sporadic attempts to close the loophole; none have made it very far. Back in 2015, Barack Obama proposed prohibiting tax-exempt bonds for any building whose use would be more than 10% private (currently projects can be less than 10% in either private use or in private financing, which leads to tons of shenanigans); the then-Republican Congress wanted nothing to do with his proposal, and it withered and died. Two years later, as part of its 2017 tax bill, the still-then-Republican House of Representatives included a provision for eliminating tax-exempt sports bonds; the Senate version didn’t include it, though, and neither did the final compromise bill that was passed into law. Trump, who had previously criticized “the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country,” reportedly made restoring the tax-exempt bond dodge a priority in the wording of the final bill.

Senators Cory Booker of New Jersey and James Lankford of Oklahoma have been annually introducing a bipartisan bill to ban tax-exempt stadium bonds, but as you can see from the above about the 2017 Senate, they haven’t even gotten many of their colleagues to sign on. And while that 2017 House Republican action may seem promising — that year’s House included somewhat more drown-it-in-the-bathtub types than the more do-whatever-the-lobbyists-want GOP Senate leadership — as I wrote at the time, “A cynical mind would be tempted to speculate that the whole House bill to crack down on stadium tax breaks was just red meat to throw to libertarian types in the GOP and anyone else who’s pissed off about sports subsidies, and House Republicans knew that their Senate counterparts would rescue them by eliminating the bill so they wouldn’t have to answer to an angry Roger Goodell.”

So, while Booker and Lankford will no doubt be looking to Joe Biden to take up Obama’s push to end federal stadium subsidies, don’t expect it to be a priority, especially not while NFL lobbyists are still out there terrorizing the citizens. And, of course, even if one day the federal bond-subsidy tap is finally shut off, that’s a relatively small amount of money compared to the couple billion dollars a year that state and local government continue to throw at sports projects. To end that, we’d need something akin to Rep. David Minge’s bill to tax stadium subsidies to the point where they’re no longer lucrative to team owners. Given that Minge first proposed it way back in 1995 and it never got significant backing from either party, I really wouldn’t hold your breath on that one, but it’s a nice reminder that the feds could put an end to the entire three-decade-long scam that has made this site necessary, if it really wanted to.

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Friday roundup: IRS hands sports owners another tax break, A’s accused of skimping on Coliseum land price, Rays could decide this summer on … something

access_time personNeil deMause

Happy Friday! Here is a fatberg of stadium and arena news to clog up your weekend:

  • San Jose Mercury News columnist Daniel Borenstein says the Oakland A’s owners could be getting a discount of between $15 million and $65 million on their purchase of half the Oakland Coliseum site from Alameda County, which is hard to tell without opening up the site to other bids, which Alameda County didn’t do. You could also look at comparable land sale prices and try to guess, which shows that the A’s owners’ offer is maybe closer to fair value; it’s not a tremendous subsidy either way, but still oh go ahead, just write us a check for whatever you think is fair is probably not the best way to sell off public assets, yeah.
  • St. Petersburg Mayor Rick Kriseman says he expects to hear by this summer from Tampa Bay Rays owner Stuart Sternberg whether Sternberg will seek to build a stadium in St. Pete or across the bay in Tampa. Of course, Sternberg already announced once that he was picking Tampa and then gave up when nobody in Tampa wanted to pay for his $900 million stadium, so what an announcement this summer would exactly mean, other than who Sternberg will next go to hat in hand, remains unclear.
  • Fred Lindecke, who helped get an ordinance passed in St. Louis in 2002 that requires a voter referendum before spending public sports venues, would like to remind you that the soccer stadium deal approved last December still has to clear that hurdle, not that anybody is talking about it. Since the soccer subsidies would all be tax kickbacks and discounted land, not straight-up cash, I suspect this could be headed for another lawsuit.
  • Cory Booker and James Lankford have reintroduced their bill to block the use of federal tax-exempt bonds for sports venues, but only Booker got in the headline because Lankford isn’t running for president. (Okay, also it’s from a New Jersey news site, and Booker is from New Jersey.) Meanwhile, the IRS just handed sports team owners an exemption from an obscure provision of the Trump tax law that would have forced them to pay taxes on player trades; now teams can freely trade their employees like chattel without having to worry about taxes that all other business owners have to, thank god that’s resolved.
  • Golden State Warriors star Kevin Durant, for some reason, revealed that “Seattle is having a meeting to try to bring back the Sonics,” but turns out it’s just Chris Hansen meeting with a bunch of his partners and allies from his failed Sodo arena plan, not anyone from city government at all, so everybody please calm down.
  • The rival soccer team that lost out to David Beckham’s Inter Miami for the Lockhart Stadium site in Fort Lauderdale is now suing to block Beckham’s plans for a temporary stadium and permanent practice facility there, because this is David Beckham so of course they are.
  • Publicly owned Wayne State University is helping to build a $25 million arena for the Detroit Pistons‘ minor-league affiliate, and Henderson, Nevada could pay half the cost of a $22 million Las Vegas Golden Knights practice facility, and clearly cities will just hand out money if you put “SPORTZ” on the name of your project, even if it will draw pretty much zero new tourists or spending or anything. Which, yeah, I know is the entire premise of this site, but sometimes the craziness of it all just leaps up and smacks you in the face, you know?
  • The Philadelphia Union owners have hired architects to develop a “master plan” for development around their stadium in Chester, because they promised the city development and there hasn’t been any development and maybe drawing a picture of some development will make it appear, couldn’t hurt, right?
  • Wannabe Halifax CFL owner Anthony LeBlanc insisted that “we are moving things along, yeah” on getting federal land to build a stadium on, while showing no actual evidence that things are moving along. “The only direction that council has ever given on this is ‘dear staff, please analyze the business case when it comes,’” countered Halifax regional councillor Sam Austin. “Everything else is media swirl.”
  • Never mind that bill that could have repealed the Austin F.C. stadium’s property tax break, because its sponsor has grandfathered in the stadium and any other property tax breaks that were already approved.
  • Hamilton, Ontario, could be putting its arena up for sale, if you’re in the market for an arena in Hamilton, Ontario.
  • And finally, here’s an article by the Sacramento Bee’s Tony Bizjak on how an MLS franchise would be great for Sacramento because MLS offers cheap tickets and a diverse crowd who like public transportation and MILLENNIALS!!!, plus also maybe it could help incubate the next Google, somehow! And will it cost anything or have any other negative impacts? Yes, including $33 million in public subsidies, but Tony Bizjak doesn’t worry about such trivialities. MILLENNIALS, people!!!
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Friday roundup: Trump rescued stadium tax break, Sacramento MLS group needs more cash, more!

access_time personNeil deMause

Happy interval between Hanukkah and Christmas! If anyone is out there reading this and not getting on a plane from somewhere to somewhere else — or is reading this while waiting for a plane from somewhere to somewhere else — enjoy your lightning-round news of the week:

  • San Diego Union-Tribune columnist Kevin Acee, who never met a stadium or arena deal he didn’t love to bits, says that several people are interested in building a new arena in San Diego, including the owners of the Padres and new Brooklyn Nets minority owner Joe Tsai. Acee adds, “Several people insisted in recent weeks the Nets will remain in Brooklyn long-term and there are no plans to ever move the team to San Diego,” which, given the relative size of the markets, is possibly the least surprising sentence ever written in the English language. Also, Acee includes zero attributed quotes in his story, and says nothing about how such an arena would be paid for, so take it with a large grain of salt for the moment.
  • Donald Trump made retaining the tax-exempt bond subsidy for sports stadiums in the tax bill “a priority,” according to one GOP aide. So when he tweeted in October, “Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!”, either he didn’t mean anyone to take him seriously just because he was the president of the United States speaking out on a matter of public policy, or more likely he just forgot to check with his funders before clicking Tweet.
  • “The Miami Open tennis tournament won permission to move to the Miami Dolphins’ stadium, with the kickoff planned in 2019,” reports the Associated Press, which seems to be slightly confused about how a tennis match starts.
  • After the NBA used the promise of an All-Star Game for Cleveland in 2020 or 2021 if it approved publicly funded arena renovations for the Cavaliers, and the city approved $70 million worth, the league gave those games to Chicago and Indianapolis. Not that there’s really that much value in hosting an NBA All-Star Game, but still, HA ha, suckers.
  • Apparently the reason why Sacramento didn’t get an MLS expansion team along with Nashville this week is the league is worried the city’s ownership group doesn’t have enough cash for a $150 million expansion fee and a $250 million stadium. All they need is to find someone with deep pockets who thinks the best thing to do with their money is to invest it in a U.S. soccer franchise that will start off $400 million in the hole, and, well, good thing that P.T. Barnum movie is opening this week, that’s all I can say.
  • There’s a “Plan B” stadium proposal for the Pawtucket Red Sox, where instead of helping to fund the stadium directly, the state would instead give the city all income and sales taxes collected at the stadium and let the city use the money on construction costs. Rhode Island state senate president Dominick Ruggerio says he doesn’t “see that as being a viable alternative,” and plans to submit his own stadium-financing bill, which probably won’t pass the state house. This could go on for a while, until somebody remembers where they stored the money generating machine.
  • The Arena Football League is now down to four teams, in part because the Cleveland Gladiators had to suspend operations for the next two seasons thanks to renovations to the Cavaliers’ arena. This was reported in the Albany Times-Union, which has to care because Albany is supposed to be getting an AFL expansion team this year, and man, do I feel sorry for whoever got stuck with being the Times-Union beat reporter on this team, because this is looking like a sad year ahead for them.
  • Deadspin’s Drew Magary weighed in this week on arena and stadium subsidies and concluded that “Arenas Are Important And Football Stadiums Are Not,” according to his headline, but really he meant “if you’re going to waste money on something, at least arenas can be used more days of the year,” which, fair enough. Or as Magary puts it as only he can: “We are entering an age of horrific corruption, and so I have accepted the fact that living in a fraud-free America is a hilarious pipe dream. All I can do is hope for the least of all corruptions, and pray that a bare scrap of public good accidentally comes out of it. If you are some ambitious dickbag city councilman looking to make his name for himself, an arena should be your priority when it comes to getting worked over.”
  • NHL commissioner Gary Bettman spoke out again about the Calgary Flames arena situation, calling it “very frustrating” and saying that “they’ll hang out and hang on as long as they can and we’ll just have to deal with those things as they come up,” but insisting that “yes, Quebec City has a building, but nobody’s moving right now, we’re not expanding East.” Which either means the Flames owners really don’t want to threaten to move right now (or ever), since making overt move threats is usually Bettman’s job, or it means even Bettman is sick of trying to pretend that the Flames have a viable threat to go anywhere.
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Congress restores sports bond tax break, now every American can help pay for Raiders stadium

access_time personNeil deMause

So the U.S. House tax bill proposed finally eliminating tax-exempt bonds for sports stadiums three decades after Congress accidentally left in a loophole about it, and the Senate version of the bill didn’t have that provision, and who could possibly guess how the two would end up reconciled?

The bill keeps a provision that allows the use of tax-exempt bonds for stadium projects. It would have been eliminated under the House version. Since 2000, the federal government has subsidized sports stadiums to the tune of $3.7 billion, according to a recent study by the Brookings Institution.

Yeah, as I was afraid of, the 31-year-old provision allowing federally subsidized tax-exempt bonds to be used for private sports stadiums so long as team owners jump through a few easy-to-jump-through hoops was revived by the House-Senate conference committee, surely not because any of them got any calls from any NFL lobbyists. This means that team owners will continue to be able to get lower interest rates on stadium bonds thanks to federal taxpayers footing the bill for the difference, which makes no damn sense but sports leagues like it so there you go.

A cynical mind would be tempted to speculate — did speculate already on Friday, in fact — that the whole House bill to crack down on stadium tax breaks was just red meat to throw to libertarian types in the GOP and anyone else who’s pissed off about sports subsidies, and House Republicans knew that their Senate counterparts would rescue them by eliminating the bill so they wouldn’t have to answer to an angry Roger Goodell. Regardless, looks like Mark Davis’s Las Vegas Raiders stadium bonds are safe — taxpayers in the rest of the U.S., hope you’ll enjoy your federal taxes helping to pay for Davis’s new home, because you’ll be doing so to the tune of $100 million.

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Friday news: Phoenix funds Brewers but not Suns, brewers float crowdfunding Crew, and more!

access_time personNeil deMause

So, so much news this week. Or news items, anyway. How much of this is “news” is a matter of opinion, but okay, okay, I’ll get right to it:

  • Four of Phoenix’s nine city council members are opposed to the Suns‘ request for $250 million in city money for arena renovations, which helps explain why the council cut off talks with the team earlier this week. Four other councilmembers haven’t stated their position, and the ninth is Mayor Greg Stanton, who strongly supports the deal, meaning any chance Suns owner Robert Sarver has of getting his taxpayer windfall really is going to come down to when exactly Stanton quits to run for Congress.
  • Speaking of Phoenix, the Milwaukee Brewers will remain there for spring training for another 25 years under a deal where the city will pay $2 million a year for the next five years for renovations plus $1.4 million a year in operating costs over 25 years, let’s see, that comes to something like $35 million in present value? “This is a great model of how a professional sports team can work together with the city to extend their stay potentially permanently, which is amazing, and we’re doing it in a way where taxpayers are being protected,” said Daniel Valenzuela, one of the councilmembers opposed to the Suns deal, who clearly has a flexible notion of “great” and “protected.”
  • And also speaking of Phoenix (sort of), the Arizona Coyotes are under investigation by the National Labor Relations Board for allegedly having “spied on staff, engaged in union busting and fired two employees who raised concerns about pay.” None of which has anything directly to do with arenas, except that 1) this won’t make it any easier for the Coyotes owners to negotiate a place to play starting next season, when their Glendale lease runs out, and 2) #LOLCoyotes.
  • A U.S. representative from Texas is trying to get Congress to grandfather in the Texas Rangers‘ new stadium from any ban on use of tax-exempt bonds in the tax bill, saying it would otherwise cost the city of Arlington $200 million more in interest payments since the bonds haven’t been sold yet. (Reason #372 why cities really should provide fixed contributions to stadium projects, not “Hey, we’ll sell the bonds, and you pay for whatever share you feel like and we’ll cover the rest no matter how crappy the loan deal ends up being.”) Also, the NFL has come out against the whole ban on tax-exempt bonds because duh — okay, fine, they say because “You can look around the country and see the economic development that’s generated from some of these stadiums” — while other sports leagues aren’t saying anything in public, though I’m sure their lobbyists are saying a ton in private.
  • A Hamilton County commissioner said he’s being pressured to fund a stadium for F.C. Cincinnati because Cincinnati will need a sports team if the Bengals leave when their lease ends in 2026 and now newspapers are running articles about whether the Bengals are moving out of Cincinnati and saying they might do so because of “market size” even though market size really doesn’t matter to NFL franchise revenues because of national TV contracts and oh god, please make it stop.
  • MLB commissioner Rob Manfred says the proposed Oakland A’s stadium site has pros and cons. Noted!
  • NHL commissioner Gary Bettman says the Calgary Flames‘ arena “needs to be replaced” and the team can’t be “viable for the long term” without a new one. Not true according to the numbers that the team is clearing about $20 million in profits a year, but noted anyway!
  • Cincinnati Mayor John Cranley is set to announce his proposal for city subsidies for F.C. Cincinnati today, but won’t provide details. (Psst: He’s already said he’ll put up about $35 million via tax increment financing kickbacks.)
  • The Seattle Council’s Committee on Civic Arenas unanimously approved Oak View Group’s plan to renovate KeyArena yesterday, so it looks likely that this thing is going to happen soon. Though apparently the House tax bill would eliminate the Historic Preservation Tax Credit, which the project was counting on for maybe $60 million of its costs, man, I really need to read through that entire tax bill to see what else is hidden in it, don’t I?
  • The owners of the Rochester Rhinos USL club say they need $1.3 million by the end of the month to keep from folding, and want some of that to come from county hotel tax money. Given that the state of New York already paid $20 million to build their stadium, and the city of Rochester has spent $1.6 million on operating expenses over the last two seasons to help out the team, that seems a bit on the overreaching side, though maybe they’re just trying to fill all their spaces in local-government bingo.
  • There’s a crowdfunding campaign to buy the Columbus Crew and keep them from moving to Austin. You can’t kick in just yet, but you can buy beer from the beer company that is proposing to buy the team and then sell half of it to fans, and no, this whole thing is in no way an attempt to get free publicity on the part of the beer company, why do you ask?
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Friday fun: Draw your own Rays stadium, Pacers make money hand over subsidized fist, and more!

access_time personNeil deMause

Oh, has it ever been another week! Some things that happened:

  • The Indiana Pacers revealed they brought in a record $13.2 million in revenues from non-sports events last year. “We’re trying to be a good steward for this venue,” said Rick Fuson, president of the team that is getting paid $16 million a year by the city to run its arena without sharing any of its revenues with taxpayers and also may ask for more public money for arena upgrades soon. “This is about an investment into the economic vitality of our city and our state.”
  • UC Berkeley is going to bail out its terrible football stadium deal with non-athletic department funds, though it can’t say where exactly the money will come from other than that it won’t be student tuition or state tax dollars. You guys, I’m starting to worry that UC Berkeley may have a lucrative meth-lab business on the side.
  • The University of Connecticut is spending $60 million on three new stadiums, which it will presumably totally pay for out of student tuition and tax dollars.
  • The NFL is opposed to the language in the GOP tax bill that would ban use of tax-exempt bonds for sports stadiums, because of course it is. “You can look around the country and see the economic development that’s generated from some of these stadiums,” NFL spokesperson Joe Lockhart said with a straight face, either because he doesn’t understand that any sliver of economic development in one part of the U.S. from stadiums just comes at the expense of economic development in another part, or because it’s what he’s paid to say, or both. Meanwhile, speaking of that tax bill, there are a lot of reasons to be terrified of it, even if that stadium clause would be nice.
  • The Oakland Chamber of Commerce polled 503 “likely voters” and found that a large majority supported the idea of an A’s stadium at “a new, 100 percent privately financed site, near Interstate 880, four blocks from Lake Merritt BART and walking distance from downtown.” Cue the opposition poll describing it as a “cramped site wedged into an already-developed neighborhood with existing traffic problems” in three, two…
  • A website commenter got sick of waiting for the Tampa Bay Rays to issue stadium renderings and drew some of their own, getting on SBNation for it despite having failed to find the Fireworks menu in their CAD program. No, I don’t know why it has an apparent non-retractable roof, or how people in that upper deck in right field will get to their seats, or what’s holding up those seats, or lots of other things.
  • FC Cincinnati president Jeff Berding says a stadium announcement is scheduled for next week and that it will involve Cincinnati Mayor John Cranley, so presumably the team owners are now focused on building in Cincinnati instead of across the river in Kentucky, using Cincinnati’s tax kickbacks instead of Kentucky’s. Poor Cincinnati.
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Ban on tax-exempt bonds would add $100m-plus to Nevada’s costs for Raiders stadium

access_time personNeil deMause

That provision in the U.S. house tax bill to bar use of federally tax-exempt bonds for pro sports facilities is already starting to freak out proponents of the Oakland Raiders‘ planned $1.9 million stadium in Las Vegas, which is set to use $750 million in public bonding:

“We stress-tested the model for things like higher interest rates,” [Nevada economic analyst Jeremy] Aguero said. “We understand the potential that comes with either legislative risk, or interest-rate risk or development risk, for that matter. I wish I could tell you it’s going to cost X amount of dollars in order to make it work but we need to go through the exercise of making sure we understand all the components of that legislation because that’s not the only one that will affect municipal finance.”

Okay, sure, figuring out how exactly this bill’s passage would affect the Raiders stadium costs is complicated. Figuring out roughly how much it would affect it, though, is dirt easy: Tax-free bonds typically allow an interest rate 1-1.5% below taxable bonds. So adding that much to the financing costs on the state’s $750 million would mean an extra $7.5-11.25 million a year, which over 30 years, converted into present value … I get between $115 million and $173 million worth of added interest costs.

So that’s a hefty chunk of change, and the big question would be who would pay it: The state or Raiders owner Mark Davis? That all depends on what it says in the team’s stadium lease — and in all likelihood it just says “we’ll use tax-exempt bonds,” meaning the whole thing would need to be renegotiated to settle who’d be on the hook for the extra cash. That would certainly be interesting.

(Note: It’s also important to remember, as I almost didn’t while writing this headline, that this would not be an increased cost of the stadium — it would just be shifting $115 million to $173 million worth of costs from the federal treasury, which would have been subsidizing it with tax exemptions, back to the state. It would make a hidden subsidy less hidden, in other words, but somebody’s paying those costs regardless.)

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House tax bill would finally put a fork in tax-exempt bonds for sports stadiums

access_time personNeil deMause

Buried deep in the hand grenade of a tax bill proposed by the House of Representatives is a clause that a lot of people have been waiting a long time for:

To recap briefly for anyone who hasn’t been reading this site: In 1986, Congress tried to rein in the use of federally tax-exempt state and municipal bonds — basically a funding mechanism by which local governments can get lower interest rates by fobbing off some costs onto the federal government — by prohibiting their use for any projects where more than 10% of the use would be by a private entity, and more than 10% of the cost would be paid for with private dollars. The idea was to allow tax-exempt bonds for projects that genuinely needed the help — public parks, say — but preventing cities from just sticking federal taxpayers with part of the bill for private projects that could pay their own way.

To say that this failed would be a massive understatement. Local governments immediately started upping their public contributions to stadium and arena projects to keep the private share under that 10% limit — and where that wasn’t possible, they resorted to shenanigans like accepting private payments but pretending they were public tax money. The result has been $3.7 billion in federal subsidies to sports facilities since 2000, according to a Brookings Institution study; it’s this provision that has meant that Red Sox fans living in Boston helped pay for a share of the New York Yankees‘ new stadium.

Rep. Dennis Kucinich proposed prohibiting sports stadiums from using the tax-exempy bond dodge a decade ago, then President Obama did the same in 2015, then Senators Cory Booker and James Lankford did it earlier this year, and finally President Trump hinted at it (in retaliation for NFL players taking a knee during the national anthem) last month. But only now are we seeing actual legislative language for outlawing tax-exempt stadium bonds in a bill that might actually be passed.

Whether it will, in this form, is anybody’s guess: The House could still strip the stadium language before passing the tax plan, or it could be eliminated in the Senate version of a tax bill; you have to figure that sports league lobbyists are working the phones hard this morning. Even if it does pass, it won’t eliminate sports subsidies by any means — state and local governments will still be welcome to throw their own money at team owners, and they would almost certainly seek out loopholes by, say, trying to use tax-exempt bonds to finance all the parts of a stadium project not used for sports. (An attached food court isn’t really “used for games,” right?) But it would at the very least close a 31-year-old loophole that even the guy who wrote it into law wanted repealed, which would be a start, anyway.

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