Playing Subsidized Ball

The Washington Post reports on tax exempt financing for sports stadiums.

Houston alone has issued $158 million in tax-exempt bonds for its baseball park, $334 million for its football stadium and $227 million for its basketball arena.

"The big advantage for us is the lower rate of interest," said Oliver Luck, chief executive of the Harris County-Houston Sports Authority. "I don't think, quite honestly, that very many people are focused on the hit that the U.S. Treasury would take. Most folks look at these things in terms of the local taxes involved.

"Everybody has this mentality that because we send so much money to Washington, if you can get direct or indirect support of federal dollars, take advantage of it. But the federal government has contributed in a substantial way in getting football, baseball and basketball facilities built around the country."

Comments

[Brad S]

Everyone always wonders how pro athletes' salaries got so high. The answer: subsidy. Taxpayers build facilities for billionaire owners. It's ludicrous. Owners are relieved of the burden of having to pay for a facility, except for their leasehold payment, which is usually artificially low due to both the tax-exempt nature of the muni bonds that financed the facility as well as incentives usually given to the owner to keep him from moving his franchise. As a result, capital that was saved as a result of artificially cheap facilities is freed up to pay for human resources (i.e. A-Rod et al).

[John Hood]

Great link. This is part of a larger problem at the state and local level created by the federal tax treatment of government bonds. Because muni bonds are tax-free, they are a cheaper way of financing projects such as stadiums, convention centers, industrial parks, and the like than is typically available to private developers. (It actually doesn't benefit investors much, if at all, because the interest rates fall to compensate for the lower tax.) So private firms connive with governments to create public-private partnerships, faux nonprofits, "tax-increment-financing districts," revenue-bond authorities, and other shams to extend the government's bonding authority to private ventures. This inevitably gets governments involved what they shouldn't be, plus it invites a large degree of corruption into the political system (as if another such invitation were needed). It's all a great argument for a tax reform that eliminates the tax-free status of muni bonds -- or makes all bond tax-free, either way.

[prisoner]

Rex Stetson, what job have YOU got that requires so little of you that you can blog all day?

[J Canuck]

The biggest insult is not that munis build these playpens for filthy rich owners, it's that they then turn over all the profits derived from said playpen to the owner ( i.e. parking, concessions, etc.). Then, in a few years, when some other owner has figured out a new way to fleece an extra nickel out of his local/state government, all the other fatcats hold their breaths until they get the same breaks, or better yet, threaten to move out. Time to cut the umbilical.

[Hope]

In spite of what Huckabee wants to hide, we can get the information from the AK IDC via the FOIA.

[Kevin Carson]

I live in Arkansas, where a highly ethical Baptist preacher currently "serves" as governor. I know he's highly ethical, because he constantly proclaims it, and goes into a snit when anybody draws attention to all the gifts he receives from his wealthy patrons. Governor Huckabee ordered the Arkansas Industrial Development Commission not to release information to the public on corporate welfare deals they cut with companies looking to relocate to the state, because it would have a "chilling effect" on investment.