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U.S. Taxpayers Have Been Forced to Pay Over $3.2 Billion on Sports Stadiums

Public financing of private boondoggles isn't just a local issue, according to new report from Brookings Institution.

You paid for this.Yobro10/Dreamstime.comOwners of professional sports teams frequently find their hands in the public coffers via sweetheart deals handed to them by state and local politicians eager for a photo-up with a shovel and a hardhat and an opportunity to promise jobs and other economic incentives which almost never materialize. But a new report from the Brookings Institution details how it's often federal taxpayers who are ultimately on the hook for the subsidies handed by the government to private businesses owned by billionaires.

To make this point, the report's authors (Brookings Senior Fellow Ted Gayer, Austin J. Drukker, and Alexander K. Gold) cite the construction of the new Yankee Stadium, which opened in 2009 and owed 68 percent of its financing to New York City-backed tax exempt municipal bonds — $1.7 billion worth. But just because the bonds were issued by the city doesn't mean the costs are limited to New York City taxpayers:

Because the interest earned on the municipal bonds is exempt from federal taxes, a large amount of tax revenue that would have been collected—had the bonds been issued as taxable—went toward the construction of the stadium. In other words, the Yankees received a federal subsidy to build their stadium. How much? About $431 million. That's a lot of money, but it gets worse.

The loss in federal tax revenues was even higher than the subsidy to the stadium. High-income taxpayers holding the bonds receive a windfall tax break, resulting in an even greater loss of revenue to the federal government. In the case of Yankee Stadium, the additional loss was $61 million. That is, the federal government subsidized the construction of Yankee Stadium to the tune of $431 million federal taxpayer dollars, and high-income bond holders received an additional $61 million.

Of the 45 major league professional sports arenas in the United States which have either been newly constructed or majorly renovated since 2000, the report calculates that "36 of them were funded, at least in part, with federal tax expenditures in the form of tax-exempt municipal bonds." Added up, the price tag of federal subsidies for professional stadiums totals around $3.2 billion, but balloons to $3.7 billion if the total loss in tax revenue — thanks to the "windfall tax breaks" of wealthy bondholders — is considered part of the total cost.

As we note often at Reason, there is almost no evidence available that sports stadiums add any economic benefit to their communities, and as the report correctly points out, "there is clearly no economic justification for federal subsidies for sports stadiums. Residents of, say, Wyoming, Maine, or Alaska have nothing to gain from the Washington-area football team's decision to locate in Virginia, Maryland, or the District of Columbia."

One potential solution offered by the authors is to have Congress end the "private payment test," which would put a stop to federal tax-exempt funds being used on buildings whose primary function is "private business use" — which would obviously apply to all professional sports arenas.

Watch Reason TV's doc on a publicly subsidized stadium boondoggle in Hartford (Conn.) below:

Photo Credit: Yobro10/Dreamstime.com

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  • Playa Manhattan.||

    A billion here, a billion there. Soon it all adds up to some real money.

  • loveconstitution1789||

    I really wish that writers of articles and people in general understood that tax breaks do not equal cash in the form of taxes from taxpayers. The assumption is that the feds would have received tax revenue from these projects and that, I assume, is where the flawed reasoning comes from. There is no guarantee that any of these projects would have taken place if these sports teams had to come with all the money for the stadiums themselves and had to do without tax incentives.

    Taxes are already too high, so I have zero problem with giving business tax breaks. I have a problem with giving businesses taxpayer funds for their projects.

    I have the most problem with any taxation that is not a flat tax without any exemptions for individuals and businesses. That is a different topic though.

  • toolkien||

    The tax breaks received will probably be cancelled out with Alternative Minimum Tax which stadium bond income is added back.

  • Matte Object||

    As usual, it depends on the tax break.

    When people hear "tax break", they're thinking of "non-refundable" tax credits or waivers on taxes paid - in both cases, neither of these refund more tax than the tax liability, hence the "non-refundable" part.

    However, most industry tax breaks take the form of "refundable" or "transferable" tax credits, which are structured in such a way that they refund far more tax than industry pays, in some cases, we're talking an order of magnitude more.

    I'll repeat that - don't assume that "tax breaks" are a reduction in taxes, they frequently refund a LOT more tax money than gets paid by feted industries and increase the tax burden on state taxpayers to give handouts to companies that aren't even based in those states.

    Film tax credits, in particular, are a perfect example - films are typically subsidized at 30% of cost (note, 30% of COST, not 30% of taxes) when states are only taxing those companies at most around 5% of their total budget (even assuming all that budget goes to taxable income).

    In fact, the $600m that Georgia is now spending per year is 3x the amount that they're spending on the Falcons new stadium. The $3.2bn spent on stadia since 2000 is less than two years' worth of the subsidies that state taxpayers give to Hollywood every year.

  • ||

    Without a major sports franchise, you aren't a real city. In municipal terms, you have a tiny dick, and are laughed at and made fun of by big-dick cities that host multiple teams. Just look at St. Louis; their dick shrank by 3 inches this year. If the Cards & Blues ever left, it would cease to be a city, and just be a giant vagina on the banks of the Mississippi River.

    You don't want to be a giant vagina, do you? So fucking pay up.

  • Atanarjuat||

    You also have to have a light rail and SoDoSoPa district, or you ain't shit.

  • loveconstitution1789||

    CtPa Town and Whole Foods. Gotta have a Whole Foods!

  • toolkien||

    Well, with all the beer brewed there, it does smell like yeast...

  • Quo Usque Tandem||

    I don't generally like sexual analogies, but have to give credit where it is due; your vagina monologue is wet spot on.

  • KevinP||

    Hillary Clinton fainted at the 9/11 memorial, but you wouldn't know it from the Reason web site.

    Suggested headline: Hillary Clinton faints in public, Reason staff hardest hit.

  • Citizen X||

    That's a terrible headline for an article about sports stadiums.

  • Certified Public Asshat||

    Read the lynx.

  • Atanarjuat||

    Apparently there is a meme making the rounds about her fainting spell* happening on 9/11 being her bad karma for letting those people die on the same date in Benghazi a few years ago. I'm not above a little schadenfreude.

    *If you think the one caught on camera was the first time it happened...

  • GILMORE™||

    You wouldn't know it from the front page of Reuters either (*which characterizes the story of the day as "Trump plays health card")...

    wapo, nyt, seem to want to emphasize "Pneumonia! = what America needs to know about this benign and common affliction"

  • Atanarjuat||

    America's political class: pretending to be experts in pneumonia and Aleppo since 2016.

  • Cynical Asshole||

    Needz moar "KOZMOZ!1!!1!11!!!1"

  • ||

    the federal government subsidized the construction of Yankee Stadium to the tune of $431 million federal taxpayer dollars

    Well, it is America's team.

  • Ken Shultz||

    MetLife stadium that's housing the New York Jets and the New York Giants reportedly cost about $1.5 billion.

    Maybe that's a new way to talk about costs with average Americans.

    For the total cost of the Iraq War, about $2.4 trillion according to the CBO . . . let's see, $2.4 trillion divided by $1.5 billion, carry the one. . . we could have had 1,600 football stadiums!!!

    I guess that's not the issue.

    The real problem is getting average Americans to understand that when the government borrows money, it comes out of our future paychecks.

    It's easier to get some people to believe that Jesus came to the wine-rescue of an overbooked kegger than it is to get them to believe that when the government spends their money, it's their money the government is spending.

  • WTF||

    Probably because whether the government spends the money on a stadium or not, their paychecks are raped exactly the same. If they don't spend it on a stadium, they will piss it away on something else. It's not like they'll get a tax refund if the stadium doesn't get built.

  • Ken Shultz||

    They'd borrow less.

    Less would come out of their future paychecks.

    For reals.

  • bassjoe||

    Hm, no economic benefit to building stadiums? Cities have a solution to that problem: they will just start building these monstrosities in "reinvigorated" downtown areas and claim the stadium is why the area is doing better, even if the stadium is only used about twice a month.

  • Cynical Asshole||

    "The Lofts at the Stadium in Sodasopa" does have a nice ring to it. /sarc

  • Atanarjuat||

    I'm pretty sure the way it works is if you knock over a few crack houses, they go away forever and never crop back up anywhere else.

  • Ken Shultz||

    It kinda worked in San Diego.

    Doesn't mean it will work anywhere else.

  • Diane Reynolds (Paul.)||

    U.S. Taxpayers Have Been Forced to Pay Over $3.2 Billion on Sports Stadiums

    Really? This seems light. Considering that one modern stadium can be half a billion dollars... one stadium.

  • Butts Wagner||

    $1B seems to be the new starting price. Isn't the proposed Las Vegas stadium for the Raiders going to cost $2B?

  • Rohdewarrior||

    Calling this Crony Capitalism is an oxymoron. This is crony socialism.

  • ||

    FUCK ART MODELL

  • Bob K||

    FUCK CLEVELAND!

  • Adans smith||

    Nothing new here. I'm waiting on a in depth article on Hillary's health. And not just the episode yesterday. She lie's about her record ,emails and possibly her poor health. My thought? Hillary,being cold blooded ,have either fin rot or ich.

  • Homple||

    Because the interest earned on the municipal bonds is exempt from federal taxes, a large amount of tax revenue that would have been collected—had the bonds been issued as taxable—went toward the construction of the stadium. In other words, the Yankees received a federal subsidy to build their stadium. How much? About $431 million. That's a lot of money, but it gets worse.

    Wait. Not taking is giving. now?

    I am confusal.

  • Contrarian P||

    Yeah that was my take too. They're acting like these guys getting a tax break on municipal bonds is some kind of windfall. There are loads of legit reasons a city might float municipal bonds, which are tax exempt to give people an incentive to buy them over private or federal bonds. The feds did this to themselves in the tax code and it's perfectly legal and moral to buy bonds this way. If these people didn't buy stadium bonds, they'd buy other municipals. It's not like these bondholders are somehow getting away with a crime, but that's how the authors seem to feel.

  • Cynical Asshole||

    That caught my eye too. I wasn't sure if I was reading it correctly since it seems as though Fisher is accepting the "not taking is giving" premise. Presumably because "sports stadiums." Perhaps an example of principals over principles not just being for progressive asshats?

  • WTF||

    I wasn't sure if I was reading it correctly since it seems as though Fisher is accepting the "not taking is giving" premise.

    That seems to crop up more and more at Reason these days.

  • Invisible Finger||

    Which is why I crop up here less and less. There is no point in supporting dumbed-down libertarianism.

  • The Late P Brooks||

    But just look at that new stadium in Minnasoda. It's beautiful. Why do you hate beautiful things?

  • Homple||

    The old inflatable-roofed Hubert Humphrey Metrodome was a fitting tribute to the man: a taxpayer funded bag of wind.

  • ||

    That's the one with the big pile of perfect throwing rocks in front of the glass walls, right?

  • spqr2008||

    Utini!!!! It's a glass Jawa Sandcrawler.

  • ||

    Trump speech was perfect. He nailed it. Right up until the end.

    My attention faded and then I thought I heard him say "We are going to be one nation under one god saluting one flag"

    I did a double take, asked my wife and she said "Yep. That's what he said"

    I guess he just cant help it. Upon further reflection, if he never says that again, he may have just stolen a lot of blue collar dems, Hispanics and Blacks. I don't know if it will prove to be brilliant or his usual tripping over his own dick.

  • Diane Reynolds (Paul.)||

    So is Trump now including Muslims?

  • Quo Usque Tandem||

    Another Il Duce moment, or tripping over his own dick, as you please.

  • Homple||

    You weren't going to vote for Trump no matter what. This was meant to fire up the people who would and convert some who might.

  • The Late P Brooks||

    "We are going to be one nation under one god saluting one flag"

    For some reason, I don't think that was a reference to e pluribus unum.

  • Dr. Fronkensteen||

    Ein reich, Ein Gott, Ein Flagge. Just sounds better in the original German.

  • Homple||

    I've heard politicians talk since the 1956 campaign speeches and most of the candidates said stuff like Trump did there. None of those who did turned out to be dictatorial. The one candidate who pointedly avoided such rhetoric is the current incumbent who is as close to an autocrat as I have seen in my lifetime.

    Make of it what you will, but I suggest using a little bowel control when Trump speaks.

  • toolkien||

    But we have all been touched by the copious players refusing to stand of the National Anthem to protest the huge drain from the people, in the form of regressive taxation, and the use of eminent domain to push people off to build sports districts (above and beyond the stadia themselves). The fact that the players have spoken so loudly about how taxpayer forced subsidization and the skyrocketing of player salaries go hand in hand has been inspiring.

    Oh

    /sarc

    A half century ago, ALL players in the NFL (perhaps with the exception of one or two) had to have off season jobs. Now most hold a financial place that even the charioteers of old Rome would have envied. Bread and Circuses...

  • toolkien||

    Oh, and

    http://www.smithsonianmag.com/.....28/?no-ist

    Same as it ever was.

  • robc||

    A tax break is not a subsidy.

    I mean, they work much the same and may be just as problematic, but they arent the same thing.

  • Glide||

    While I am generally unoffended by the "tax break = subsidy" equivalence (given that, while we are in permanent deficit spending mode, they yield the same final result - me still paying interest on that stadium debt in 50 years), care probably should be taken not to give any more ammo to the statist folks seeking to make us all equal in overtaxation.

    Doesn't bother me personally because in my version of libertopia there would be no tax deductions for any reason, but the pop-culture conflation of not taking and giving is presently being used more for evil than for good thanks to the anti-KKKochporation crowd.

  • Uncle Jay||

    RE: U.S. Taxpayers Have Been Forced to Pay Over $3.2 Billion on Sports Stadiums

    ...and why shouldn't the taxpayers be forced to pay over $3.2 billion on sports stadiums? You don't really expect millionaires and billionaires to pay for their own stadium, do you? They have other things to buy besides sports stadiums...like politicians. Besides, the unwashed masses has so much money, and these millionaires and billionaires have so little? One would be ashamed if they didn't contribute their hard earned money to such noble enterprises as sports stadiums. I know I wouldn't be able to sleep at night knowing I didn't have more money taken out of my check for a stadium is only used a few days out of the year. The guilty would be overwhelming for me, and I probably would fall into depression and kill myself. So look at this way. Allowing millionaires and billionaires to use their political influence to have the taxpayers pay for their sports stadiums saves the lives of those who really care where the ulta-rich spend their money.
    I'm sure everyone here would agree with that.

  • bassjoe||

    I feel like this article spends too much time criticizing the tax-exempt status of municipal bonds. Municipal bonds are tax-exempt because they're supposed to be "safe" but low-yield investments used to finance local public service projects.

    If they were taxed at normal investment rates, municipal bonds would either have to raise their yields to compete with corporate bonds or lose out on financing. So there was a policy decision made to socialize the tax "losses" from municipal bonds at the federal level in order for municipalities and their residents to pay less to finance their projects. Tax-wise, it likely evens out in the end since everybody pays a bit more at the federal level to subsidize local public projects around the country while they also take advantage of their own subsidized local projects.

    That said, municipal bonds should NOT be used to finance super-expensive projects that will mostly benefit private interests, like a sports team owned by a billionaire.

  • Bill E||

    When the citizens vote for the subsidy then it has not been "forced" on them, anymore than any other public spending. So here in Nashville we did it to ourselves. I wanted the team but voted against the (awful) stadium deal. I lost, and enjoy having the team here.
    I am against ANY special tax breaks to lure a particular business, and it's hardly just sports teams gaming the system. Any major employer knows damn well that concessions are there for the asking if considering moving just about anywhere.

  • Paper Wasp||

    If enough people woke up and stopped voting for public finance schemes for stadiums, the team-owning billionaires would figure out that they must pay for sports colossi themselves, and teams wouldn't leave. As it is, pro teams threaten to leave, stamp their feet and hold their breath until they turn blue, and weak governments and dumbassed voters give the teams their desired boondoggle.

  • Bubba Jones||

    Wait a minute. The problem here is that the "correct" answer is for these stadiums not to be built at all. Under that scenario, there is no federal tax receipt, so this article is wrong.

    If the assumption is that the NFL will issue corporate bonds and pay higher yields that then result in higher tax receipts, you need to remember that the higher yields would reduce the NFL's tax burden by the exact same amount. I am pretty sure that the interest paid on corporate bonds is a deductible business expense.

    So, this article is dumbfucked from the very beginning.

    I am not a tax lawyer.

  • FloridaProf||

    Excellent article except that there is no such word as "majorly"??? Is the writer 19?

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