Sports arenas

Use of taxpayer dollars for pro-sports arenas sparks new scrutiny

For decades, cities and states have wooed sports teams with hefty grants for new arenas and stadiums, sums that have increased with the cost of facilities, despite howls from economists who deem them a misuse of it. public money.

Critics now have new momentum as the Obama administration targets grants. President Barack Obama’s 2016 budget, introduced to Congress last month, calls for a ban on the use of tax-exempt bonds to fund professional sports facilities. These bonds have raised about $ 17 billion over the past three decades, with the proceeds funding the construction of major league stadiums and arenas in cities from Seattle to Baltimore.

Other cities are evaluating the use of grants for new facilities in the coming years, including a football stadium in New York and a basketball arena for the Milwaukee Bucks which could use up to $ 220 million in obligations.

Cities and states typically pay off multi-decade tax-exempt bonds with income from levies such as sales tax or hotel tax. Investors who buy these bonds do not have to pay taxes on their income, which makes interest rates cheaper than for taxable bonds and lowers the cost of projects.

But financing business facilities with tax-exempt obligations has simply “shifted a greater portion of the costs and risks from private homeowners to local residents and taxpayers in general,” the Treasury Department said in its proposal. budget. Stopping municipalities from issuing the bonds would save the federal government $ 542 million over 10 years, the Treasury said.

The fate of the measure, linked to a wider debate on the budget, is not clear. A spokesperson for the House Ways and Means Committee declined to comment on the plan for the sports facilities, but said the committee “was considering proposals in the context of comprehensive tax reform.”

Representatives from Major League Baseball, the National Basketball Association and the National Hockey League declined to comment on the Treasury proposal, while a National Football League spokesperson did not respond to a request for comment .

Whatever the outcome in Washington, the move adds a new element to a long-standing public policy debate. Despite a near-unified view from economists and other academics that professional sports grants are not worth the cost, teams and elected officials have been remarkably effective in securing public investment in new facilities, which they believe will generally spur development. economic.

Research on the issue has accumulated over the past two decades. The general conclusion: a city’s economy is not penalized by the arrival of a new sports team or the construction of a stadium, and meager economic development dollars could be better spent with other investments. .

“You won’t get revenue growth; you won’t get tax growth; you’re not going to get job growth, ”said Dennis Coates, an economist at the University of Maryland in Baltimore County, who studies the economic effects of professional sports teams and facilities.

A 2007 study in the Journal of Sports Economics looked at cities that won professional teams. He found that adding a team “did not have a positive economic impact on the local community” and did not increase regional revenues.

In addition, some teams want to move after only two or three decades in a facility. The Miami Arena, the former home of the Miami Heat, was only open 20 years before it was demolished.

Mr Coates, who published work with similar findings, said that even in cities that attract teams from outside, new facilities typically attract entertainment dollars that would be spent elsewhere locally.

New York’s Yankee Stadium was built across from the old stadium. It employs 1,600 more people than the old facility, according to the team and city officials.


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Critics point to facilities like New York’s Yankee Stadium, built across from its predecessor and using more than $ 1 billion in tax-free debt. The construction was accompanied by hundreds of millions of dollars of investment in public infrastructure, including a new commuter train stop. Few real estate developments followed.

The team and city officials said it employed 1,600 more people than the old facility and created new parks in a poor neighborhood. “Since the construction of Yankee Stadium, it has kept its promises,” said Yankees president Randy Levine. He said the federal proposal “won’t change anything. This will in effect reduce economic development.

Proponents of using tax-exempt bonds generally argue that the projects will boost economic development and tax revenue, spurring new restaurants, tourism, and an influx of big wages from gamers.

The case in point, according to supporters, is the billion-dollar football stadium for the Minnesota Vikings under construction in Minneapolis, funded with nearly $ 500 million from the city and state to the using tax-exempt bonds. For decades, city planners had struggled to stimulate development in the area near the city center. The stadium has helped build $ 800 million in new office towers, apartments and a medical clinic, said Michele Kelm-Helgen, chairman of the Minnesota Sports Facilities Authority.

“I challenge anyone to come here and tell us that this stadium has not generated significant economic development, and I guarantee you there are more to come,” she said.

But critics say taxpayers are getting much less for their money than in the past, given soaring facility costs. For example, in addition to the Viking Stadium, the Minnesota Twins built a more than $ 500 million baseball stadium in 2010 with around $ 350 million in grants. The University of Minnesota built a nearly $ 300 million football stadium the previous year. Until recently, all three teams played in the Metrodome, built in 1982 at a cost of $ 68 million.

Write to Eliot Brown at eliot.brown@wsj.com

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