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Competition among cities for the elusive prize of a professional sports franchise has spawned a building boom in stadiums, arenas, and ballparks. Local, state, and federal taxpayers subsidize professional teams that use a publicly owned sports facility. Typically, the state and local subsidy is provided through below-market rents, guarantees, and direct payments on behalf of the team. The federal subsidy is provided when state or local bonds are used to finance the facility. This article analyzes the legal and policy issues relating to tax-exempt financing of professional sports facilities. Section II examines the recent building boom in those facilities and the forces underlying that boom. Section III examines the federal tax laws on tax-exempt financing and the federal subsidy for publicly owned stadiums, arenas, and ballparks. Section IV analyzes whether there is any policy justification for the federal subsidy and examines the possibility of reform and potential legislative changes in the tax laws. The article concludes that such tax-exempt subsidies for professional sports venues are inequitable and not economically justified and argues that the building boom in professional sports facilities is an all-out raid by professional sports teams on local and national resources.
This book updates the public policy dialogue on major league sports facilities and the property tax in the US. By providing a rigorous treatment of the property tax within the context of major league sports facilities, this volume debunks the widely asserted claim that most major league teams do not pay property taxes. The chapters methodically lay out the property tax status of every activity major league facility, the actual worth of that property tax expenditure, and the impact of property tax exemptions on local public services. Using empirical data, the volume provides a foundation for informed policy making regarding major league sports facilities. As such, this book will be a useful tool for researchers and students in sports economics, sports management, public policy, and public finance, as well as practitioners involved in the policy process. Economists have extensively studied the billions of dollars that state and local governments have devoted to funding professional sports stadiums. However, the implicit subsidies that stadiums typically receive through property tax exemptions has received scant attention. In Major League Sports and the Property Tax, Geoffrey Propheter thoroughly examines the common practice of removing sports venues from local tax rolls, which results in millions of dollars in forgone tax revenue that is often not reported in the public accounting of costs. Propheter provides a detailed examination of how property taxes are administered and the implications that derive from stadium property tax exemptions and abatements. His comprehensive analysis presents stylized facts and specific examples that provide the most thorough treatment on the subject to date. The breadth of analysis and meticulous coverage of relevant issues demonstrates why Propheter has emerged as a leading expert on the economics of stadiums. This is perhaps the most important book on the public financing of stadiums written in the past decade, and anyone interested in stadium economics will want their own copy to read and reference. JC Bradbury, Professor of Economics, Kennesaw State University

Gaming the Tax Code

United States. Congress. House. Committee on Oversight and Government Reform. Subcommittee on Domestic Policy

Published: 2009

Total Pages: 108


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Users of publicly owned stadiums receive subsidies from both state-local and federal taxpayers. The federal subsidy arises when the stadium is financed with statelocal bonds issued at below-market interest rates paid for by exemption of the bonds' interest income from federal income taxes. A $225 million stadium built today and financed 100% with tax-exempt bonds might receive a lifetime federal tax subsidy as high as $75 million, 34% of construction costs. The total public subsidy for one year, 1989, of 21 stadiums with average construction cost of $50 million is estimated to have been $146.4 million, with $24.3 million, 17%, being federal subsidy. The federal subsidy will be at least quadrupled for the $200 million-plus stadiums now being built. Proponents argue that these stadiums' economic benefits justify the subsidies. Economic analysis suggests this is not the case. One study found that a new stadium had no discernible impact on economic development in 27 of 30 metropolitan areas, and had a negative impact in the other three areas. The reasons for this can be illustrated with the Baltimore football stadium proposal. Economic benefits were overstated by 236%, primarily because the reduced spending on other activities that enables people to attend stadium events was not netted against stadium spending. And no account was taken of losses incurred by foregoing more productive investments. The state's $177 million stadium investment is estimated to create 1,394 jobs at a cost of $127,000 per job. The cost per job generated by the state's Sunny Day Fund economic development program is estimated to be $6,250. The economic case against federal subsidy of stadiums is stronger. Almost all stadium spending is spending that would have been made on other activities within the United States, which means benefits to the Nation as a whole are near zero. Non-economic benefits are sometimes used by state-local officials to support the political decision to provide subsidies. Such benefits might be of value to state-local taxpayers, but are less likely to be of value to federal taxpayers. The change in treatment of tax-exempt bonds for stadiums made by the Tax Reform Act of 1986 has generated problems. It continues stadium financing as an open-ended matching grant for which the magnitude of the federal subsidy in any given year is determined without the input of federal officials and federal taxpayers; it virtually requires state-local governments to offer more favorable lease terms to its professional tenants; and it requires state-local governments to finance their subsidy with general revenue sources rather than benefit-type payments such as stadiumrelated user charges and rents. Two options are considered to reduce the federal revenue loss from this subsidy. Elimination of stadium tax-exempt bond finance might be the solution Congress thought it was adopting in 1986. This would, however, restrict the independence of state-local officials in a way rarely invoked to control unproductive investments in private activities. A second option would allow stadium bonds to be issued only as tax-exempt private-activity bonds subject to the private-activity bond volume cap. Requiring stadiums to be financed with private-activity bonds would further reduce the incentive for such investments because these bonds are subject to rules that increase project costs, rules that do not apply to stadiums financed with governmental bonds. One of these rules is the prohibition on use of private-activity bonds to finance luxury seating.
" America is in the midst of a sports building boom. Professional sports teams are demanding and receiving fancy new playing facilities that are heavily subsidized by government. In many cases, the rationale given for these subsidies is that attracting or retaining a professional sports franchise--even a minor league baseball team or a major league pre-season training facility--more than pays for itself in increased tax revenues, local economic development, and job creation. But are these claims true? To assess the case for subsidies, this book examines the economic impact of new stadiums and the presence of a sports franchise on the local economy. It first explores such general issues as the appropriate method for measuring economic benefits and costs, the source of the bargaining power of teams in obtaining subsidies from local government, the local politics of attracting and retaining teams, the relationship between sports and local employment, and the importance of stadium design in influencing the economic impact of a facility. The second part of the book contains case studies of major league sports facilities in Baltimore, Chicago, Cincinnati, Cleveland, Indianapolis, San Francisco, and the Twin Cities, and of minor league stadiums and spring training facilities in baseball. The primary conclusions are: first, sports teams and facilities are not a source of local economic growth and employment; second, the magnitude of the net subsidy exceeds the financial benefit of a new stadium to a team; and, third, the most plausible reasons that cities are willing to subsidize sports teams are the intense popularity of sports among a substantial proportion of voters and businesses and the leverage that teams enjoy from the monopoly position of professional sports leagues. "
Rich and his contributing authors provide a political and economic analysis of sports stadium construction in the United States—the impact it has on the sports industry itself and on the host communities in which stadiums and arenas are built. The book brings together the research of leading academic analysts of sports in American society and gives a candid assessment of the claims and benefits the sports industry makes, in its continuing promotion of new stadium construction. Focusing on Baltimore, Cleveland, Chicago, Boston, Detroit, New Orleans, Toledo and Phoenix, the authors examine the topic from the perspectives of history, politics, and economics—and in doing so they raise several questions about taxpayer and community protection issues. Specifically, what do communities really get out of these facilities? They point out that even as new and more expensive facilities are being built, Congress has not provided taxpayers and cities any real protection from the risks involved in stadium investment. Rich and his contributors examine how the pro-stadium coalitions mobilize and explain why stadium supporters manage to win most of their construction initiatives. In doing so, the contributors challenge the conventional wisdom that stadiums stimulate economic development and provide good jobs. On the contrary, they have not lived up to the promises owners made to their host communities. Neither have they generated high paying jobs nor have they met their operating costs. The book concludes with ways in which sports franchise owners can be held more accountable to their communities. The result is a powerful, well reasoned, skeptical but fair assessment of a growing phenomenon, and an important resource for professionals and academics in all fields of public policy administration and urban development and management.
This edited volume discusses the economic impact of sports facilities, franchises, and events on local economies. Written in honor of Robert Baade upon his retirement, the book provides a state-of-the-art of current research on the economic impact of sports, and recognizes the seminal contributions that Dr. Baade has made to this topic. The analysis of the economic impact of spectator sports is a vital public policy topic as $75 billion has been spent on stadium construction since 1990 in the US alone, with nearly $35 billion of this coming from taxpayer subsidies. True public cost of sports franchises is much higher than this as this figure excludes facilities outside the Big 5 domestic leagues (like NASCAR track, NCAA facilities, minor league baseball, and the Canadian Football Leagues), public subsidies for major events like the Super Bowl or Olympic Games, and excludes sports subsidies outside of direct stadium construction subsidies. Including contributions from many of the most notable researchers studying the economic impact of sports, topics include impacts of stadiums and franchises on local economies, labor markets, and tax collections, the effect of sports franchises on property values, and changes in the public and academic discourse on sports subsidies over time. This volume will be of interest to researchers and students of sports economics, management, public policy, and public finance.
Offering an overview of the sport industry and coverage of the foundational knowledge and skills required of the today's sport manager, Principles and Practice of Sport Management is devoted to educating students on the various industry segments where they can focus their careers. After detailing the history and various principles – from management and marketing to finance, legal and ethical – the book delves into key sports management segments, discussing the skills needed in those sectors, the types of positions available, and the curre