A Chance to Get Sports Teams Out of Taxpayers’ Wallets

President Obama has a good idea: End the use of tax-exempt bonds to finance stadiums.
March 20, 2015
By Charles Chieppo  |  Contributor
Principal of Chieppo Strategies and former policy director for Massachusetts’s Executive Office for Administration and Finance

A little-noticed provision in President Obama's current budget proposal would protect state and local government officials from themselves by ending the practice of allowing tax-exempt bonds to be used to finance sports stadiums.

Tax-exempt bonds were designed to help governments build infrastructure by reducing borrowing costs, but political leaders routinely use them to benefit privately owned sports franchises. A 2012 Bloomberg analysis found that 22 National Football League teams were playing in stadiums that were financed with tax-exempt debt. Sixty-four baseball, basketball and hockey teams played in facilities that were built using the bonds.

Right now, the NFL's St. Louis Rams and Oakland Raiders, the National Basketball Association's Milwaukee Bucks and Golden State Warriors, and Major League Baseball's Oakland Athletics are all threatening to move if they don't get public subsidies to help build new facilities. Missouri Gov. Jay Nixon has said that losing the Rams would cost the state $10 million in annual tax revenue.

But you'd have to save $10 million for a lot of years to add up to the cost of providing public subsidies to profitable sports franchises. In a 2012 book, "Public/Private Partnerships for Major League Sports Facilities," Harvard urban planning professor Judith Grant Long estimated that just the difference between estimated and actual taxpayer subsidies for the 121 professional sports stadiums that were in use in 2010 was about $10 billion.

Long and Smith College economist Andrew Zimbalist estimated that the public shouldered about 60 percent of stadium capital and operating costs between 2000 and 2006. Long's book indicates that number has since risen to about two-thirds.

And it appears that taxpayers get little in return for their massive investments. One reason is simply that the subsidies are so large that stadiums can't produce enough in local or regional economic benefits to match them over the period they are in use. Sporting-event attendees are overwhelmingly local; if they didn't attend a football game, they would likely go to a movie or to a restaurant, so the region sees little in the way of money that wouldn't otherwise have been spent there. And much of the subsidy money flows to owners and athletes who often don't live in the area and spend the bulk of the money outside the host city.

State and local taxpayers may conclude that non-economic benefits such as local pride or entertainment value make stadiums worth the investment. But ask just about anyone in Boston, where record snow and cold has paralyzed the public-transit system this winter, and I suspect that most would agree that stadium subsidies shouldn't crowd out needed infrastructure investments.

President Obama has his own reasons for trying to put an end to using tax-exempt debt for sports stadiums: Tax exemptions on interest paid by muni bonds that were issued for sports structures costs the federal government $146 million annually. There would be a number of beneficiaries of doing away with the practice, but taxpayers would be the biggest winners of all.