Taxpayers Really Shouldn’t Finance Sports Stadiums

Taxpayers should be informed as state lawmakers explore legislation providing billions for pro sports stadiums.

Three additional NFL stadiums are being built in New York, Tennessee, and Virginia. Oakland, California and Las Vegas, Nevada are exploring considerable investments to maintain or transfer the Oakland Athletics.

For each case, tax-exempt municipal bonds have been proposed as a critical funding source.

Municipal Bonds

These bonds save towns money by excluding them from paying taxes on the bond proceeds.

After a surge in professional stadium building utilizing these bonds in the 1950s, Congress sought to stop it in 1986 with the Tax Reform Act.

However, laws intended to prevent public stadium funding have allowed towns to do so at taxpayers’ expense.

To be tax-exempt, bonds have to be funded by the public at least 90% of the time.

As a result, towns had to bear a more significant percentage of the cost to remain tax-exempt. It increased taxpayer spending on stadium construction, rather than reducing the use of bonds.

Tax-exempt bonds have an influence on taxpayers beyond the towns that use them. When towns and states with pro teams utilize tax-exempt bonds to construct stadiums, they rob the federal government of tax money.

The 22 states without a professional sports team thereby support the states and cities that do.

Tax-exempt stadium financing diminishes funds available for more essential municipal projects like flood mitigation, school construction, and other infrastructure upgrades.

Houston, Texas, and Harris County spent hundreds of millions of dollars building NFL, MLB, MLS, and NBA stadiums between 2000 and 2011, leaving less money for required flood-mitigation infrastructure investments.

During Hurricane Harvey, the county’s outdated flood control systems failed, causing severe devastation.

No Economic Benefit For the Community

Many franchisees use disproved assumptions that investing in professional stadiums will encourage economic growth to support their agendas.

Owners of MLB, NBA, and NFL teams tout the stadiums’ ability to host important events like the Championship Series, Final Four, All-Star Game, and Super Bowl.

For a city or state, public support of a stadium is a subsidy and an enormous tax cut for billionaires. Still, it brings little to no economic benefit to the locality.

Sens. James Lankford (R-OK) and Cory Booker (D-NJ) presented legislation to close the tax-exempt stadium bond loophole, but it was not passed.

According to Rep. Earl Blumenauer (D-OR), the “No Tax Subsidies for Stadiums Act of 2022” would close a loophole created by the 1986 Tax Reform Act that permits towns and states to fund billion-dollar franchises.

Both proposals are trying to eliminate the ability to make these bond subsidies tax-free. A bipartisan effort is needed to make sure Congress does the right thing.

State and municipal authorities should examine how they use taxpayer dollars.

To improve local community services and schools, they should focus on enhancing local neighborhood services and schools, rather than increasing public debt through stadium bond programs.

Or, perhaps, they should cease issuing these bonds entirely.

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