The NFL is not a big fan of recent Republican tax reform proposals that cancel the billions that teams get in tax subsidies to build and operate sports stadiums across the country, a report says.
The tax proposal would eliminate the big tax breaks cities and states receive on money borrowed to build stadiums meant to entice or prevent sports franchises from moving to another city.
“The proposed tax bill would target the tax exemption on municipal bonds,” Pro Football Talk wrote, “and those bonds have become a key piece of the $750 million in public funding that will build a new stadium for the Raiders in Las Vegas.”
But the tax reform idea does not sit well with the National Football League, according to Pro Football Talk.
“We believe that the construction of new stadiums and renovations of stadiums are economic drivers in local communities,” said NFL spokesman Joe Lockhart. “If the idea is to promote economic growth, this would be a step backwards.”
The Las Vegas Raiders is one team that could be one of the first to be affected by the proposed tax break elimination.
With the team’s recent move to Sin City, the plan to get the team up and running includes building one of the most expensive sports stadium complexes in U.S. history. The plan also features an incredible $750 million in publicly issued, tax-exempt bonds to fund its construction.
But according to the Associated Press, the new tax law would prevent the ability to issue those tax-exempt bonds putting the Raiders’ whole deal in jeopardy.
“The stadium, as designed, appears to meet the definition of a project that could not use tax-exempt bonds,” Las Vegas Stadium Authority and the Southern Nevada Tourism Infrastructure Committee, Jeremy Aguero, told the AP. “That could potentially affect the financial models we have been using in estimating the potential cost of the project.”
But is the NFL spokesman right? Do big sports tax breaks bring even more in economic growth to any city that applies for them? Unfortunately, the truth seems to be that the millions that cities and states give sports teams are almost never returned in kind—and not just by the NFL, but this is generally true for all sports.
For many years the “economic boom” idea of building stadiums seemed to make sense and city after state pumped billions of taxpayer dollars into sports franchises. But starting in the early 2000s, economists began to have enough data to show that the idea that building a stadium is an economic boon is not quite as advantageous as advertised.
In fact, these days economists that disagree amongst each other about so many other ideas have developed a wide consensus based on the belief that sports spending is not a great economic engines for any city and that building giant new stadium complexes just don’t return economic prosperity.
The reason sports stadiums are not a great investment is threefold according to Andrew Zimbalist, the Robert A. Woods professor of economics at Smith College and renowned sports economist. Zimbalist spoke in 2009 to Freakanomics author, Stephen J. Dubner in the pages of The New York Times.
For one thing, Zimbalist says, the money that will be spent on the events held at these new sports arenas is mostly money spent by local residents. This is not new money but money that would simply have been spent anyway on other entertainment in the metropolitan area even if the stadium didn’t exist. Secondly, the big money that goes to players, owners and investors does not stay in the area but is usually invested elsewhere. Third, the city or state is often chipping in up to a third of the continuing maintenance costs o the facility and this is tax money wasted, not revenue made.
Another point is most important to dwell upon in this time of one of the worst economies in 70 years. “‘… in the typical case,’ Zimbalist says, ‘the city and/or state contributes roughly two-thirds of the financing for the facility’s construction and takes on obligations for additional expenditures over time.'”
There are other problems with these projects, as well. For one thing, the jobs created are for the most part low paid, part-time and offer no benefits. Because of this good, sustainable jobs are not really created by a sports complex. Also, very few ballparks have been much of a boon to surrounding businesses. Few people that attend sports events stay around the area in which the stadium sits to shop, eat, or look for other entertainment. They go to the park, and then they leave. About the only thing locals get are drunken fans, traffic nightmares, and litter.
If Andrew Zimbalist and so many like-minded economists are right, the end of these massive tax breaks would be the real boon to the taxpayers.
Follow Warner Todd Huston on Twitter @warnerthuston.