The National Football League is finally back.
With most of the opening week games in the record book, water cooler work conversations are sure to turn to Monday morning quarterbacking your favorite team’s coaching decisions, to lamenting a fantasy football player you drafted too high.
Just in time for this most American of rituals, the Brooking Institution released a new report detailing federal government subsidies for sports stadiums and spoiler alert, it’s as bad as the Detroit Lion’s 0-16 season.
The playbook for taxpayer funding is an instrument known as tax exempt municipal bonds. Traditional bonds are simply loans to a company or government by individuals for which they are paid interest. The earnings on those bonds however, are taxed as capital gains by the federal government. Tax exempt municipal bonds were created to give investors extra incentive to invest in in local infrastructure as the interest is exempt from the capital gains tax.
The Green Bay Packers and the Indianapolis Colts walk onto the field at Tom Benson Hall of Fame Stadium after their scheduled preseason NFL football game was cancelled due to unsafe field conditions caused by the painted logo at midfield, Sunday, Aug. 7, 2016, in Canton, Ohio. (AP Photo/Gene J. Puskar)
For example, if a town wanted to invest in a new water treatment plant, they could sell tax exempt bonds and offer investors a lower rate of return since their interest earned wouldn’t be taxable. While there are pros and cons to these bonds, the purpose for them is clear - public infrastructure.
In a spin move worthy of the great Barry Sanders, the NFL and their owners, have used these tax exempt municipal bonds to subsidize the cost of their new stadiums as well as expansions.
The Brookings institute report looked at all stadium financing since 2000 and calculated more than $1.1 billion in federal subsidies. The Chicago Bears won the Super Bowl of subsidies with more $200 million for the renovations of Solider Field. At least the Bears can win something because the chances of a Super Bowl with Jay Cutler as their quarterback looks slim at best.
Other dishonorable mentions include the Cincinnati Bengals, whose owners should borrow this look from their fans after they received $164 million in subsidies, and the Indianapolis Colts who lucked into $163 million for their new stadium.
But the taxpayer goodies don’t end there.
Looking at the four major American sports, Brookings found $3.2 billion in subsidies and $3.7 billion in total revenue lost since the year 2000. The largest recipient of taxpayer subsidies was the New York Yankees, who received $431 million in subsides for the New Yankees stadium. The Yankees as it turns out are the world’s fourth most valuable sports franchise at $3.4 billion are hardly in need of a handout from taxpayers.
Yet even this isn’t the end to the welfare for billionaires and their sports stadiums. State and local governments have collectively shelled out billions in fear or losing their beloved sports franchise or for the false promise of economic development. The Braves new stadium in Cobb Country, which was clearly sorely needed as they will be demolishing the only 20-year-old taxpayer funded Turner Field, has cost taxpayers of Cobb Country $400 million. This cost has so indebted Cobb Country they are unable to purchase of park land approved by voters and taxes look to increase to pay for the stadium. As egregious as the Braves deal is however, it would pale in comparison to a proposal to demolish the Texas Rangers current ballpark, which is only 22 years old, and spend $800 million of taxpayer dollars on a billion-dollar stadium.
So what has the American public received in return on the billions of dollars they’ve been forced to invest in sport stadiums? Well it turns out not much. Study after studyhas shown the value of sports franchises and stadiums to a local economy is so dismal that it's essentially a rounding error.
As Holy Cross Economics Professor Victor Matheson, who studies the impact of sports stadiums, has said “Take whatever number the sports promoters says, take it and move the decimal one place to the left... that’s a pretty good estimate of the actual economic impact.”
With virtually all economists in agreement that these subsidies fail to deliver on their lofty promises, as well as a bipartisan consensus in Congress, why has the federal government continued to give up billions in revenue?
Congress actually attempted to fix this issue with the Tax Reform Act of 1986 but as an unintended consequence actually incentivized local and state government to subsidize stadiums to qualify for federal bonds. Congress could correct this flaw as they consider legislation providing funding for the government later this year. Lawmakers could also address this issue in the context of comprehensive tax reform next year."
As much as Americans love football and sports in general, taxpayers should not be forced to pick up the tab for billionaires’ shiny new toys. The madness has to end.
Eric Peterson is a Senior Policy Analyst at Americans for Prosperity. You can follow his policy and sports musings at @IllinoisEric89
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