Politicians show sports teams the money on stadiums

Politicians show sports teams the money on stadiums
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Liberals and conservatives don't agree on much when it comes to tax policy, but they mostly agree on this: Professional sports owners are relying far too much on taxpayer subsidies to build new stadiums.

But as Gov. Scott Walker's recent decision to approve $250 million in public funding for a new arena in Milwaukee, Wis., shows, state and local officials are still having a hard time saying no to the local team.

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That’s despite a growing consensus among economists that big stadiums for National Football League or Major League Baseball teams and smaller arenas for National Basketball Association and National Hockey League teams don’t give the economy much of a jolt or create many jobs.

Liberal groups and free-market organizations like the Cato Institute oppose the use of taxpayer money for arenas for similar reasons, arguing that there’s no reason that wealthy sports team owners need the help from the public. But more business-friendly conservatives, like the anti-tax activist Grover Norquist, also believe that too many owners are getting sweetheart deals out of taxpayers.

“It’s better to have the billionaires who own these teams to pay for this themselves,” said Norquist.

Under the deal Walker announced this month, Wisconsin taxpayers would front roughly half of the $500 million cost of building a new arena for the NBA’s Milwaukee Bucks. The team’s current and former owners would cover the rest. 

Walker, who’s currently seeking the GOP nomination for president, defended a deal that he said would save millions in tax revenue, help the economy and keep one of the just 30 high-profile professional basketball teams from skipping town.

“We have protected our hard-working taxpayers against the major loss in tax revenue that was inevitable had we failed to reach an agreement,” said Walker, whose office said the new arena would be a key cog in economic development projects creating or keeping 15,000 construction jobs in Milwaukee. 

He’s hardly the only current or former GOP governor seeking the White House who’s negotiated to keep a professional team from leaving.

Gov. Bobby Jindal (R-La.) struck a deal in 2012 to rehabilitate the New Orleans Arena – now called the Smoothie King Center – that ensured the city would have an NBA team for at least the next dozen years. 

That deal required public money to finance the arena improvements, but also cut annual state subsidies – meaning it was projected to save taxpayer money in the long run.

A wide range of economic studies have questioned the wisdom of putting public money into stadiums. 

“The claim that this somehow boosts local economy is pretty lame,” said Howard Gleckman of the Urban-Brookings Tax Policy Center. 

That’s because, Gleckman said, sports fans would find other ways to contribute to the economy – like by going to a bar or out to dinner – if they weren’t going to the arena. He added that the stadiums “do create jobs. But the jobs they create are generally pretty bad jobs.”

Analysts have also argued that there are more hidden costs that drive up what taxpayers end up paying on stadiums, above stated figures like the $250 million for the Milwaukee arena. 

Judith Grant Long, now a professor at Michigan, has pointed to lost property taxes and added infrastructure costs as just a couple of the culprits that drive up taxpayer costs by, on average, another 25 percent. In all, Long wrote in a 2012 book that taxpayer end up paying about four out of every five dollars in public-private partnerships for stadiums. 

In looking at the Milwaukee deal, Gleckman has noted that taxpayers would owe another $170 million on interest payments on the bonds used to build the arena.

Norquist has argued that the federal government might need to step in to essentially save state and local officials from themselves when it comes to arenas and stadiums. 

“I understand the pressures on mayors and governors on this – you become the guy that lost our team,” Norquist said.

But lawmakers have tried to limit state and local governments’ ability to fund stadiums with taxpayer money in the past – and proceeded to only make matters worse.

The 1986 overhaul of the tax code sought to make it easier to tax municipal bonds if they were used to build arenas. But in the end, that just pushed local authorities to give even better deals to owners. 

President Obama took another crack at that idea in his latest budget, with a new proposal to end the use of tax-exempt bonds for stadiums. 

The effort has gained little traction on Capitol Hill, but could easily get into the mix if Congress made progress on the sort of comprehensive tax reform that has eluded them for the past three decades.

Gleckman said such a proposal would also have to overcome the lobbying efforts of wealthy sectors like bond lawyers and investment bankers, who are profiting off the current set-up. 

And he pointed out that it’s not just smaller cities, like Milwaukee, that are going to great lengths to secure sports teams. Los Angeles is now openly chasing another NFL team, after two decades without professional football. 

“Even big cities kind of are seduced by this lure of professional sports,” Gleckman said. “They really do think it’s going to add to their prestige.”