Obama Budget Targets Arena Bonds

“Allowing tax-exempt governmental bond financing of stadiums transfers the benefits of tax-exempt financing to private professional sports teams because these private parties benefit from significant use of the facilities,” a U.S. Treasury memo states. “State and local governments subsidize that use with taxes or other governmental payments to enable the facilities to qualify for tax-exempt governmental bond financing.”

A 2012 Bloomberg report found that using bonds to float arena construction costs the U.S. Treasury $146 million annually. Dennis Zimmerman of the American Tax Policy Institute told Stateline news service the proposal is a step in the right direction, with wealthy team owners often the ones benefitting most from such subsidies.

“I’m glad he put it in the budget,” Zimmerman said. “Tax-exempt bonds are supposed to be for state and local infrastructure” rather than private business. In the past 25 years, more than 85 pro teams have played in stadiums or arenas that were constructed or renovated through the issuance of $17 billion in tax-exempt debt, Bloomberg noted.

That means that over the life of those bonds, taxpayer subsidies will total $4 billion, the report said. But tell that to St. Louis, Minneapolis, and Oakland, Calif. All three cities are pushing for construction of new venues using public funds to retain pro teams. Plus, some say the development of new venues is good for surrounding business as well.

Minnesota Sports Facilities Authority chair Michele Kelm-Helgen told Stateline the new Minneapolis stadium has spurred construction of other adjacent projects including office buildings, a hotel and apartments.

“We already have over $800 million in development in the few plots around the stadium,” she said. “All of them have indicated the reason they are making the investment is that they want to be part of this stadium complex. It’s no longer speculation as to what kind of economic development has resulted from the stadium. It’s actual proof.”

If the proposal makes it through Congress, it would be effective for bonds issued after Dec. 31.