How GOP Tax Reform Plan Could Hurt Venues Like Pinnacle Bank Arena

A Proposed federal tax code change could adversely impact venues with the loss of federal tax exemptions on bond interest. Case and point: the Pinnacle Bank Arena in Lincoln, Neb., which says it could stand to lose as much as $3.6 million per year or $70 million over the life of the bonds if the federal subsidies are eliminated.  

Huskers.com – Pinnacle Bank Arena

The West Haymarket Joint Public Agency, overseeing the venue’s construction, passed a resolution asking the federal government to maintain the federal subsidy for bonds it issued to build Pinnacle Bank Arena, which opened in 2013. The bonds were issued with taxable interest but are eligible for a federal subsidy equal to a percentage of each interest payment.

“While the federal tax reform bills being considered in congress do not specifically address subsidies for the bonds, we are concerned that unintended consequences will result in the elimination of the subsidies,” said city finance director and treasurer for the JPA in a news release, as reported by the Journal Star. “The JPA is asking our congressional delegation to ensure that the government fulfills its promise to continue to pay the annual subsidies on the JPA bond.”

In 2010, the JPA used $168 million of Build America Bonds and $32 million of Recovery Zone Bonds to help finance arena improvements, according to the Journal Star. The two programs would be affected by the GOP tax bill.

The Lincoln situation sheds some light on what was a somewhat hazy distinction in the Nov. 16 bill passed by the House of Representatives, to be considered by the full chamber in December.

The language mentioned “sports stadiums” as losing tax-exempt status on bond interest, but went on to describe a “sports stadium” as any venue that hosts sports at least five days per calendar year.

Apregan Group President Jeff Apregan, who is executive director of the Gridiron Stadium Network which assists 15 NFL stadiums, previously told Pollstar, “Leave it to the government to stick their nose into an already cumbersome and costly process.”

“New and existing venues need to look at all types of revenue sources and need to get as much utilization and event days as possible,” added Apregan, whose Venue Coalition provides booking and operations consultancy services for more than 70 arenas and theatres. “That includes not only anchor sports tenants, but exhibition sporting events, concerts, family shows and motor sports.

“We often see cities floating bond issues to build venues in their markets with unrealistic expectations in terms of annual event days,” he said, “Additional tax burdens on construction will ultimately increase debt service and prolong ROI.”

Pinnacle Bank Arena, operated by SMG, was No. 83 worldwide on Pollstar’s Third Quarter Top 100 Arenas chart, with more than 158,217 tickets sold at the time.

Recent Pinnacle Bank Arena box office reports submitted to Pollstar include The Weeknd Sept. 27 (10,442 tickets, $661,139 gross), Kendrick Lamar Aug. 18 (11,140, $667,964), and Bruno Mars Aug. 7, which sold 13,849 tickets and grossed $1.37 million).