8/27/2014

Why Are Sports Franchises on Welfare? A Look Into Stadium Subsidies

Why Are Sports Franchises on
Welfare? A Look Into Stadium
Subsidies
By Daniel Ferry | More Articles
November 3, 2013 | Comments (6)

When the Red Sox triumphed on Wednesday, it was the first time they had clinched the World Series in their home city since 1918. It was a happy day for Red Sox fans everywhere, but Bostonians should also be proud of the great deal they got on
Fenway Park. Fenway was built in 1912, back in an era when the owners and investors who profited from a sports franchise actually paid the cost of building a stadium. Not so anymore: today, nearly 80% of the cost of the average major league sports stadium falls on the government, and that's resulted in taxpayers losing more than $30 billion subsidizing stadiums. Your local major league sports team might just be the biggest welfare queen in town.
There are lots of ways team owners manage to part cities from their taxpayers' money. Often, a local or state government will simply shoulder the cost of building a new stadium, sometimes letting a team use it virtually free of charge. Typically governments will raise sales taxes or levy new taxes on car rentals, hotel stays, or restaurants to fund a stadium's construction. The city of Indianapolis, for example, spent over $250 million in 2013 dollars to build Conseco Fieldhouse, now known as the Bankers Life Fieldhouse, for the Indianapolis Pacers basketball team. The
Pacers get exclusive use of the publicly built arena, for which they pay $1.
Many teams also get operating subsidies, public payments made every year just to convince a team to stick around. Sometimes these operating subsidies are even greater than the rent a team pays on a public stadium: the Milwaukee Brewers pay the county governments that built the $527 million Miller Park about $1 million annually in rent to use the stadium. However, the Brewers also receive a $4 million operating subsidy, effectively allowing the team to pay negative rent. In 2010, the owners of the Pacers demanded $10 million per year in government subsidies to stay at the stadium the taxpayers had built for them.

http://www.fool.com/investing/general/2013/11/03/sports-franchises-on-welfare-stadium-subsidies.aspx

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8/27/2014

Why Are Sports Franchises on Welfare? A Look Into Stadium Subsidies

The taxpayers of Indianapolis paid to build Bankers Life Fieldhouse and pay the Pacers to stay.
Photo credit: Wikimedia

Sure, but voters have to approve this stuff, so what's the problem?
In addition to the flashier giveaways, there are more subtle ways that team owners get rich off the public purse, and they're not always as easy to see. For starters, municipalities are often expected to pick up the tab for connecting infrastructure like power, water, and city streets to stadiums. When stadiums are built on previously developed land, governments have to use eminent domain to seize the land for a "public use," but they also have to pay the existing landowners market rate for their property. These costs can easily be hidden when people vote on constructing a stadium.
Taxpayers are also left to cover the shortfall left by the many highly profitable professional sports franchises that don't pay taxes, or are allowed to underpay.
Many municipalities excuse sports teams from local taxes in order to entice them to come to town or to stay. In addition, some professional sports leagues, including the highly lucrative National Football League, don't have to pay any income tax at all because they are, incredibly, legal non-profits. Not taxing these organizations means that regular people, who typically lack the lobbying money to get themselves declared non-profits, have to pay more to make up the difference.
Altogether, the public costs of stadium construction and maintenance, infrastructure, operations, and foregone property taxes cost the taxpayer $259 million per stadium in 2010, according to a recent study by