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Eliminating Subsidies to Sports Teams Would Be Difficult, Experts Say

Posted on September 27, 2017 by Andrea Muse

As legislators look to use tax subsidies to punish NFL owners for their teams' national anthem protests, experts say eliminating those subsidies would be tough to do for existing incentives but could impact future stadium projects. 

Lee Igel, a professor at New York University School of Professional Studies' Tisch Institute for Sports Management, Media, and Business, told Tax Analysts on September 26 that while it would be possible to withhold future subsidies for professional teams and stadiums, it would be difficult to repeal current incentives.

Igel said an opportunity, such as negotiating a stadium lease agreement, would need to be found, because existing agreements are usually “pretty well locked up” and would have to be undone. He said taking away existing subsidies “would take a number of legal maneuvers over time” and would likely result in lawsuits.

In Tennessee's General Assembly, Rep. Judd Matheny (R) in a September 26 statement ordered that a bill be drafted and introduced to “stop any and all future economic incentives to professional and amateur privately owned sports teams in Tennessee.” Under the bill, teams would have to reimburse the state for traffic and security costs for functions at their privately owned venues, it said.

The statement said that under the legislation, all current contracts would be honored until they expire, but that the state funding to be taken away would include “direct and indirect monies for stadiums, maintenance, or any other cost associated with a sports team's functions both in and out of their official seasons.”

Before their September 24 game, Tennessee Titans and Seattle Seahawks players stayed in the locker room during the national anthem in protest of President Trump's comments at an Alabama rally that players protesting the national anthem should be fired.

“As long as professional and minor league sports teams allow their players to show overt disrespect to our national anthem and flag during an official event, then there will be no consideration of state funding,” Matheny said.

In Louisiana, State Rep. Kenneth Havard (R) said the state should cut state incentives allocated to the New Orleans Saints after a group of players sat during the national anthem at their September 24 game.

Heather Lawrence-Benedict, a professor of sports administration at Ohio University, told Tax Analysts that any legislation could “absolutely impact new projects going forward.” She said those proposals are more likely to be approved than proposals affecting current funding, because trying to fill any gaps left afterward could hurt a lot of different entities.

“Much of the new stadium development is not coming from the state level” but from the tax bases where the stadium will be built, Lawrence-Benedict said. The public is getting smarter, she said, and they are now holding public officials and team owners accountable for how public dollars are spent. “There’s already a hesitancy to fund and support, with public money, the revenue for private team ownership,” she added.

However, Lawrence-Benedict said every location is different, and the historical context and political climate of the area matters. She pointed to the quality of the team, previous cost overruns on projects, and promised job growth that never materializes as issues that can make the public skeptical of providing more funding.

Igel said behavioral factors such as quality of life matter as well. Igel and Lawrence-Benedict pointed to agreements with sports teams that have revitalized areas as projects that residents tend to view favorably.

Meanwhile, two bills proposed in the current Congress by Rep. Steve Russell, R-Okla., and Sen. Cory A. Booker, D-N.J., are focused on the use of exempt bond financing for professional sports facilities.

Timothy Gayer of the Brookings Institution, who studied the federal subsidies for professional sports stadiums and arenas using state and local tax-exempt bonds that were provided in the 1986 tax reform bill, said the cost of subsidies at the state and local level — particularly the local level — would be significant.

He said the cost of the subsidies to federal taxpayers for the 25-year period he studied was over $3 billion, and that the cost of the subsidies at the state and local level would be higher.

Gayer said that while he has doubts that federal legislation will pass, one or two states may be able to enact bills to eliminate subsidies for stadiums.

Greg Sullivan, director of the Professional Masters of Sports Administration program at Ohio University, told Tax Analysts on September 26 that legislation to remove stadium subsidies is unlikely to pass. “I don’t think that the general public has an awareness of issues like economic impact,” he said.

He said the public sees construction and stadiums full of people, and the logical conclusion is that there is a big economic impact, “but unless that money is coming [from] outside the host community, it’s hard to create an argument that there is economic impact.”

“The real issue, the impetus behind the [federal] legislation, is the acknowledgement that spending taxpayer dollars does not come back in the form of economic impact,” Sullivan said.

Matheny said September 26 that the Tennessee Titans received $55 million in state bonds when they initially came to the state. He said he has asked the state Department of Revenue to determine how much tax revenue spent on the upkeep of the team's facilities was enabled through state legislation.