Easterbook estimates that tax favors granted to the NFL total $1 billion per year. Almost all of that is in the form of publicly financed stadium construction or property and other tax rebates granted as part of stadium deals. Since 1997, 20 NFL teams have built or renovated stadiums. Nineteen of the 20 have involved public money. The exception is the $1.6 billion stadium built in New Jersey by the New York Jets and Giants. That exception aside, the public has provided 71 percent of all financing for NFL stadium construction.
Most stadiums are financed by tax increases. That’s right: Localities and states frequently raise hotel or other taxes to provide some or all of the hundreds of millions of dollars needed to build a modern sports stadium. Lucas Oil Stadium, built for the Indianapolis Colts, was 86 percent publicly financed. The $620 million public component comprises a 0.5 percent city sales tax increase, a 2 percent city hotel tax increase, a 5 percent city car rental tax increase, a 10 percent admissions tax, a 3.5 percent parking tax, and $25 million from the county. Other forms of tax favors frequently granted include property tax rebates (for stadiums that are owned by the team rather than the government), sales tax rebates, infrastructure improvements, and, most notably in the case of New Orleans, straight-up operating cost grants to team owners. (New Orleans Saints owner Tom Benson is paid $6 million annually by Louisiana as an inducement not to move his team.)
When a stadium is publicly financed, it might be assumed that local governments are simply making an investment in a revenue-generating structure. However, most publicly financed projects allow teams to keep virtually all ticket, concession, and parking revenue. The public is building stadiums for wealthy team owners, and then essentially passing all the benefits of the new facility to the team. (And when those teams move, the stadiums are frequently demolished, as will happen with Turner Field when the Atlanta Braves move to a local suburb in a few years.)
So what’s in it for the public? Most people would argue that there is little economic impact from a new sports stadium, meaning the main benefit to localities is the security of keeping their team for at least a little while longer. Easterbrook and others call this extortion. And that’s not far from the truth. As a stadium ages, a team owner typically starts making noise about needing something new. When officials drag their feet, the team either openly or subtly implies that it might seek a better home (read: one that will build it a new a stadium).
Easterbrook calls moving a hollow threat, at least in the NFL. He points out that no professional football team has relocated since 1998. This is somewhat misleading. While it’s true that no team has made a long-distance move since the Oilers left their temporary home in Memphis for Nashville in 1998, teams have moved locally in recent years. For example, San Francisco is losing the 49ers to Santa Clara because it refused to negotiate over a new stadium. That isn’t a big move, like the Los Angeles Rams moving to St. Louis, but it still creates incentives for localities to bid against each other to keep or attract a team.
And that’s the real problem with tax favors granted to the NFL and other sports leagues. The race to the bottom by states and cities hurts taxpayers. It is no different than the often ludicrous tax benefits and favors provided to corporations for headquarters or factory construction. Providing tax favors to business causes local and state governments to compete against each other, which benefits only a small part of the public while hurting everyone else. Tax competition has severely undermined state finances, and has even become an issue at the international level. But tax favors and tax increases designed to benefit an immensely profitable sports league may be the most egregious and most difficult to defend.