Originally Published: November 8, 2017 10:40 p.m.
WASHINGTON — The Oakland Raiders decided to move to Las Vegas largely because Clark County, Nevada, agreed to finance a new stadium with $750 million in tax-exempt bonds. Now, that tax exemption could be going away, leaving the county on the hook for even more money.
The GOP tax reform bill released last week would bar state and local governments from issuing tax-exempt bonds for stadium construction, a common feature of stadium deals over the past two decades. It’s one of a few reforms in the bill that would affect the world of sports.
Getting rid of stadium subsidies has long been a popular talking point in Washington, and it’s not a partisan issue, either. Former president Barack Obama’s 2015 budget sought to do away with the tax exemption for stadium bonds. President Donald Trump asked in a tweet last month why the NFL was getting “massive tax breaks” amid the controversy over players kneeling during the national anthem.
“Change tax law!” Trump tweeted. And Congress apparently listened.
“It’s good policy,” said Ted Gayer, a senior fellow at the Brookings Institution and the lead author of a study on stadium subsidies. “It’s always been kind of a no-brainer politically and, I think, economically.”
The Brookings study, released last year, found that the federal government subsidized stadium construction to the tune of $3.2 billion since 2000. During that stretch, 36 stadiums were built or renovated in part with tax-exempt bonds. The Raiders’ stadium would get a $120 million tax break if the law isn’t changed, according to the Brookings analysis.
Sen. James Lankford, an Oklahoma Republican, and Sen. Cory Booker, a New Jersey Democrat, cited those figures when they introduced a bill earlier this year to end the subsidies. Rep. Steve Russell, an Oklahoma Republican, introduced a similar bill in the House.
“Using billions of taxpayer dollars for the subsidization of private stadiums when we have real infrastructure needs in our country is not a good way to prioritize a limited amount of funds,” Lankford said. “Tax reform could be a unique opportunity to enact this into law. I’m pleased this idea is gaining momentum.”
The NFL argues that communities benefit from stadiums because they create jobs and spur economic development, but many economists say cities never recoup their investments and that the financing deals amount to handouts for wealthy team owners. A new stadium can cause the value of a professional franchise to skyrocket.
“We’ve always believed the construction of new stadiums and renovations of existing stadiums are economic drivers in local communities,” NFL spokesman Brian McCarthy said. “If the idea is to promote economic growth, this would be a step backwards.”
Getting rid of the tax exemption would have a negligible impact on federal revenue, bringing in $200 million over 10 years, according to the bill.
Rep. Dina Titus, a Nevada Democrat and a proponent of the stadium deal, said the bill would harm her district, which includes Las Vegas.
“Eliminating the tax exemption for stadiums could cost Clark County more money to build projects that are already underway,” Titus said in a statement. “This is an attack on local governments that will take money away from our communities and hamper infrastructure nationwide.”
The elimination of a tool that NFL owners use to defer the costs of new stadiums could be seen as an irony given many owners’ support for Trump, who is pinning his hopes on the tax-reform package as he seeks a major legislative accomplishment. Redskins owner Dan Snyder was one of several owners who donated $1 million to Trump’s inaugural committee, and he’s looking for a site to build a new stadium. A Redskins spokesman did not respond to requests for comment.
Even if the bill becomes law, teams will still find ways to build stadiums with public money, Gayer said.
“The overwhelming amount of the subsidy comes at the local level, not at the federal level,” he said. “What’s driving that is, if you’re Las Vegas and you want a team, you can’t just create a football team. You have to entice a team. There’s a fixed supply ... and that creates these bidding wars.”
IMPACT ON COLLEGES
The bill would also get rid of a tax deduction that many universities use to entice donors to buy season tickets, and it would levy a new 20 percent tax on salaries of public university employees who make more than $1 million — many of whom are football and basketball coaches.
Many schools require donors to give thousands of dollars to a booster fund in exchange for the right to purchase tickets. Eighty percent of the amount donated is tax-deductible, and the schools tout the tax benefits as an enticement to give.
Getting rid of the deduction will harm athletic departments that use the contributions to fund sports that don’t generate revenue, said Liz Clark, director of federal affairs at the National Association of College and University Business Officers.
“We do know that for some athletic programs, that this can be a critical source of revenue,” Clark said. “Eliminating this deduction will hurt the revenue stream and will make it harder for those programs to meet expenses.”
Duke University, for example, requires donations of at least $4,000 per seat for the right to buy coveted men’s basketball season tickets at Cameron Indoor Stadium. Michael Schoenfeld, vice president of public affairs and government relations at Duke, said getting rid of the deduction was tantamount to “a tax on education and a tax on opportunity for all students, which is not in anyone’s interest.”
The tax on salaries above $1 million would also drive up costs for universities, although they could save money by keeping coaches’ salaries below that threshold. Some universities already keep base salaries low by pairing it with compensation from other sources like private athletic donations and sponsor payments.