Over the last few months, more and more stories have been popping up online that discuss whether Salt Lake City or the state of Utah should build a ballpark for some future MLB expansion team. Utah residents have therefore been asking local leaders who exactly would be paying for such a project. Rep. Ryan Wilcox, R-Ogden, has an answer. He wants residents to know that “local taxpayers will not be left on base holding the bill”. Many other city and state political leaders agree, and expressed to a local Fox 13 station that “they do not favor taxpayer money directly going to fund stadiums”. Utah Senate President Stuart Adams went on TV to tell the public that any tax hike would “not be on Utahns”. Sounds straight-forward.

Then last week, Ryan Wilcox, put forward this bill:

“A (116-page) bill introduced in the Utah State Legislature would earmark $900 million for a new state-owned baseball stadium in Salt Lake City” — Fox 13 Now, 02/21/24

Since the ballpark would be the “centerpiece of a mixed-use development project”, the total bill of the project would total $4 billion dollars. To collect $900 million, this bill allows for an increase in various taxes (once an MLB deal is agreed upon):

1. Energy Sales and Use Tax
2. Telecommunications License Tax
3. Transient Room Tax
4. Resort Communities Sales and Use Tax
5. Accommodations and Services Tax

So let’s assume that an MLB agrees to come to Utah. This means that hotel taxes would increase by 1.5%, which is “$3 dollars per night on a $200-per-night hotel stay”. The bill would establish a Fairpark Area Investment and Restoration District that would lease the stadium to any sports team for $150,000 per month for 360 months. The deadline for this deal is set at 2034. Keep in mind that even today, nobody knows any specific details about this proposed ballpark. Zero. But we do know the location of the entertainment district, right? Well, no to that as well.

So, how can these politicians state that taxpayers won’t pay for the ballpark…when they clearly are funding it?

Several Ways:

1) Visitors will pay for the new venue

Sadly, many city and state leaders around the country continue to believe that they can pay for an arena, ballpark, or stadium by increasing hotel taxes or car taxes. According to the idea, these tax increases allow for visitors or out-of-state people to pay for the new sports venue. A so-called tourist tax. But visitors do not pay for it when these taxes are put into place. Let’s first start with Utah. A rep for the Utah Hotel and Lodging Association informed KSL.tv that out-of-state residents would not pay for this project because “half of hotel stays in Utah are paid for by people that reside in Utah”. Everyone in a hotel is not always from far away.

The Miami Marlins did this when they wanted a new ballpark in 2009-2010. Their owner at the time wrote an open letter to Marlins fans that was published in three local newspapers. In it, he wrote that the taxpayer money being used to build the new ballpark came from hotel taxes. Therefore, the financial burden would be “incurred by tourists who are visiting…NOT the resident taxpayers”. Essentially, he believes that local residents were financially protected because only tourists would be affected by the city raising hotel taxes for the ballpark. When the Marlins were negotiating with the city, they told the city to fund the new ballpark with “more hotel or rental car taxes, or even a new cruise line tax”. They loved those tourism taxes. But many people have pointed out over the years the numerous issues with this line of thinking.

2) Tourist taxes can’t be used on police or firefighters

Outside of Utah, tourist taxes are very common to fund sports venues. One way that local leaders sell it to the public is to claim that these tourist taxes can’t be used for local services, as in police and fire departments. Therefore, it is acceptable for the sports team to use this taxpayer money. Back to the Marlins. After initially claiming that only tourists would fund their new ballpark, the team changed strategy. The team had the city manager release a memo stating that the taxes used for the ballpark “cannot be used for general government funding purposes such as social services, public safety and public education”. But this was a falsehood, since there was a significant amount of social services and public safety programs that could have used the money from these taxes.

In September 2023, the Tampa Bay Rays finally agreed to a ballpark deal with local officials. According to the team, the ballpark will cost $1.3 billion and will be split 50/50 by the team and city/county governments. Just a brief reminder, the Rays are being given a $545 million dollar land price break and will also be exempt from “$411 million in city property taxes and $222 million in county property taxes over 30 years”. That sure doesn’t sound like a 50/50 deal. Some estimates have the taxpayers owing not $600 million but $2.4 billion. Anyway, back to the point. The local funds will come from a bed tax (tourist tax) that is paid by people who stay at local hotels. One county commissioner mentioned that while this money is usually used for projects like “beach renourishment”, no money will be “coming out of the general fund”. Therefore, the ballpark deal will still be a “home run” because the city has enough in reserves to deal with all of these projects. But beach renourishment and erosion have been major issues for the city for numerous years now. Just last July, a Tampa news site wrote a story discussing how even though over half of Pinellas County beaches were “critically eroded”, little could be done because officials “lack(ed) vital funding for renourishment projects”. In fact, local leaders mentioned at this time that their ability to deal with these issues may be hamstrung by a ballpark deal with the Rays.

“Commissioners brainstormed potential solutions at a work session Thursday and broached the idea of using additional bed tax dollars that could potentially fund a new Tampa Bay Rays stadium. County Administrator Barry Burton stressed the importance of a federal partnership and said self-funding would liquidate the ‘entire tourism development tax money just for renourishment‘” — St. Pete Catalyst, 07/14/23

A few months after that city meeting, Hurricane Idalia hit the region, causing “some of the worst erosion seen by local residents and coastal researchers in decades”. Are they sure they can fund all of this at one time?

Taking money from a city’s general fund can hurt the entire area. Just ask Pearl, Mississippi. The Atlanta Braves moved their Double-A team to the city in 2005 with promises of economic glory. It never financially panned out, yet the city still had to take 5% of its general fund to pay down the ballpark debt. Things got so bad that the city’s debt rating was lowered to “junk status” with “Moody citing the stadium liabilities”.

3) New tourism revenue will pay for everything

Other times, the team will claim that tourism will EXPLODE with a new sports venue. Look at those city wallets spilling out with extra sales and property taxes! Just one small problem…has a single professional sports team actually done this?

“Unfortunately, I am not aware of any stadium that has produced a positive return on investment to its host municipality” — JC Bradbury, Global Sports Matters, 06/15/22

Let’s start with the Dallas Cowboys. In 2004-2005, the Cowboys were looking to build a new stadium in Arlington, Texas. The Arlington city council gave the team $325 million taxpayer dollars. This means that the city would have annual debt payments of $20 million dollars. Since the city expected $238 million in yearly economic activity from the new stadium, they would cover this amount with ease. The mayor of Arlington at the time was a big proponent of the stadium move and claimed that “You have to spend money in order to make money”. The stadium was built, and the city saw an increase in government revenue of $2.9 million per year. Yes, finances did improve for Arlington several years on, but the overall amount promised was never delivered.

The Atlanta Braves changed ballparks in 2018 by moving to Cobb County. How was the move presented?

• An “economic home run for Cobb County” by a Georgia Tech study due to the calculated yearly gain of $18.9 million after expenses.
• A “financial boost” by Braves officials touted the deal’s impact on the local economy.
• The “biggest economic development deal in our county’s history” by former Cobb County Chairman Tim Lee in 2018.
• “Cobb County will realize a 60 percent annual return on investment from the (new ballpark and development)” by former Cobb County Chairman Tim Lee in 2015.

Is Cobb swimming in pools of money today? Not quite.

“The public debt obligation on the stadium amounts to $16.4 million a year. Of that, $6.4 million is paid by Cobb residents out of the county’s general fund, while the remaining $10 million is funded through taxes and fees, including a countywide hotel/motel tax, a countywide rental car tax, a localized Cumberland hotel/motel tax, and localized Cumberland commercial property taxes…Cobb pays another $1.2 million for stadium operation and maintenance and about $1 million for police overtime and traffic management at games and events” — AJC, 12/27/17

According to the Atlanta Journal Constitution, the county is closing libraries and struggling to fund the police. Why? Because Cobb County has faced a budget shortfall every year, in large part because of the ballpark expenses. In 2018, Cobb County faced a budget shortfall of $55 million. This doesn’t include the $21 million used through the county’s rainy day fund. Five years after opening, the deficit was $15 million per year. Cobb County’s Chairman puts the financial issues on the ballpark’s “unrealistic expectations”. Furthermore, the ballpark nor its development was ever able to increase general fund collections. This led to the county being forced to increase property tax rates to cover its costs.

Las Vegas is an interesting case, in my opinion. The Raiders got $750 million taxpayer dollars to move to Las Vegas. This was done through room (hotel) taxes being increased. To be fair, what makes this case intriguing is that many rightfully look at the Raiders’ stadium as a financial success. The Nevada Independent pointed out in December 2022 that Allegiant Stadium was “proving to be a big financial success” in large part due to the stadium’s concert revenue being higher than anywhere else in the world. But, as the Nevada Independent goes on to say, even with these numbers, the stadium financially is not making anyone money, outside the Raiders. Taxpayers don’t share in the profits being generated.

“However, the profitability of Allegiant Stadium doesn’t magically transform government’s $750 million gift into some sort of wise investment. In fact, it does quite the opposite, given that the agreement made no provision for sharing stadium revenue with taxpayers. One doesn’t have to be a savvy Wall Street banker to see that spending hundreds of millions of dollars so other entities can turn a profit isn’t exactly a winning investment strategy — and yet that’s precisely what Southern Nevada has done with Allegiant Stadium” — The Nevada Independent, 12/18/22

Keep in mind that with interest, the cost to Las Vegas taxpayers is $1.3 billion over 30 years. Then there are the tax abatements and credits that total hundreds of millions of dollars. I think the real cost is over $2 billion now. But even with the revenue being brought in by the stadium for concerts, there have been instances where Clark County took millions of dollars from reserve funds to meet a payment on the Raiders’ stadium. The Raiders were supposed to bring in new tourism dollars. This meant that the city would see more people renting rooms and therefore more money from the increase in room taxes. This would allow the county to pay the Raiders monthly through this fund. But some months, the money from the fund is not high enough for the city to cover the Raiders payments. This forces the county to use money from the reserve funds. In 2021, Sportico reported that Clark County had made an “unscheduled draw of $11.7 million from one of the reserve funds” due to the county having a $16.1 million payment coming up. As time goes on, the county bills will get higher and higher. In 2022, the county paid $35.4 million. The last payment will be in 2048 for $59.2 million.

4) Property Taxes will allow for a city to make its money back

A big venue would and should pay a lot in property taxes. Land value around a new sports venue should increase in value. Unfortunately, almost nobody in the MLB, NBA, NHL or the NFL pays full property taxes. As of two years ago, almost 80% of major sports teams “were fully exempt from real property taxes”. In Geoffrey Propheter’s book Major League Sports and the Property Tax, he concludes that if all current sports venues had paid full property taxes, then cities/states would have received an additional $654.3 million in 2022 alone. He also estimates that sports owners have saved close to $18 billion in property tax breaks over their lifetime.

This is why sports teams do not own the land on which their venue sits on. If the public owns the land, there are no property taxes to be assessed. Recently, property taxes have been a big, big issue for sports teams. Recently, the Tampa Bay Rays agreed to a new ballpark and development deal. Even though the city is “taking on significant new debt” to pay for it, the owners “won’t pay property taxes for at least 30 years”. Therefore, the local area loses out on $411 million in revenue. In Chicago, property taxes are mostly the reason as to why the Chicago Bears have not already announced that they are building a new stadium in Arlington Heights, Illinois. Instead, the team is fighting with a city tax assessor over how much their land is worth (the higher the price, the more in property taxes owed). In Virginia, the proposed Capitals/Wizards arena deal allows for the state to “create a state stadium authority to purchase most of the development land”. This allows the owner, Ted Leonsis, to save “around $380 million in property tax breaks”. Who pays for the $200 million dollar transportation expenses likely to be required for any new venue? The public, of course.

To summarize, there is virtually no evidence that sporting venues are better at “attracting tourism dollars to a city than other activities”. If the venue was not built, chances are that the tourist would have spent the money on “another activity if the sports outlet were not available”. As sports economist Dennis Coates found in his report, there is little support for the idea that a new sports team is statistically correlated with better economic outcomes compared to other similar cities.

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