Congressman Questions Use of PILOTS to justify tax exempt bond financing for new sports stadiums
Have you ever been to Tropicana Field in St. Petersburg, Florida (pictured above, notice the lack of fans)? I am a baseball pursit. The Tampa Bay Rays (formerly the “Devil Rays”) play home games in this dark, dank, place. After one game there, I vowed never to return. Baseball should be played outdoors on natural grass, period. Anyway, Tropicana Field is the worst place in the world to watch a baseball game. Its dark, even with the lights on, it has an echo like an old abandoned construction warehouse, its just a terrible place to watch and play a baseball game. I loved PNC Park in Pittsurgh — now that is a place to watch a game!
Anyway, this is a blog about tax so I’ll get to the point. The hated Yankees (I hate the Red Sox too!) — may they never win another penant — are building a new ballpark as we all know. As a matter of fact, the Rays are trying to get the taxpayers to help pay the $16 billion bill necessary for a new ballpark that will look sort of like the San Francisco Giants’ waterfront stadium (a beautiful partk that is!). Here is an artist rendering of the proposed St. Petersburg beauty:
Now THAT is a stadium at which to watch a ballgame. Fruition, of course, depends on taxpayer support and no doubt a plain old hotdog will cost about $20.00 if the stadium is built. Recently, Representative Dennis Kucinich wrote a letter to the IRS a few weeks ago questioning the appropriateness of using tax exempt financing to support such quintessentially private activities. Like I said, I love baseball and hope the stadium in St. Petersburg gets built. But intellectually, one has to admit that tax exempt financing for sports stadiums cannot be described as anything but tax exemption for private benefit.
The issue with respect to taxpayer financing of sports stadiums — via tax exempt bond financing — is whether more than 10% of the payments on the bonds will come from private business proceeds. If more than 10% of the payments on the bonds come from private sources, that’s a pretty good indication that the bonds are being used to an excessive extent to finance private benefit. The IRS has interpreted the so called “private payment test” to exclude PILOTs — payments in lieu of taxes — as private payments. In other words, if the Steinbrenners (and whoever owns the Rays) make payments in lieu of taxes towards the repayment of tax exempt bonds, those payments are not treated as payments from private business sources but essentially as taxes (and thus pubic sources, suggesting public rather than private benefit). The treatment of private payments as public taxes allows for the legal fiction that the subsidy embodied in tax exempt bonds are for public rather than private benefit. Kucinich has a point, though, when he argues that PILOTS are more like special assessments for individual private benefit than generally applicable taxes:
On March 29, 2007, the Domestic Policy Subcommittee held a hearing that looked at the promises of economic prosperity that are made to cities which finance professional sports stadiums. The first hearing revealed that no evidence has been found to suggest that professional sports stadiums create jobs, raise incomes, or raise local tax revenues. America’s infrastructure is crumbling while state and local officials approve taxpayer-financed professional sports stadiums. About 31 percent of the nation’s urban bridges are deemed structurally deficient, awaiting public investment. At the same time the public is paying about 80 percent of the costs for new professional sports facilities.
Like I said, Kucinich has a point. Mine is less sophisticated and perhaps less civically motivated: As long as ticket and hot dog prices are so outrageously high, the financial side of me hopes people admit the logic of Kucinich’s argument. But I’ll patronize the new stadiums even if they don’t. I love real baseball better than logical tax policy — hey, I’m just being honest about it!
For the full transcript on the hearing regarding public support for privately owned sports stadiums go here.
dkj