SBJ/March 1 - 7, 1999/No Topic Name
Bill again takes aim at no-tax arena bonds
Published March 1, 1999
Sen. Daniel Patrick Moynihan is renewing a federal effort to turn off the flow of public money that has fueled the past decade's stadium and arena boom.
If successful, Moynihan could put a serious dent into the sports-facility craze that will witness $6 billion to $8 billion in new construction between 1990 and 2000. At the very least, his bill, officially titled the Stop Tax-Exempt Arena Debt Issuance Act, would make public financial support of sports development inordinately more expensive.
The senior senator from New York, who plans to retire after next year, recently reintroduced the so-called Moynihan bill banning tax-exempt financing of sports facilities. He introduced it to great fanfare in 1996.
If the bill were law today, planned stadiums in cities like Denver and Hartford, Conn., for example, would cost far more for public governments to finance. The bill would affect only project bonds issued after the bill's passage.
Without tax-exempt financing, which means bondholders do not have to pay taxes on their profits, municipalities would have had to spend hundreds of millions of dollars more in the past decade on sports development because the taxable bonds they would have had to issue carry higher interest rates.
"The bill would save about $50 million a year now spent to subsidize professional sports stadiums," Moynihan said in a statement introduced earlier this year into the Congressional Record. "We have got to do something about the explosion of tax-subsidized stadium construction."
Critics take issue with his figures, however, saying the government assumes bond investors would buy taxable bonds if the tax-exempt stadium bonds were no longer available. There are, however, many other types of tax-exempt bonds.
Most experts see little chance that the Moynihan bill will pass because tax-exempt financing has grown too important to take away. Six stadiums have been proposed just for NFL teams to be completed in the next three years, most of which will use tax-exempt financing.
"With so many cities and communities looking at financing, it is really a question of whether [the bill] will get enough support," said Professor Mark Rosentraub, director of the Center for Urban Policy and the Environment at Indiana University and a frequent critic of public support of sports development.
One Washington insider described the bill as "languishing" as it awaits attachment to a larger tax bill. Another hurdle is House Ways and Means Committee Chairman Bill Archer. Archer's home district is Houston, which, to lure an NFL expansion franchise, plans to finance a stadium in part with tax-exempt bonds. The measure would need to pass through his committee.
Nonetheless, sports leagues are waging an aggressive campaign against the bill. The four major leagues spent $3.5 million in political contributions between January 1997 and June 1998, according to the Center for Responsive Politics.
One underlying tenet of the Moynihan bill is that it would create an even playing field among cities vying for teams and negate the argument that municipalities can issue cheaper debt than teams.
But even without tax-exempt financing, it would still be less costly for municipalities to issue debt than private teams, said Aaron Barman, a sports banker with Prudential Securities. The bill's only effect , he said, would be to make it more expensive for cities to fund sports development by increasing debt costs.
As a result, "What it does is make it more expensive for [local] taxpayers," Barman argued, because these facilities will be built even if the bill becomes law, just at a higher cost if the local government pays.