Planet Debate 2014 Subsidized Sports Stadiums Update



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Planet Debate 2014


Subsidized Sports Stadiums Update

General/Reference 2

Massive Subsidies/Financing Now 3

History of Public Funding 4

How Stadiums Are Financed with Public Support 6

Pilot Tax Exemptions 8

Tax Exempt Municipal Bonds 10

Pro 12

Sports Stadiums Catalyze Development & Cities 13



Sports Arenas Attract Businesses 16

Examples of Stadiums That Have Revitalized Cities 17

Teams That are Part of Large Economic Development Initiatives are Economically Desirable 23

Pro Arguments Apply to Minor League Teams 28

Sports Teams Prestigious 30

Revenue/Economic Opportunity 31

Civic Pride 32

A2: No Public Purpose 33

A2: Teams Won’t Leave 36

Con 37


Sports Businesses Profitable 38

Hotel and Rental Car Taxes Bad 39

A2: Teams Will Leave 40

Financial Benefits Exaggerated 41

Financing Stadiums Violates the Public Purpose 44

Neoliberalism Bad K Links 48

A2: Improved Quality of Life 49

Undermines Education/Public Goods 50

A2: Public Support 51

A2: Reduced Crime 52

A2: New Businesses 53

A2: Better Players 54

A2: General Economic Benefits 55

A2: General Economic Benefits 56

A2: Stadiums Increase Visitors and Benefit the Economy 57

A2: Attracts Corporate Residents 58

Alternative Finance Mechanisms 59

General/Reference




Massive Subsidies/Financing Now




Massive financing of new stadiums by tax payers now

Martin J. Greenberg & Dennis Hughes, 2011, Jr.** * Martin J. Greenberg is managing member of the Law Office of Martin J. Greenberg, member of the National Sports Law Institute Board of Advisors, adjunct professor of law at Marquette University Law School, and has written The Stadium Game, Sports Law Practice and $ port$ Biz. ** Dennis Hughes, Jr. is a 2010 graduate of Marquette University Law School and is currently serving a fellowship with Ilya Sheyman's Progressive campaign for U.S. Congress in Illinois' 10th District., Marquette Sports Law Review, 22 Marq. Sports L. Rev. 91, ARTICLE: SPORTS.COMM: IT TAKES A VILLAGE TO BUILD A SPORTS FACILITY, p. 91-2


In the past twenty years, over 100 new or renovated sports facilities have been developed in cities across the United States. n2 In the 1990s, approximately $ 15 billion was spent on major league facilities, with approximately $ 11 billion of the funding contributed by state and local governments. n3 Since 2003, the four major sports leagues - Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA), and the National Hockey League (NHL) - have seen the development of twenty-one new facilities, at a cost of over $ 16 billion, n4 nearly equal to the cost of the sixty-five facilities built the decade before. n5
As stadium costs, not to mention revenues, continue to rise, the American taxpayer continues to be the largest underwriter of sports facilities for its home teams. For example, in MLB during the 1990s, nine new stadiums were completed n6 with over eighty percent of the cost of those MLB ballparks [*92] financed through public resources. n7 From 2000 through the planned construction of the new Miami Marlins ballpark in 2012, fourteen MLB stadiums have or will be completed. n8 Fifty-four percent of the cost of those MLB ballparks was financed through public resources. n9 Twenty-three of the thirty MLB teams received new or renovated stadiums during the period from 1990 to 2010. Therefore, most MLB teams were able to take advantage of a booming American economy during the 1990s and early 2000s to convince local taxpayers to help finance their stadiums.

History of Public Funding




Sports stadiums have been publicly funded for over a century



Williams et all, 2012, Jack F. Williams,* Jessica O'Quin,** and Joshua Stein***, * Professor, Georgia State University College of Law and Middle East Institute, Graduate Research Assistant. J.D., Georgia State University 2011.

Associate, Mesirow Financial Consulting, LLC. B.S., University of Georgia 2010Albany Government Law Review, 5 Alb. Gov't L. Rev. 123, BASEBALL AND THE LAW: AMERICA'S NATIONAL PASTIME: ARTICLE: PUBLIC FINANCING OF GREEN CATHEDRALS, p. 127

Public financing of sports stadiums is not a recent phenomenon. "Since the nineteenth century, stadiums have been built with complete public financing, complete private funding, or more typically, by some combination of both private and public money." n14 Public financing for baseball can be traced back to the formation of the professional teams themselves. In several situations, local politicians and booster clubs organized the founding teams, such as the Cincinnati Red Stockings (Red Socks) in 1869 and the Chicago White Stockings (the Cubs) in 1870. n15 In 1871, the first professional baseball game was played on municipally owned land that was donated to the city by the federal government with stipulation that it must be used for non-profit ventures.
In 1914, San Diego built the first publicly financed stadium. n17 That stadium seated 23,000 people and was built at the cost of $ 150,000. n18 During the 1920s, several other stadiums were built around the country, including Pasadena's Rose Bowl in 1922, the Los Angeles Coliseum in 1923, and Chicago's Soldier Field in 1924. n19 These stadiums were initially not intended for professional sports use, but rather "to encourage athletics in general and promote the reputation of [the host] cities." n20
The most famous early municipal stadium was the Los Angeles Coliseum, a football stadium. n21 The Coliseum was constructed by [*128] private developers to help attract the 1923 Olympic Games to Los Angeles, after which, the stadium reverted to public use. n22 The structural history behind the financing of the Los Angeles Coliseum is illuminating. Influential boosters formed the Community Development Association (CDA) to spearhead the stadium plan. n23 Initially, the CDA wanted Los Angeles either to issue a bond for the stadium or to pay for it directly. n24 While city and county officials were open to the bond idea, voters turned down the issue in a referendum. n25 In response, the CDA undertook the development of the park. n26 While the city and county were prevented from providing bonds for the construction of the stadium, the city gave the CDA seventeen acres in Exposition Park for the new stadium, underwrote CDA's $ 800,000 note on the stadium, and agreed to pay the building costs through rental fees of the facility. n27 Eventually, the city and the county paid $ 499,225 in rent towards the construction of the stadium, gaining joint control of the stadium after the 1932 Olympics. n28
The Cleveland Municipal Stadium, which opened in 1932, was the first publicly financed stadium intended for MLB use. n29 The financial structure of that stadium is indicative of the modern financial package offered to sports franchises today.

History of team finance

Zachary A. Phelp, JD, 2004, NOTE: STADIUM CONSTRUCTION FOR PROFESSIONAL SPORTS: REVERSING THE INEQUITIES THROUGH TAX INCENTIVES, St. John's Journal of Legal Commentary, Summer, 18 St. John's J.L. Comm. 981p. 984-6


I. History of Stadium Finance

The current trend of using public resources for professional sports stadiums has not always been the norm. n5 In the early [*983] days of professional sports, publicly financed stadiums were the minority. n6 The first professional stadium, the Baker Bowl in Philadelphia, was privately constructed and financed in 1897. n7 Fenway Park and Wrigley Field, two of the most famous sports venues still in use today, were also privately financed. n8 In fact, prior to 1948, only four of 28 major stadiums were built with any public funds. n9 The first stadium to be totally publicly financed was the Los Angeles Coliseum in 1923. n10 The Coliseum, which was built in an unsuccessful attempt to obtain the Olympics, cost [*984] taxpayers just under one million dollars. n11 However, during this time period the publicly-funded Los Angeles Coliseum was still in the minority. Public funding did not become the norm until the early 1950's, when stadium construction began to increase dramatically. n12 From 1953 to 1970, 30 stadiums were built, creating an average of almost two per year. n13 In contrast, before 1953 only 28 professional sports stadiums total had been constructed. n14 Of the 30 stadiums constructed between 1953 and 1970, 27 received financial support from taxpayers. n15 This taxpayer support totaled over $ 450 million, nearly 70% of the total cost of all 30 stadiums constructed during this time period. n16 As detailed, the use of public funds became the popular mechanism to finance these projects.

[*985] The large increase in construction, beginning in the early 1950's, was due to the popularity of sports, its growing audience, and additional teams being fielded. n17 During the 1950's the population was moving away from the industrial cities. n18 As the country grew, new and upcoming cities wanted to compete with the more established cities of the east coast. n19 One avenue of competition, and a status symbol of a major metropolis, was a professional sports team. n20 To lure these teams away from their eastern roots, the new cities had to create incentives to leave their loyal fan bases. n21 The most popular and effective incentive was the publicly funded stadium.

One of the most famous exits actually involves two teams. In 1957 New York began the year with three professional baseball teams.n22 After the season one remained. n23 The Brooklyn Dodgers left for Los Angeles, and San Francisco lured away the New York Giants. n24 The Dodgers worked out a deal with Los Angeles where they traded a minor league stadium for a much more valuable piece of real estate. n25 The city also paid over $ 4 million for construction preparation of the site and road improvements. n26 The Giants fared even better in the new California market. They received the promise of a brand new stadium. n27 In 1960, at a cost of $ 32 million to taxpayers, Candlestick Park opened as the new home of the Giants. n28 This [*987] mass exodus from New York, known for its loyal fans, was the real beginning of the current competitive atmosphere. n29 It is this atmosphere that has led so many cities to spend large amounts of public funds to attract a professional franchise.



How Stadiums Are Financed with Public Support

How stadiums are financed with public support

Zachary A. Phelp, JD, 2004, NOTE: STADIUM CONSTRUCTION FOR PROFESSIONAL SPORTS: REVERSING THE INEQUITIES THROUGH TAX INCENTIVES, St. John's Journal of Legal Commentary, Summer, 18 St. John's J.L. Comm. 981p. 987-


II. Using the Federal Tax Code to Finance a Stadium

A. Basic Tax Framework

All stadium construction begins with a financing plan. A key component to many stadium-financing plans is the use of the tax code. n31 Indirectly, the code is used to provide a subsidy, but to qualify the bond issuer has to meet certain requirements. n32 These requirements pressure cities and states to take on more of the debt and promote economically unsound practices.

Internal Revenue Code 103(a) excludes from a bondholder's gross income any interest earned on a municipal bond. n33 This [*988] incentive for individuals to invest in municipal bonds was created to help local governments raise capital. n34 A city can easily raise capital because it can offer the bonds at a lower interest rate than the private market due to the advantageous tax treatment of the interest to bondholders. n35

One type of bond specifically excluded from 103(a), thereby making the interest taxable income, is a "private activity bond." n36 Private activity bonds are defined in 141 as any type of bond that meets two specific tests. n37 The first test is the "private business use test," which is met if, "more than 10% of the proceeds of the issue are to be used for any private business use." n38 Private business use is defined in 141(b)(6) as "use (directly or indirectly) in a trade or business carried on by any person other than a governmental unit." n39 In the context of a stadium this test will always be met because private sports teams are the primary users of the facility. n40 The second, and [*989] more important test for a private activity bond is the "private security test." n41 To meet the private security test, more than 10% of a bond issue must directly or indirectly be secured by an interest in property that will be used for a private business. n42 If both of these tests are met a bond is classified as a private activity bond. Generally, once the private activity classification attaches, a bond issue cannot obtain tax-exempt status. n43 However, a private activity bond can fall back into tax-exempt status if it is a "qualified private activity bond" under 141(e). n44 If the bonds are qualified, the interest to the bondholder is excludable even though it is a private activity bond. n45 The main drawback of being classified as a qualified private activity bond, instead of a normal municipal bond, is that the bond issuer is subject to a cap. n46 The cap is imposed by 146, which limits the amount of qualified private activity bonds that can be issued. n47 The cap, determined by using state population, requires the [*990] particular bond issuer to make a choice. n48 Among the various qualified uses in 141(e), a government must choose which types of projects will get tax-exempt status. n49

It is helpful to remember that teams and local governments want to fail one of the two private activity tests. In doing so, the bonds received by the bondholder are not classified as private activity bonds, which in turn will exclude the bond interest from gross income under 103(a). n50 Because the private business use test is normally met, the private security test is the main focus. n51 A closer look at the security test shows that to build a stadium, the stadium itself cannot be used to secure the bond debt. n52 Any revenue from a stadium cannot be used to finance more than 10% of the debt, meaning that a city or state must secure 90%. n53 By placing a limitation on stadium revenue that [*991] can be used to pay off the bond debt at 10%, additional sources of income are necessary. n54

Several cities have levied taxes on alcohol or cigarettes, known as sin taxes, as an alternative form of revenue.n55 Other cities have used hotel taxes n56 or rental car taxes, n57 which place the burden of financing the stadium on travelers that will probably never see a game there. This is troubling because not only are non-resident's taxed for something from which they will never benefit, but they have no representation in the local legislature to represent their interests before the tax is imposed. n58 This burden shifting approach allows local politicians to display the stadium as their accomplishment while not having to raise taxes on his or her constituents. n59

[*992] Some have opted not to tax visitors, but rather tax everyone in a given community. In Milwaukee, for example, a five county sales tax was imposed to acquire the needed revenue. n60 This approach will place the burden on the entire community, including those who will never attend a game. This seems to be more equitable than taxing non-residents, but there are still innocent taxpayers who never receive any benefit from their direct subsidy of the stadium. n61

Whatever the additional source of revenue, the burden falls on the community, and in some instances, people who derive little, if any, benefit from the stadium. These drastic and somewhat unfair measures are undertaken merely to keep the bond interest tax-free. n62 If a city can maneuver around the private activity bond status, they can build for a lower cost. n63 Various experts in the field have estimated the benefits of keeping a bond issue tax-free. Some believe it can add an additional 34% to the cost of [*993] construction to a stadium,n64 while more conservative views are 15-20%. n65 These estimates show how some stadium construction projects could possibly hinge on the classification of the bonds as private activity bonds. n66 These cost figures also reveal why a city will go to great lengths and adopt economically irrational policies to fail one of the private activity bond tests.

Once a bond issue fails either the private business use or the private security test, the bond interest is tax-free to the holder. n67 Tax-free interest is lost revenue to the federal government. n68 If that same bondholder invested in a private bond or some other type of taxable income producing security, the [*994] government would receive taxes. n69 The federal government is foregoing money to benefit these stadium construction projects, which is equivalent to a cash payment. n70 Obviously the federal government has more pressing issues on its agenda than making sure all of the professional sports teams have new stadiums to play in. This money could be used to fund any number of cash-deprived programs that would benefit more people than a few select franchise owners. n71 Even if one agrees with this federal subsidization on the first cycle, some have argued that it will also create a second subsidy. n72 The second subsidy arises when cities stop spending for other vital programs, and instead seek federal funds for these programs. n73 Not only is the government subsidizing the bonds themselves, they are also paying for the programs that a city would be funding if it had not undertaken a stadium construction. n74

[*995] The tax structure currently in effect creates two negative aspects that need to be changed. First, it is questionable whether the federal government should be supporting tax subsidies for professional sports owners who arguably, are some of the wealthiest individuals or corporations in the country. n75 Second, even if one agrees that the subsidization aspect is acceptable, there should not be an incentive to use outside revenue streams for funding when the stadium itself could generate a large portion of the needed funds. This promotes cities to adopt fiscally unsound principles to satisfy the federal requirements for tax-exempt status. n76




Pilot Tax Exemptions




How PILOT tax exemptions work



Williams et all, 2012, Jack F. Williams,* Jessica O'Quin,** and Joshua Stein***, * Professor, Georgia State University College of Law and Middle East Institute, Graduate Research Assistant. J.D., Georgia State University 2011.

Associate, Mesirow Financial Consulting, LLC. B.S., University of Georgia 2010Albany Government Law Review, 5 Alb. Gov't L. Rev. 123, BASEBALL AND THE LAW: AMERICA'S NATIONAL PASTIME: ARTICLE: PUBLIC FINANCING OF GREEN CATHEDRALS, p. 132-3


Property Taxes and PILOTs

One of the main revenue-generating tools used by a local government is property tax, which accounts for nearly one-third of municipal income. n67 State and local governments regularly impose a tax on real property and have done so to fund local services even before the implementation of the income tax. Most [*133] states implement some form of ad valorem tax, that is, a tax based on the value of real property multiplied by some rate, often in the form of a millage. n68 Because of the enormous size and value of sports stadiums, along with the possibility of the stadiums being located on valuable property, the potential property tax burden for a team could be financially burdensome. n69

One major tool local governments use in attracting professional sports teams is to allow for an abatement of these property taxes. n70 These abatements generally last a number of years. n71 Some examples include New York, where the maximum number of years allowed for an abatement is ten years, and Ohio, where the maximum is set at twenty years. n72
However, to circumvent the abatement term limits, payments in lieu of taxes (PILOT) bonds were created. n73 These bonds were created in 2006, when the Internal Revenue Service issued two letter rulings that allowed the tax-exempt bond financing for two New York stadiums. n74 These rulings allow stadium related revenue to be used to pay debt service on governmental debt as PILOTs. n75
These bonds allow a private entity, such as a sports team, to make an annual payment for public bonds being used for their benefit, instead of paying a property tax. Moreover, the local government and the team usually agree that the payments related to the PILOT bonds will never be greater than the property tax that would have been assessed on the property. n76

This means that revenues from the stadium that would have gone towards paying taxes are now being used to pay off the publicly financed PILOT bonds. n77 Additionally, these "payments qualify as generally applicable taxes and do not count against the 10 percent limitation on using revenue arising from private business activity to pay debt service," so the stadium can be funded with traditional bonds as well. n78


After the Yankee Stadium project received criticism, the Internal [*134] Revenue Service ("Service") finalized treasury regulations that required a percentage of taxes to be paid instead of Yankee Stadium's financing approach of a fixed payment negotiated years in advance. The regulations permitted already negotiated or completed projects, however, such as Yankee Stadium and Citi Field, to continue according to pre-regulations plans. n79



Another explanation of PILOTs

Gregory Fox, 2005, B.A., Cornell University; J.D. candidate, 2006, Brooklyn Law School, Public Finance and the West Side Stadium: The Future of Stadium Subsidies in New York, Brooklyn Law Review, February, p. 477-8


C. Payments in Lieu of Taxes as a Form of Local Subsidy

Some states, including New York, use payments in lieu of taxes (PILOTs) as an additional method of financing stadium construction. n64 PILOTs are, as defined by the laws of New York, "any payment made to an agency, or affected tax [*488] jurisdiction equal to the amount, or a portion of, real property taxes, or other taxes, which would have been levied by or on behalf of an affected tax jurisdiction if the project was not tax exempt by reason of agency involvement." n65 This means that private contributions to the cost of the stadium may be paid to the municipality in amounts equal to the property taxes that would have been due to that municipality. PILOTs become a form of local subsidy when a municipality lends capital in the form of municipal bonds to the private developer in order to cover the private share of the stadium construction costs. n66 This is because the municipality is forfeiting its right to receive property taxes in exchange for payments that merely service the debt owed to it by the private entity.

The NYSCC proposal called for the issuance of at least $ 600 million in tax-exempt bonds and the use of PILOTs by the Jets. n67 The next part will describe what that massive investment would have went towards if the West Side Stadium had been built.


Tax Exempt Municipal Bonds




Stadiums are usually financed through tax exempt bonds


Gregory Fox, 2005, B.A., Cornell University; J.D. candidate, 2006, Brooklyn Law School, Public Finance and the West Side Stadium: The Future of Stadium Subsidies in New York, Brooklyn Law Review, February, p. 477


The predominant method for financing stadiums today is through the issuance of tax-exempt bonds. n32 The proposal for [*484] the NYSCC was no exception. n33 This type of financing involves the issuance of tax-exempt bonds by a municipality or state that will in turn be repaid using taxpayer dollars. State and local governments prefer this method because it allows them to pay below-market interest rates, which bondholders are willing to accept because the interest on these bonds is exempt from federal taxation. n34 This means that when a state or municipality issues a bond to fund the construction of a stadium, not only are the taxpayers of that state or municipality subsidizing the cost of construction by assuming the debt, but the federal government is subsidizing it as well by forfeiting tax revenues. n35 Many proponents of publicly financed stadiums justify the policy of indirect subsidization by the federal government by claiming that the "'benefits of [public capital facilities] extend beyond the jurisdiction that provides them,' and will therefore, without the subsidy, be provided at less than the optimum level." n36 Many economists, however, claim that the economic benefits of stadiums to the jurisdiction are highly exaggerated, thus rendering the local and state subsidy justifications weak and the federal justification even weaker. n37
The federal government has attempted to curtail the indirect federal subsidy of professional sports facilities on several occasions, but the practice is occurring with as much frequency, if not more, than ever. n38 One such attempt was the Tax Reform Act of 1986, which deemed a bond to be a "private activity bond," and thus taxable, if more than ten percent of the bond proceeds are used by a nongovernmental entity and more [*485] than ten percent of the debt service is secured by property used in a private business. n39 This law has been interpreted to mean that a government bond issue may exceed "one but not both of the 10 percent bond tests." n40 Owners of recently constructed stadiums have circumvented the requirements of the second ten percent test by servicing at least ninety percent of the debt using non-stadium revenues. n41 By repaying their debts in this manner, less than ten percent of the bonds are secured by the private business that is occupying the stadium and the bond cannot be considered a private activity bond for tax purposes. n42
So called "stadium authorities" are another way for municipalities to avoid "private activity bond" status and maintain federal tax exemptions. n43 This is possible because a tax is not considered to be stadium related if it is "generally applicable." n44 By establishing an authority as a separate unit of the state government that manages several stadiums, the taxes on event tickets are generally applicable as long as they are applied to all events equally. This allows stadium authorities to circumvent the ten percent of stadium debt service requirement of the Internal Revenue Code by servicing their debts with tax proceeds from ticket sales that are not considered to be stadium related. n45

How tax exempt municipal bonds work



Williams et all, 2012, Jack F. Williams,* Jessica O'Quin,** and Joshua Stein***, * Professor, Georgia State University College of Law and Middle East Institute, Graduate Research Assistant. J.D., Georgia State University 2011.

Associate, Mesirow Financial Consulting, LLC. B.S., University of Georgia 2010Albany Government Law Review, 5 Alb. Gov't L. Rev. 123, BASEBALL AND THE LAW: AMERICA'S NATIONAL PASTIME: ARTICLE: PUBLIC FINANCING OF GREEN CATHEDRALS, p. 130-1


Municipalities may issue bonds that are exempt from federal income tax. n46 The exemption from federal income tax (and often state income tax as well) is designed to allow municipalities to issue bonds at a lower price, compared to corporate public debt, because of the after-tax return investors would experience by investing in such tax-exempt instruments. This exemption allowed municipalities to use bonds to fund the construction of sports stadiums through what is commonly known as an industrial development bond (IDB). n47 "Prior to 1968, the [Internal Revenue] Code did not constrain state and local officials from issuing tax-exempt debt and using the proceeds to finance investment projects for individuals and privately owned businesses." n48 In 1968, the Expenditure Control Act (ECA) was drafted to curb the use of tax-exempt debt issued for private purposes, due in large part to concerns that the widespread use of these "tax-exempt revenue bonds were driving up interest rates [*131] for general obligation tax-exempt debt," were creating a loss of tax revenue, and allowing state and local officials too much control over government funds. n49

The ECA defined an IDB as having two requirements: "First, more than 25 percent of the bond proceeds [were] used by a nongovernmental entity. Second, more than 25 percent of debt service payments [were] paid directly or indirectly by property used in a trade or business." n50 The thought behind this financing structure was that only users of the stadium would pay for its services, thus saving general tax revenues from being used. n51 However, the ECA was undermined by exempting stadiums as "inherently quasi-public in nature" from the twenty-five percent requirements. n52

Over time, the IDB restrictions "proved to be too weak and the volume of tax-exempt debt issued for private purposes continued to grow until the Tax Reform Act of 1986 ... ." n53 Senator Daniel Patrick Moynihan, a staunch opponent of public financing of sports stadiums, said the goal of the 1986 Act was to "eliminate tax-exempt financing of professional sports facilities [altogether]." n54 The 1986 Act replaced the IDB language in the ECA with the term "private-activity" and reduced the percentage requirements from twenty-five percent to ten percent, for both the "use of proceeds" and "securities interests" tests identified above. n55 Additionally, stadiums were removed from the list of activities eligible to use tax-exempt, private-activity bonds. n56
With the introduction of the 1986 Act, section 141 of the Internal Revenue Code provided that a bond would be considered a taxable "private-activity bond ... if more than 10% of the bond proceeds [were] used by a nongovernmental entity and more than 10% of the debt service [was] secured by property used directly or indirectly by a nongovernmental entity." n57 The congressional intent was that if stadiums were non-exempt and the bonds available to finance stadiums were taxable, the use of these governmental bonds would be less attractive to investors, who [*132] would then find private means of financing the stadium. n58 However, the continued demand for limited sports teams encouraged cities to compete with one another by offering stadium deals to teams. n59 To be eligible for governmental bonds, as opposed to the private-activity bonds, the bonds only had to pass one of the ten percent tests. n60 Since a sports franchise is bound to use more than ten percent of the stadium services, thus failing the use test, "no more than 10% of the debt service on the bonds [could] be secured directly or indirectly by any private business." n61 This results in no more than ten percent of the stadium-related revenues being used to finance the debt services. n62 Meanwhile, a loophole was created that allowed payments to be made with general municipal revenues (i.e., tax revenue).

The practical result of the 1986 Act was to change the method of debt repayment. Municipal officials and stadium owners structured their debt repayment so that revenue streams from the actual stadium accounted for less than 10% of the total repayment, while the public was responsible for the remaining 90%. n64

This was done generally through increases in sales tax, tourist tax, sin tax, and taxes on lottery proceeds. n65 Additionally, the requirement that no more than "ten percent [of] funding from a private entity [should] fund [a] stadium financed with state or local bonds, [caused the] city to also provide a favorable lease" to the owners of the sports team.




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