Federal Tax Policy Tax Subsidies And The Financing Of Professional Sports Facilities

Competition among cities for the elusive prize of a professional sports franchise has spawned a building boom in stadiums, arenas, and ballparks. Local, state, and federal taxpayers subsidize professional teams that use a publicly owned sports facility. Typically, the state and local subsidy is provided through below-market rents, guarantees, and direct payments on behalf of the team. The federal subsidy is provided when state or local bonds are used to finance the facility. This article analyzes the legal and policy issues relating to tax-exempt financing of professional sports facilities. Section II examines the recent building boom in those facilities and the forces underlying that boom. Section III examines the federal tax laws on tax-exempt financing and the federal subsidy for publicly owned stadiums, arenas, and ballparks. Section IV analyzes whether there is any policy justification for the federal subsidy and examines the possibility of reform and potential legislative changes in the tax laws. The article concludes that such tax-exempt subsidies for professional sports venues are inequitable and not economically justified and argues that the building boom in professional sports facilities is an all-out raid by professional sports teams on local and national resources.