Stadiums Are Built On Federal Tax Break

"The tax exemption is absolutely critical," said Mitchell Ziets, a sports financing consultant who has worked on projects across the country and is now working with the Virginia baseball authority. "A lot of these deals are really tight. There's no excess money."

This benefit to the stadium builders comes at the expense of the Treasury, however, because the bond investors are not paying federal taxes on the interest income.

For the baseball park in Seattle, the Treasury lost the opportunity to generate more than $7 million a year, based on The Post's calculations.

"Local government officials don't say, 'I'm really, really worried about the national deficit, so I'm not going to do it,' " said Andrew Zimbalist, a Smith College economics professor and a critic of baseball finances. "They say, 'This is going to help me get elected.' But why should the federal government be involved in this?"

U.S. lawmakers have sought to limit the use of tax-exempt bonds for projects that benefit private parties, such as professional sports teams. Most notably, the massive 1986 tax reform law revoked a specific exemption for sports venue construction, and many expected that tax-exempt bonds would no longer be used for that purpose.

But the reform law allowed the use of tax-exempt bonds for any project -- sports or otherwise -- if 90 percent of the repayment comes from taxes.

Attempts to change the tax law, fueled in part by a 1996 Congressional Research Service report, have failed, and the opening has allowed the use of more than $6.8 billion in tax-exempt bonds for professional sports venue construction since 1990, according to The Post's review.

Houston alone has issued $158 million in tax-exempt bonds for its baseball park, $334 million for its football stadium and $227 million for its basketball arena.

"The big advantage for us is the lower rate of interest," said Oliver Luck, chief executive of the Harris County-Houston Sports Authority. "I don't think, quite honestly, that very many people are focused on the hit that the U.S. Treasury would take. Most folks look at these things in terms of the local taxes involved.

"Everybody has this mentality that because we send so much money to Washington, if you can get direct or indirect support of federal dollars, take advantage of it. But the federal government has contributed in a substantial way in getting football, baseball and basketball facilities built around the country."

Nationally, more than $6.3 billion of that bond debt is still outstanding, which translates into a loss to the Treasury of more than $100 million annually, according to The Post's calculations.

Representatives of professional sports leagues point out that the use of tax-exempt bonds is perfectly legal and a local prerogative.

"Communities and their leaders make the decisions on how to use tax-exempt bonds, not a sports league," said National Football League spokesman Greg Aiello. "Many communities have clearly and consistently identified sports facilities as worthy of public support because they generate a wide range of public benefits, economic and otherwise."

He said that NFL owners have invested $2.6 billion in private funds in stadium projects.

Some economists take aim at this federal subsidy, saying it generally serves no national purpose. For although it might make sense for a local government to subsidize a stadium -- either as a cultural attraction or in the belief that it will spur redevelopment -- they see no federal benefit in helping sports teams pit one city against another.

"The beauty of the tactic is that tax-exempt bonds have very little meaning to most people," said Robert A. Baade, an economics professor at Lake Forest College in Illinois and an expert in the financing of public sports venues. "Very few perceive that the amount of money involved is very significant. The costs are really hidden."