Utah Taxpayers to Provide $41 million Subsidy for Soccer Stadium?

by Howard Stephenson

Utah legislators have authorized Salt Lake County an ongoing funding source expected to empower the county to provide more than $40 million to the owners of Salt Lake Real soccer team. The Utah Legislature passed
HB371 (Rep. David Clark) which enables Salt Lake County to permanently extend last year’s “temporary” 1.25% rate increase on transient room taxes (TRT). Last year, the Legislature authorized Salt Lake County to “temporarily” increase the TRT rate from 3.0% to 4.25% in order to fund the Salt Palace Convention Center expansion. HB371 also allows Utah’s 28 other counties to increase their rates from 3.0% to 4.25%. Naturally, county officials statewide supported the rate increase authorization.
While the council has not yet acted, some leaders in Salt Lake County intend to use the additional 1.25% TRT funding, which was set to expire in ten years, to subsidize a soccer stadium.

Faulty Logic

Stadium proponents have argued that the current stadium proposal is not a taxpayer subsidy because “local” tax dollars are not being used because funding will come from hotel taxes which are primarily paid by out-of state tourists. Even though hotel taxes are largely paid by tourists from out of state, the revenues generated by tourism taxes belong to local taxpayers, not wealthy professional sports team owners.

These revenues belong to local taxpayers just as much as property taxes, sales taxes, and income taxes that are paid by local taxpayers.

Using tourist taxes to subsidize a soccer stadium is poor tax policy.
While general taxes should not be earmarked for specific purposes, user fees and selective sales taxes should be earmarked for purposes related to their collection. Selective sales taxes on tourists such as hotel and car rental taxes should be used to fund tourism promotion and the costs of hosting these visitors. Currently, Utah spends millions of dollars of /general fund /dollars to fund tourism promotion and services. If Utah were to use tourism taxes to fund tourism promotion and services to tourists, then general fund dollars could be used for other purposes, including tax cuts.

Another irrational argument used to convince some legislators to vote for the new tax was that legislators are not really giving money to a soccer team – they are merely allowing local governments to make that decision. If legislators really buy this argument because there is no blood on their hands for the tax hike, then perhaps they should also allow local entities to set whatever impact fees they choose, or allow them to impose local option income taxes, or permit them to increase property taxes without undergoing the rigorous public notice and public hearing requirements of Truth-in-Taxation.

Utah’s Subsidy of Stadium Contrary to Recent National Trends

While Utah legislators pave the way for ReaL Salt Lake soccer team owners to receive $41 million in tax subsidies, state legislatures and local entities across the country are finally saying no to major league handouts. They’re making Utah look like a blue state.

In a March 2006 article entitled “Skybox Skeptics”, /Governing /magazine revealed that it’s getting harder and harder for baseball teams to wrangle public money for new stadiums. This should make us wonder how a so-called conservative legislature like Utah’s could enable local government to give tax dollars for a stadium which otherwise would have been paid for by team owners.

/Governing/’s Josh Goodman reported that David Samson, President of the Florida Marlins went to Portland Oregon a few months ago to discuss relocation of the two-time World Series champions.

If the goal of his trip was either to pressure Florida legislators to chip in money toward a new stadium or to find a new home that would, he failed spectacularly, Goodman reported. Tom Potter, Portland’s mayor, not only reasserted his opposition to public financing of a stadium but insisted he spoke for most of his constituents. Asked whether most Portlanders “couldn’t care less about a baseball team,” he replied, “That’s my very strong sense.”

“Although Potter’s bluntness is unusual, his perspective is not unique,”
Goodman wrote. “Local and state governments are putting up increasing resistance to the idea of paying for new baseball stadiums. The Minnesota Twins have spent a decade trying to win public funds for a new ballpark but have been rebuffed by the legislature every time, most recently last year. The Marlins began seeking new suitors after the Florida legislature refused to contribute state money to build the team a new home. And the District of Columbia’s city council has already demanded, and won, multiple renegotiations of the deal that brought the Washington Nationals to town last year,” he said. The one ballpark completed in the past two years, in St. Louis, was built almost entirely with private money.

Goodman said communities are declining subsidies in part because elected officials have begun to accept academic research showing that the economic benefits of subsidizing stadiums doesn’t justify the costs.
/Governing /revealed that in the past decade, economist after economist has lambasted the idea that governments are making a prudent choice when they “invest” in stadiums.

Their central point has been that most people have relatively fixed entertainment budgets. That means a dollar spent on baseball is a dollar not spent elsewhere in the local economy. Many academics are also skeptical that stadiums can revitalize neighborhoods. When a new stadium goes up in any city, says Villanova University’s Rick Eckstein, “you can see for yourself, even if you’re a lay person, that there’s not much going on there except on game days.”

Goodman said the result is that longstanding stadium foes — critics on the right who see public financing as an impetus for higher taxes and critics on the left who view it as welfare for billionaires — have more influence than they did in the past.

Last year, the Minnesota Legislature failed to give approval to a plan for a new stadium, even though the public costs would have been borne exclusively by Hennepin County, which approved the funding package, Goodman reported.

“In Florida, the threat of a Marlins departure also backfired. After team officials met with Las Vegas representatives to discuss a possible move there, Florida Senate President Tom Lee, rather than seeking additional state money to keep the team in town, accused the Marlins of ‘blackmail,’ declaring that ‘I don’t negotiate with terrorists.’ Later in the year, the team reached a deal with Miami-Dade County officials that was predicated on the legislature kicking in $60 million in state money. Legislators balked at that sum and the measure stalled,”
Governing wrote.

When it comes to subsidizing major league teams, the Utah Legislature seems to be 30 years behind the times. Let’s hope the Salt Lake County Council has better sense when they are asked to make the final decision on the tax subsidy.