Whether the Tampa Bay Rays end up in Ybor City or in a new ballpark in Pinellas County, the federal tax overhaul underway in Congress could make it much more costly to build the team’s next home.
The version of the tax cut approved by the U.S. House of Representatives eliminates a tax exemption on bonds issued to build or renovate stadiums.
That exemption has saved local governments — or cost the federal government, depending on your point of view — tens of millions of dollars on stadiums across Tampa Bay.
Officials in both Hillsborough County and St. Petersburg — the communities that have taken the lead on Rays negotiations — say that if it passes, the cost of borrowing money to build a new ballpark will go up significantly.
"Certainly having to issue all taxable bonds for a new Rays stadium will increase the city’s cost," said Joe Zeoli in St. Petersburg’s economic development administration.
By millions of dollars?
"I would think so," said Bonnie Wise, Hillsborough County’s chief financial officer.
Of course, it only costs more if those governments decide to help build the Rays a new ballpark. Proponents of the House tax bill say the provision will make local governments think twice about using taxpayer dollars to pay for stadiums for teams that are owned by millionaires and worth billions of dollars.
Rays owner Stuart Sternberg said the team’s contribution could be around $150 million on a facility that is likely to cost more than $600 million.
The elimination of the tax exemption was first introduced as a bill in 2016 by U.S. Rep. Steve Russell, an Oklahoma Republican, who suggested using the savings for defense spending.
Cutting the exemption, Russell said, "is a step in the right direction, for our national security, as well as for fixing our annual deficits."
At President Donald Trump’s urging, Congress is rapidly moving ahead with a $1.5 trillion tax cut that will lower the corporate tax rate from 35 percent to 20 percent and nearly double the standard deduction for individual filers.
To help cover the bill’s price tag, lawmakers have targeted for elimination dozens of exemptions in the tax code. Nonpartisan analysts say the bill will leave a $1 trillion hole in the budget over the next decade.
The exemption for stadium borrowing will add $200 million to federal government coffers from 2018 to 2027, according to the Joint Committee on Taxation. The provision was not included in the Senate package that passed last week.
The House and Senate are conferring on a final bill that can pass both chambers.
The stadium provision is one of several tax exemptions on the table that worry local governments. For example, both the House and Senate bills would eliminate tax exemption status for "advance refunding bonds," which are often used by governments to refinance debt on large infrastructure projects.
"Almost every tool we need to sustain growth or maintain infrastructure, they’re watering it down," said Hillsborough County Administrator Mike Merrill.
Governments typically borrow money from banks or other lending institutions when they build facilities for professional sports teams. Under existing law, those lending institutions don’t have to pay federal taxes on the revenue they make from selling those bonds.
Those savings are passed on to the borrower in the form of lower interest rates. So it ends up costing local governments much less to pay off the debt if the bonds are tax exempt.
Hillsborough County has taken advantage of this in the past to build and renovate Raymond James Stadium, Amalie Arena and George M. Steinbrenner Field. A county analysis of the borrowing for those facilities estimated tax-exempt bonds saved $141 million. That does not include bonds issued by the city of Tampa for their contributions to these projects.
A 2016 study from the Brookings Institute found that the exemption led to between $2.6 billion and $3.2 billion in federal subsidies of sports stadiums since 2000. The study also concluded that the tax was "ineffecient" and the subsidy outweighs the economic benefit.
"Proponents of government subsidies for sports stadiums typically justify them on the grounds that stadiums provide spillover gains to the local economy," the study’s authors said. "The evidence for these spillover gains is weak."
Calls to eliminate the stadium tax exemption are just one way Republicans, from Tallahassee to Washington, D.C., want to make it harder for taxpayers to finance arenas for sports teams.
A Florida House committee has already approved a bill that would ban governments from building sports stadiums on public land. All three of the aforementioned stadiums in Tampa are on government-owned land, as is Tropicana Field.
Opposition to these kinds of arrangements has grown considerably in recent years, especially in Florida, where Miami-Dade County helped the Miami Marlins build a ballpark that will cost taxpayers $2.4 billion when the bonds are paid off.
Contact Steve Contorno at [email protected] or (813) 226-3433. Follow @scontorno.