Tax-Exempt Bonds and the Economics of Professional Sports Stadiums (part 1)

Users of publicly owned stadiums receive subsidies from both state-local and federal taxpayers. The federal subsidy arises when the stadium is financed with state-local bonds issued at below-market interest rates paid for by exemption of the bonds’ interest income from federal income taxes. A $225 million stadium built today and financed 100% with tax-exempt bonds might receive a lifetime federal tax subsidy as high as $75 million, 34% of construction costs. The total public subsidy for one year, 1989, of 21 stadiums with average construction cost of $50 million is estimated to have been $146.4 million, with $24.3 million, 176, being federal subsidy. The federal subsidy will be at least quadrupled for the $200 million-plus stadiums now being built.