1. FACILITY FINANCING CHAPTER 9

2. TERMS Subsidies Subsidizing construction Infrastructure Subsidies Operational subsidies Gestation Era Public Subsidies Era Transitional Era Subsidies Fully Loaded Era MLB (A58) Tax Reform Act 1986 Deficit Reduction Act Of 1984

3. Sport Facility Investments There are three types of investment: A. Subsidizing Sport Facility Construction This is the amount given toward building a sport facility.

4. Types of Investments C. Operational Subsidies: The lease agreement between government and the teams who play in the venues. B.Infrastructure Subsidies: This is the amount that government acquires site and/or services (water, electricity, security, and etc.)

5. The Four Eras of Stadium Subsidies A. Gestation Era 1961-1969 B. Public Subsidies Era 1970-1984 C. Transitional Era 1985-1994 D. Fully Loaded Era 1995-2003

6. (Era of subsidies continued) Gestation Era 1961-1969 During this era, it was common for the government to finance and construct facilities for the franchise team. This is done through a lease agreement in which the government is the landlord. During this time, this occurred in the Midwest and East coast. Public Subsidies Era 1970-1984 Popularity of sports grew tremendously. Funding was perceived to be the exclusive responsibility of public entities. They used bonds or revenue bonds redeemed by sales tax

7. Era of subsidies continued) Transitional Era 1985-1994 This era saw the government assumed less of the proportion of financing new sport facilities. The Deficit Reduction Act of 1984 which prohibit the use of tax- exempt bonds to finance luxury boxes. The Tax Reform Act of 1986 prohibit use for new sport facilities. Fully Loaded Era 1995-2003 This era saw 47 new major new facilities were built. Most facilities were financed by private-public partnership.

8. FINANCING SOURCE OF BUILDING STADIUM

9. Stadium Funding Sources

10. Trends in the Minor Leagues There has been a resurgence of interest in minor league games, attendance at minor league games exceeded 38.8 million. The attendance increases have urged for bigger and better stadiums. MLB incorporated Attachment A58 to the Professional Baseball Agreement. It specifies standards for minor league stadiums. Non-compliance of A58 means minor franchise would lose their major league affiliation and player development contracts.

11. GREER STADIUM

12. BENEFITS Positive externalities: Public good Psychic impact Controversies Franchise free agency Sports teams and owners Leagues Fans/patrons Cities/municipalities Positive externalities – overflow effects like the creation of new jobs, growth in related businesses. Can help justify public investment in a private business. In the sport industry, this includes local businesses like bars, restaurants, hotels, and retail stores. Radio and newspapers also benefit from sport

13. Historical Changes in Financing Phase 1 – private sources of revenue Phase 2 – general obligation bonds (GOBs) Phase 3 – changing array of complex and creative financing methods: GOBs – Debt and interest paid out of local government general funds Modern period Initial public funding sources - sales taxes, property taxes, and stadium rent, but increasingly came from hotel and rental car taxes and others. Private sources - capitalizing revenue streams from the facility (e.g., naming rights, premium seating, and sponsorships) and borrowing against those to pay for construction.

14. Laws of Interest in Building Facilities 1984 Act – Prevented tax exempt bonds for financing luxury suites 1986 Act – Prohibited tax exempt bonds for facility where a single organization was responsible for 10% of more of revenues generated in facility (Private Use Test) Changes caused interest rates in bonds to increase.

16. Public Financing― Direct Revenue Sources  Sales tax  Tourism / food & beverage taxes  Sin taxes  Sale of government assets  State appropriations

17. Sales Tax Funding for Facility Construction

18. Facility Funding Through Tourism and Food and Beverage Taxes

19. COORS FIELD & LUCAS OIL STADIUM

20. Public Financing― Direct Revenue Sources Ticket or parking taxes / surcharges Lotteries / gaming revenues Player income taxes Utility and business taxes Reallocation of existing budget Public Financing― Indirect Sources  Land donations  Infrastructure improvements  Tax abatements Land – Brooklyn Nets, St. Louis Blues Infrastructure – St. Louis Cardinals Tax abatements $10 million in Utah for owners of MLS stadium, Nationwide Arena (half of normal amount)

21. Parking Taxes

22. Trends in Colleges There has been an increase the number of college stadiums either renovated or expanded. 1. The best student athletes and the best coaches are attracted to institutions that have the best facilities. 2. The football pot is lucrative with bowl payouts, football T.V., and NCAA College Basketball Championships. 3. Division I schools are using the sale of premium seating as the basis for financing major facility improvements.

23. COLLEGE FOOTBALL STADIUMS

24. Observations: 1.Americans spend three times as much money on flowers, seeds, and potted plants as they do on spectator sports. 2. A major university is not only larger than any sports team, but may exceed the size of an entire league. 3. Teams are cultural icons which people identify with and are willing to pay for.

25. Factors Contributing to Enhanced Private Sector Investment in Professional Facilities 1. Opportunity Costs 2. The Equity Issue 3.Owner Leverage 4. The Community Power Structure 5. The Increasing Costs Stimulus Students are to add these words to your terms. Turn them in with the other term on or before the 19 th.