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What happens if a government defaults on stadium payments to a team?

May 12, 2014, 9:50 AM EST

Money on the Table

A lot of sports teams get payments from local governments to pay off stadium construction from diverted property taxes. The system is called tax increment financing – TIFs for short — and the decision of a government to offer that money to sports teams is based on the presumed rise in property tax revenues caused by the stadium being built. It’s a way for governments to claim that stadiums are paying for themselves, as the money wouldn’t have been coming in if the stadium hadn’t improved the overall area to begin with.

Except, often, that tax revenues don’t increase and the government just ends up paying for the stadium out of general tax dollars. By then, however, the stadium is built and people tend not to notice too much.

Neil deMause of Field of Schemes has a great post up today noting that, at least in Reno, Nevada, people are noticing. Indeed, there is at least some suggestion that the local government may just stop paying the Diamondbacks’ Triple-A affiliate for the new park out of general funds. deMause wonders what might happen if that actually were to occur.

It’s a great point about an often-overlooked side of public financing of sports facilities.

  1. [citation needed] fka COPO - May 12, 2014 at 10:03 AM

    poring over a hypothetical Aces v. Reno ruling for years to come

    Not exactly thinking of baseball when I hear that hypothetical court case.

  2. sdelmonte - May 12, 2014 at 10:15 AM

    A government defaulting on anything could be seen as abrogating the responsibilities it agreed to in accepting the deal, right?

    • groundruledoublebourbon - May 12, 2014 at 12:11 PM

      It would seem so, but a premise of local government law is that one current governing body cannot bind or obligate a future governing body (which I’m aware makes no sense when you consider municipalities enter into long-term debt contracts all the time). Under this premise, it is possible a governing body could decline to appropriate funds under a contract a prior governing body inked, but this has never been before a court to my limited knowledge, as the author notes. Anyhow, the real incentive to continue paying debt service is to keep the municipality’s credit rating clean and allow future use of public funds at reasonable interest rates.

      Interesting dichotomy.

    • paperlions - May 12, 2014 at 12:17 PM

      Depends on the deal. If the team’s part of the deal is that its existence is supposed to affect property values and increase tax revenues on local properties, then the team is only getting what the deal stipulates if those tax dollars do not manifest.

  3. DelawarePhilliesFan - May 12, 2014 at 10:21 AM

    Public finance deals of stadium are atrocious. However, unless the City of Reno (or any other municipality) can produce the photo of the gun pointed at their head when they agreed to the deal, I say they should pay up

  4. raysfan1 - May 12, 2014 at 11:10 AM

    “I’m kind of hoping they do, not because I have a particular interest in the fate of either the Aces or Reno’s budget, but because it would be extremely interesting to see how a court would rule on the legality of a city stopping payments on an already-built stadium.”

    To the author of the original article–my thoughts exactly

  5. Charles Gates - May 12, 2014 at 12:10 PM

    But the dems keep telling me that government debt isn’t a bad thing.

    • raysfan1 - May 12, 2014 at 12:19 PM

      Off the topic of baseball, but an interesting read–

      http://business.time.com/2011/07/02/what-would-the-founding-fathers-say-about-the-national-debt-dont-default/

    • tellyspop - May 12, 2014 at 12:20 PM

      Please kind sir, a link or quote to your pronouncements.

    • tellyspop - May 12, 2014 at 12:33 PM

      Here is what I found.

      “You know, Paul, Reagan proved that deficits don’t matter. We won the mid-term elections, this is our due.”

      Dick Cheney to Paul O’Neill, then Treasury Secretary from the book, “The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill”
      by Ron Suskind

    • ewyorksockexchange - May 12, 2014 at 1:54 PM

      Actions speak louder than words. Since world war II, there have been only two presidents who have had the national debt double during their terms. Those presidents: Reagan and GWB.

      In fact, here is a list of the presidents since Eisenhower who lowered the deficit during their terms:

      Kennedy (40% reduction)
      GHWB (by a very small amount)
      Obama (From 1.6T his first year, to a projected ~$450 billion, 71% decrease)

      Repubs might say they hate government debt, but they sure don’t govern like it.

      • ewyorksockexchange - May 12, 2014 at 2:00 PM

        Forgot Clinton in that second list, from $230B to $130B

      • drewsylvania - May 12, 2014 at 3:28 PM

        Republicans say they hate big government, too…then they want to keep (and add more) bigoted laws…

        Today’s Republicans aren’t conservatives. I’m not sure they even know the definition anymore.

    • drewsylvania - May 12, 2014 at 3:00 PM

      If only we would stop throwing huge piles of money into other countries’ messes…

      If only we would stop gouging the common people while letting megacorps get away with murder (sometimes literally)….

      If only….

  6. ud1951 - May 12, 2014 at 1:35 PM

    You think the attorney turned baseball blogger would be able to give us three or four paragraphs on what happens when one party to a contract fails to meet their obligations to the other.

  7. barrywhererufrom - May 12, 2014 at 1:37 PM

    We have the largest debt in the history of our republic..if you think defaulting on a stadium is bad you haven’t been paying attention.

    • drewsylvania - May 12, 2014 at 3:02 PM

      This case is not something that is generally known. That’s why it’s interesting.

      Having said that, our power structures do all they can to prevent their fleecing of America from becoming too interesting. So they can keep doing it.

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