National Football League presses to preserve tax-exemption for stadiums

With the municipal market's prized tax exemption possibly in play next year as Congress tackles tax policy, the National Football League is getting into the game by lobbying to protect the financing tool for the controversial and niche stadium market.

The use of tax-exempt bonds to build sports stadiums, which have been subject to several legislative attacks over the years, appears to be a top priority for the NFL. In April, the league hosted a dozen Congressional aides in Detroit during the 2024 Draft. The first legislative briefing was titled "Stadium Construction and Municipal Bonds," and included a discussion of federally tax-exempt bonds "as a tool to promote economic development at the local level that allow state and local governments low-cost financing for community economic development projects."

Neil deMause

The move comes as municipal market lobbyists are gearing up for a fresh fight to preserve the tax exemption across all markets. Congress next year will tackle expiring tax provisions in the 2017 Tax Cuts and Jobs Act and on the hunt for so-called "pay-fors" to avoid deepening the deficit. Muni lobbyists will be working to "support maintaining tax-exempt financing authority under current law," including stadium bonds, said Brett Bolton, senior vice president of Bond Dealers of America. 

The use of tax-exempt bonds to build stadiums on behalf of wealthy team owners has faced near-constant criticism since the Tax Reform Act of 1986, when Congress eliminated them from the category of private activity bonds eligible for federal tax exemption. In order to be eligible for the exemption, stadium bonds must now be structured so that no more than 10% of debt service is secured by interest in the stadium and no more than 10% of the bond proceeds are from payments derived from the stadium.

Despite having to take the debt onto their own books, cities and states are often eager to finance costly stadiums in order to hang onto high-profile teams and say that the facilities spur economic development and jobs. Critics including academics and economists say the numbers often fail to pan out.

Congress has floated several bills over the years to eliminate the perk, all of which have failed to gain traction. The most recent bill came during the last Congress from Oregon Democrat Rep. Earl Blumenauer, who introduced a bill to eliminate the federal tax exemption for bonds that finance or refinance capital expenditures for a stadium or arena that is used for professional sports games, exhibitions or training at least five days a year. The bill did not move out of the House Ways and Means Committee.

"It's always been an issue that a handful of elected representatives and senators will take up, and it never really goes anywhere because the league lobbies really, really hard against it," said Neil deMause, who wrote Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit and writes the Field of Schemes website.

DeMause, who testified on the topic before a House committee in 2007, said the issue's lack of traction on Capitol Hill indicates "somebody important doesn't want it to be discussed," he said. "Actually having a vote on it is beyond the pale because nobody wants to have to take sides against saving taxpayers money or helping the sports leagues — and this is clearly a major priority by the sports leagues."

The federal tax exemption on stadium bonds, he added, is the "gift that keeps on giving from the U.S. Treasury to sports teams owners."

The NFL, considered the most active lobbyist among the sports leagues, spent more than $1.3 million on federal lobbying in 2022, according to Open Secrets. The league spent $1.46 million last year, and in the first quarter of this year has spent $380,000. The NFL ranked first for the last two years in the category of recreation and live entertainment, followed by Major League Baseball. The league did not respond to a request for comment.

One of its external lobbying firms, Capitol Counsel LLC, reported $80,000 of lobbying income for the first quarter of this year for the NFL on "issues related to tax reform, including tax-exempt bonds," among other topics. Lobbyists at Capitol Counsel did not respond to a request for comment.

Of the 11 House representatives who sent one or more aides to the NFL's Detroit draft, only one responded to a Bond Buyer request for comment. A spokesperson for Rep. Jim Jordan, R-Ohio, chair of the Judiciary Committee, said in an email that the NFL's legislative briefing was "a widely attended bipartisan event that has zero impact on our committee's work." He noted that Jordan voted against the Robert F. Kennedy stadium bill, "which was a priority for the NFL, and added that the oversight committee "has no jurisdiction over the tax-exempt bonds issue for NFL stadiums."

Two of the aides who went to the draft work for officials who are on the House Municipal Finance Caucus: Rep. Richard Neal, D-Mass., and Rep. Doria Matsui, D-Calif. Neal, a former mayor who is considered a supporter of the tax-exemption, is the ranking Democrat on the House Ways and Means Committee, where tax-related legislation originates.

An aide for House Majority Leader Rep. Steve Scalise, R-La., said in a required disclosure form that "meetings will be opertunities [sic] to learn about issues related to the industry that may be relevant to bills moving through congress," adding that "as floor director" it's important to have an understanding of issues related to the NFL's economic impact and security.

Other representatives whose aides attended include a mix of Republicans and Democrats, none of whom sit on key tax committees. They include Rep. Mark Green, R-Tenn.; Rep. Frank Pallone, D-N.J., ranking Member of the House Energy and Commerce Committee; Rep. Mark Veasey, D-Texas, who sits on the Energy and Commerce Committee; Rep. Bennie Thompson, D-Miss., a ranking member on the Committee of Homeland Security who sits on the Congressional Gaming Caucus. A staff director for the Committee on Natural Resources also attended the briefing.

A March 2020 paper from the National Tax Journal that argued against stadium subsidies estimated about $16.7 billion of tax-exempt bonds have been issued since 2000 to finance 43 new or majorly renovated stadiums. The present value federal tax revenue loss from those deals totaled $4.3 billion, assuming a 3% discount rate, in 2018 dollars, the paper said.

Several sports franchises since 2020 are pursuing pricey stadiums backed at least in part by tax-exempt bonds, according to Data from deMause's website.

The $2.1 billion Nashville Titans stadium, set to open in 2027, will set a record for the largest stadium public subsidy that includes $705 million of bonds and $500 million pledged by the state. Subsidies for the New York Buffalo Bills stadium, a public-private partnership with a $1.54 billion price tag set to open in 2026, totaled $850 million. And the NFL's Cleveland Browns met recently with Ohio lawmakers to ask for $1.2 billion in state and local funds for a new stadium.

Blumenauer's legislation last year marked the latest in a long series of measures aimed at eliminating the tax break. Former President Obama took a stance against taxpayer funding for stadiums and arenas in his fiscal 2016 and 2017 budgets, followed by several bills from both chambers over the ensuing years, including one from Sen. Corey Booker, D-N.J.

The nearest the effort came to fruition was in 2017, in the House version of the TCJA. The provision, which included state or private college athletic stadiums, was dropped during the House-Senate conference committee on final legislation.  

"Who knows, maybe this will be the year when Congress takes a serious looking at getting rid of the tax-exempt bond loophole," deMause said. "But I'm certain the leagues, which have plenty of money for lobbyists, are going to be leaning really hard on why we need you to keep it."