Public Officials Pressured to Spend Billions on Sports Venues

This April, voters in Jackson County, Mo., will decide whether to extend a sales tax that has helped Kansas City’s two biggest sports teams, the Chiefs and the Royals, build and maintain their stadiums.

Actually, it’s not exactly an extension of the existing tax, which generates about $50 million a year for the sports complex shared by the teams. The Royals, currently playing in Kauffman Stadium, a stone’s throw from the Chiefs’ Arrowhead Stadium, want to build a new venue downtown. The tax revenue can only be spent at the existing location. So the Royals approached Jackson County officials and asked for a new deal. They wanted a proposal put on the April ballot, which would maintain the three-eighths-cent tax, but allow the revenue to be spent at a new stadium.

When professional sports teams want to move, public officials are routinely drawn into the fray, whether they want to be or not. Public money is often on the line, like the $850 million in state and local subsidies dedicated to the Buffalo Bills’ new stadium, or the $1.26 billion in public funds for the Tennessee Titans' new venue in Nashville, both now under construction. Officials in Philadelphia, Washington, D.C., and Northern Virginia are weighing proposals for new arenas for NBA teams.

For elected leaders, it’s now become a routine part of the job to mediate between governments, communities, taxpayers and teams looking to build new venues. “There’s this huge incentive to look like, ‘We did something. We helped create this many jobs or helped bring this growth and excitement to our city,’” says Ron Shultis, policy and research director for the Beacon Center of Tennessee, a conservative think tank in Nashville. “And there’s a status symbol there, too.”

In Kansas City, details of the Royals' plans were scarce. Jackson County Executive Frank White — himself a Kansas City Royals Hall of Famer and five-time MLB All-Star second baseman — wanted firmer commitments from the team before agreeing to go to the voters.

Instead, the team took its ask directly to the Jackson County Legislature, which approved a referendum in early January. White vetoed the bill, saying it was “not a good deal for taxpayers.” The Legislature then overrode the veto by a vote of 7-2. Only then did the Royals announce the site where they’re hoping to build; the project would require the demolition of several blocks of downtown Kansas City.

“It’s just been a whirlwind of unnecessary difficulties,” says Megan Marshall, one of two Jackson County legislators who voted to uphold the veto.

Prized Possessions

Big development projects can be an economic boon to cities and winning those projects is one way that many public officials mark their success. In development, nothing is bigger than a stadium or arena. They create lots of jobs in construction, employ other people permanently and attract lots of free-spending people for special events — both to the venues themselves and nearby businesses. The benefits are often overstated, but even many skeptics of public financing for these projects acknowledge that they do offer big economic opportunities to jurisdictions.

The Capital One Arena in Washington, home to the Capitals of the NHL and the NBA's Wizards, helped transform the surrounding neighborhood. Now Ted Leonsis, the majority owner of both teams, wants to build a new arena and officials in D.C. and Northern Virginia have been vying for the privilege. The teams recently announced a deal to build a new home in Alexandria, Va., pending a deal on public financing making its way through the state Legislature.

“It’s undeniable that these kinds of arena projects bring some very unique placemaking, entertainment, retail and restaurant enhancements,” says Scott Surovell, the majority leader of the Virginia Senate.

Surovell introduced a bill to provide state financing for the project on behalf of Gov. Glenn Youngkin, a Republican who has made building a new arena a priority. The proposal was moving quickly until it got held up in a Senate committee, when its Democratic chair Louise Lucas said it was “not ready for prime time.”

The deal leans on tax-increment financing. The state would issue more than $1 billion in bonds to help pay the upfront cost of the arena, with the developers paying the money back with tax revenues from games and concerts over the coming years.

That kind of subsidy is often seen as a better deal for governments because it doesn’t involve a direct allocation of tax dollars. But it does present a risk if developers can’t pay back their bonds. “I think the economics of [the arena development] are likely a good deal for taxpayers," Surovell says. "We’re having internal arguments — or discussions — about whether the level of risks to taxpayers is appropriate for this project."

Although the project has triggered debate in the Legislature, the momentum behind it has helped move some other items along, Surovell says. Virginia has a Republican governor and a Democratic legislature for the first time in more than 20 years. Knowing the arena project is a priority for Youngkin has facilitated other budgetary horse-trading. Surovell says he only agreed to introduce the bill on the condition that Youngkin commit to increasing support for the Metro transit system in Washington, which is navigating a budget crisis.

Other Democratic priorities — such as new cannabis laws and a minimum-wage increase — are on the table as well. “Having something that’s this important to the governor should be helpful in trying to achieve some of our short-term policy objectives,” Surovell says.

But the clock is ticking. “I’m just not sure whether it’s going to get done or not,” he concedes.

No Local Subsidy in Philadelphia

The Philadelphia 76ers are making the pitch for a new arena to local officials. The team wants to build an arena downtown, on the site of a struggling shopping mall that’s adjacent to the city’s bustling Chinatown. The project has been deeply unpopular in Chinatown and some other adjacent neighborhoods since it was first proposed. Chinatown residents have spent decades fighting back large-scale projects that residents feel would harm the neighborhood. But many in the city support it.

The economic benefit of building a new arena for a team in the same city is up for debate. Although the project would certainly create new jobs in construction, the longer-term upside might be more marginal. The Beacon Center in Nashville opposed putting public money toward the new Titans stadium partly for ideological reasons, but also because a stadium and its attendant economic benefits already exist, Shultis says.

“These stadium subsidies do not pay for themselves, particularly when it’s a new stadium, because so much of the economic benefit of having the team was created with the first stadium,” he says. “It’s not the fact of the stadium itself — it’s the events within them.”

Local subsidies aren’t on the table in Philadelphia, according to the 76ers and city officials. But the project still needs City Council support, including for the partial striking of a city street. City Councilmember Mark Squilla has been at the center of the negotiations since the very beginning. He says it’s his role to help mitigate, offset or disperse any potential harms of the arena project.

That’s only in the event that the project moves ahead at all. The city is conducting impact studies funded by the team. Squilla is waiting for the results before backing legislation to advance the project. The project will need to account for concerns about public safety, trash, parking and traffic. Concerns about gentrification could be ameliorated with promises of affordable housing or commitments to local businesses. “If we’re going to be successful — if this thing is to eventually move forward, we have to make sure the concerns of those nearest to the project are mitigated by some benefits,” Squilla says.

He says he won’t support devoting city money to the project. But the teams could still look to state lawmakers for subsidies. “I’m not gonna say the state can’t give them money,” Squilla says. “All I have is a commitment from them that they would not seek public funding from the city.”

Big Money on the Table in Missouri

Most officials want to invite new sports arenas into their jurisdictions and keep the ones they have. But they don’t want to be taken advantage of in the process. In Missouri, Jackson County Executive White said in a message accompanying his veto of the sales tax proposal that the Chiefs and Royals were “undoubtedly important assets to our community,” but that the process of funding new stadiums should be “prudent, transparent and in the best interest of our taxpayers."

“The way we look at it is, there are pros and cons to the potential development, and we were trying to magnify those pros and also reduce the potential harms for our community,” says Caleb Clifford, White’s chief of staff. “Unfortunately we think it’s premature to put it on the ballot at this point.”

The team’s slow rollout of its plans is one concern. Another is the sheer scale of the investment that Jackson County makes in its MLB and NFL teams, both of which are profitable enterprises. The $50 million a year that the sales tax brings in for team facilities is larger than any other investment the county makes — more than it invests in parks, roads, bridges or hospitals, Clifford says.

In negotiating with the teams about the new sales tax, White was hoping to find new ways to fund long-standing needs in the Kansas City area, from public safety to housing. “The county executive was trying to find a way to get real revenue to address these issues,” Clifford says.

It's Hard to Fight Winners

One group that’s gearing up to oppose the sales tax on the April ballot is KC Tenants, a housing advocacy group in Kansas City. Building the Royals’ proposed stadium downtown would involve eminent domain and demolition, which would be immediately disruptive to people and businesses in that area, says Tara Raghuveer, KC Tenants’ founding director. The group is also concerned about gentrification and displacement in surrounding neighborhoods.

Raghuveer appreciates that some of the county officials are trying to push back on the deal. The amount of public subsidy the teams are seeking — $2 billion in sales tax revenue over 40 years — could be transformative if it were reinvested in some areas of persistent need in Kansas City, like affordable housing, she says. “I actually think there are some people who think that’s ... wrong,” Raghuveer says, using an expletive. “We’re never talking about that level of scale when we’re talking about solving problems for people — only when it comes to solving problems for private enterprises.”

Still, the link between professional sports and civic identity is strong. Raghuveer acknowledges there’s an uphill battle trying to get people to vote against something that the Super Bowl champion Kansas City Chiefs support. “If Pat Mahomes cuts a 15-second ad,” she says, "we've got a lot more work to do."