[Congressional Record Volume 142, Number 131 (Friday, September 20, 1996)]
[Senate]
[Pages S11103-S11105]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          S. 1880, THE STOP TAX-EXEMPT ARENA DEBT ISSUANCE ACT

 Mr. MOYNIHAN. Mr. President, a decade ago, I was much involved 
in the drafting of the Tax Reform Act of 1986. A major objective of 
that legislation was to simplify the Tax Code by eliminating a large 
number of loopholes that had come to be viewed as unfair because they 
primarily benefitted small groups of taxpayers. One of the loopholes we 
sought to close in 1986 was one that permitted builders of professional 
sports facilities to use tax-exempt bonds. We had nothing against new 
stadium construction, but we made the judgment that scarce Federal 
resources could surely be used in ways that would better serve the 
general public good.
  The 1986 Act accordingly prohibited the use of private activity 
bonds--that is, bonds for non-governmental purposes--for professional 
sports facilities. Yet, despite Congress' action, sports team owners, 
with help from clever tax counsel, soon found a way around the new law: 
they persuaded local governments to issue tax-exempt public bonds to 
finance new stadiums. As the columnist Neal R. Pierce wrote recently, 
team owners ``were soon exhibiting the gall to ask mayors to finance 
their stadiums with general purpose bonds.'' We did not anticipate 
this. It was--and still is--perfectly legal.
  The result has been a boom unlike anything we have ever seen in 
construction of new tax-subsidized professional sports stadiums. In the 
last 6 years alone, over $4 billion has been spent to build 30 new 
professional sports stadiums. According to Prof. Robert Baade, an 
economist at Lake Forest College in Illinois and an expert in stadium 
financing, that amount could ``completely refurbish the physical plants 
of the Nation's public elementary and secondary schools.'' An 
additional $7 billion of stadiums are in the planning stages, and there 
is no end in sight. This is why I recently introduced S. 1880--the Stop 
Tax-exempt Arena Debt Issuance Act--or STADIA for short--to end the 
Federal tax subsidy for these stadium deals. Only the team owners and 
players profit, while taxpayers and fans pick up the tab.

  I introduced S. 1880 with an immediate effective date of June 14, 
1996 for a number of reasons, which I have previously explained for the 
Record. However, I also recognized, and requested comment on, ``the 
need for equitable relief for stadiums already in the planning 
stages.'' On June 27, 1996, based upon initial comments I had received, 
I made a statement on the floor that projects that had binding 
contracts or final bond resolutions in place on the date the bill was 
introduced would not be affected by the bill. Since that time, several 
other localities with stadiums already in the planning stages have 
requested equitable relief.
  Given the Senate's imminent adjournment, it is now certain --as I 
predicted earlier--that S. 1880 will not be enacted into law this year. 
Accordingly, in order to provide needed certainty to those remaining 
localities that have expended significant time and funds in planning 
and financing professional sports facilities, I wish to indicate that 
when I reintroduce this legislation in the 105th Congress, its 
effective date will be the date of the first committee action. As 
practitioners in this field know, the date of first committee action is 
a common effective date for this type of legislation. In addition, I 
will include the transition relief provision contained in my June 27 
floor statement.
  This, I believe, strikes the proper balance between closing the 
loophole in present law--a loophole that benefits only team owners and 
their players--and addressing the concerns of those localities that 
have been planning new stadiums.
  Mr. President, I ask that four recent articles regarding this 
legislation be printed in the Record.
  The articles follow:

               [From the National Journal, July 20, 1996]

                   Calling Time on Sports Tax Breaks

                          (By Neal R. Peirce)

       Washington.--Sen. Daniel Patrick Moynihan. D-N.Y., stirred 
     up a virtual hornet's nest last month with a bill to forbid 
     use of federal tax-exempt bonds to finance sports stadiums 
     for private teams.
       It turns out that from Nashville to Cleveland, Seattle to 
     Denver, New Orleans to New York and multiple points in 
     between, mayors and councils are readying bond issues to 
     finance close to $7 billion worth of baseball, basketball, 
     football and hockey facilities.

[[Page S11104]]

       The first deal imperiled was a $60 million bond sale by the 
     city of Nashville, just one part of the tax-free bonding 
     package that the city is assembling to pay for a $292 million 
     state-of-the-art stadium to lure the Oilers football team 
     from Houston.
       So when Moynihan suggested barring tax-free financing for 
     such deals, retroactive to June 14, the day he introduced his 
     legislation, the buzz of angry protest was almost instant.
       Moynihan's proposal was ``abrupt,'' it ``jeopardized' local 
     planning, city leaders said. It was a ``dangerous 
     precedent,'' the Public Securities Association asserted.
       The political signals, for the Republican-controlled 
     Congress, seemed all wrong. ``No bill will go through the 
     House in terms of NFL [National Football League] that doesn't 
     include the Oilers being in Nashville,'' said House Speaker 
     Newt Gingrich, R-Ga. A spokesman for Senate Majority Whip Don 
     Nickles of Oklahoma said the Moynihan bill was not even ``on 
     the radar screen'' of the Republican leadership.
       Within a few days Moynihan beat a tactical retreat, saying 
     that he would consider ``the need for equitable relief for 
     stadiums already in the planning stages.''
       But Moynihan, the ranking Democrat on the Finance 
     Committee, is not backing away from his bill. And rather than 
     being pilloried, he should be hailed as a hero of the times--
     an invaluable whistle-blower and friend to all U.S. 
     taxpayers.
       Let's get it straight. Unless current federal law is 
     changed, interest payments from the billions of dollars of 
     forthcoming stadium bonds will be totally tax-free to the 
     affluent investors who buy them. These are general-purpose 
     bonds--which Congress intended for financing such truly 
     public purposes as roads, sewers, schools, libraries and 
     other public buildings.
       And who will benefit from this largesse? Joe Six-Pack, who 
     often can't afford the seats in these opulent new stadiums 
     and who'll surely never darken the door of one of their ritzy 
     skyboxes? Of course not.
       The real winners are the owners and professional sports 
     teams, who are utterly proficient in blackmailing local 
     officials: ``Buy me my stadium, rent it to me for a pittance 
     or nothing, channel the ticket and concession revenue to me, 
     and if you don't like my deal, I'll skip town and leave you, 
     Mr. Mayor, with egg all over your face for having lost a 
     team.''
       Moynihan, to his credit, has been at this struggle for 
     years. In the mid-1980s, many stadiums were financed by low-
     interest, tax-exempt private revenue bonds. Owners paid off 
     the cost over 30 or 40 years. But the federal taxpayer was 
     clipped, because no taxes were collected. Moynihan's answer 
     was to write conditions into the 1986 tax reform law that 
     virtually choked off such revenue bonds.
       The owners were checkmated--but not for long. They were 
     soon exhibiting the gall to ask mayors to finance their 
     stadiums with general-purpose bonds.
       And what a deal this was for them! At concessionary prices, 
     they rent (but are not ultimately responsible for) their 
     stadiums. And they are relieved of repaying the bonds: The 
     local taxpayers get to take care of that for them.
       As for the tax-free interest payments--well, Uncle Sam can 
     take it on the chin as lost revenue. Moynihan notes that one 
     result is ``forcing the taxpayers in the team's current 
     hometown to pay for the team's new stadium in a new city.''
       But mayors found it tough to say no. Federal and state aid 
     was shrinking. If not another city, nearby rapacious suburbs 
     would bid for their sports teams. So many said yes. They'd 
     keep (or sometimes gain) a team. But at a price--adding 
     municipal indebtedness, a possible threat to the city's 
     credit standing and thus higher borrowing costs for schools, 
     colleges, and other public investments, even while stadium 
     investors escaped taxes.
       This is the cavernous tax loophole Moynihan wants to close. 
     In time, he's likely to win. As the federal budget vise 
     tightens--forcing program after program to constrict--mega-
     subsidies to fat-cat sports owners will become even more 
     reprehensible.
       The sooner Congress acts, the better for us all. And the 
     quicker cities wise up and resist the team owners' threats 
     and demands, the better.
       Without question, the cost of sports subsidies have begun 
     to reach stratospheric levels. The Congressional Research 
     Service (CRS), in a May report, calculated that Baltimore's 
     football stadium subsidies to attract the former Cleveland 
     Browns will be $127,000 for each job created--almost 21 times 
     more than the $6,250 it cost to create jobs through 
     Maryland's economic development fund.
       Does the national economy benefit? No. CRS reported: 
     ``Almost all stadium spending is spending that would have 
     been made on other activities within the United States.'' Net 
     benefits, therefore, are ``near zero.''
       A hero on this score, maybe a pioneer, is Houston Mayor Bob 
     Lanier, who has focused city funds on bolstering police, 
     rebuilding neighborhoods, cleaning out sewers and sprucing up 
     parks.
       When Oilers owner Bud Adams applied pressure for incentives 
     to stay in Houston, Lanier just said no. All that Nashville 
     will get for a total incentive pool of $650 million, Lanier 
     noted, is 10 home games a year. The same cash, he told a 
     reporter, would almost finish the job of cleaning up 
     Houston's depressed neighborhoods.
       If a few more mayors got their priorities as straight as 
     Lanier's, the team owners would have fewer cities to prey on.
                                                                    ____


                 [From the U.S.A. Today, June 28, 1996]

                          Socked for Stadiums

       Hey, sports fans, here's some good news, at least if you're 
     a federal taxpayer, too:
       Nashville, Tenn., has put a $60 million stadium bond sale 
     on hold for a couple of weeks. The reason: Sen. Daniel 
     Patrick Moynihan, D.-N.Y., introduced legislation this month 
     that would take away federal tax exemptions on bonds used to 
     build sports facilities.
       The tax break has helped fund a bidding war for sports 
     teams, leading teams such as the Oilers to leave Houston for 
     Nashville and the Browns to move from Cleveland to Baltimore 
     and become the Ravens.
       And for no legitimate national purpose.
       Wealthy owners get almost all the stadium revenues while 
     local, state and federal taxpayers pick up the bill.
       Local jobs? The nonpartisan Congressional Research Service 
     (CRS) last month reported that Baltimore's football stadium 
     subsidies will cost $127,000 for each job created. That's 21 
     times more than the $6,250 it costs to create jobs through 
     Maryland's economic development fund.
       And the nation's economy? The CRS report notes: ``Almost 
     all stadium spending is spending that would have been made on 
     other activities within the United States.'' Thus, benefits 
     are ``near zero.''
       If that. Communities that spend their own money on stadiums 
     often need federal aid for other programs. So federal 
     taxpayers get hit twice: first with tax exemptions that 
     reduce federal revenues, then with aid that increases 
     spending. Bad all around.
       Moynihan's right. Get rid of the exemption. And then, cut 
     other federal aid, too. If local communities want to waste 
     their own money, that's up to them. But federal taxpayers 
     should be taken out of the arena.
                                                                    ____


                [From the New York Post, Aug. 29, 1996]

                           Let the Owners Pay

                         (By Irwin M. Stelzer)

       Whether Pat Moynihan was right in opposing the welfare-
     reform bill that his party's President finally signed, only 
     time will tell. But that he is right in introducing a bill 
     that would stop cities from using tax-exempt bonds to finance 
     new arenas and stadiums for millionaire sports moguls, there 
     is no question.
       If George Steinbrenner or some other team owner wants a new 
     stadium, and decides to finance it by selling bonds to 
     private investors, the interest he pays those lenders is 
     subject to federal income tax. But if a city sells bonds and 
     uses the proceeds to build a stadium for the Yankees, the 
     bond buyers--generally the most affluent members of society--
     receive interest that is exempt from federal taxes.
       Naturally, the city has to pay borrowers a lower interest 
     rate than would Steinbrenner or any other team owner. Experts 
     estimate that the cost of new facilities would rise by 15-20 
     percent if teams were denied tax-exempt financing. This would 
     add $30-40 million to the cost of a typical football 
     stadium--enough to make several now on the drawing boards 
     unfeasible.
       When a city does finance a stadium, it raises, the money 
     and then leases the facility to a team at some nominal rent--
     leaving the owner free to rake in revenues from ticket sales, 
     television rights, parking, hot dogs and beer and, most 
     important, luxury boxes.
       With Nashville, Cleveland, Denver, Seattle, New Orleans and 
     New York among the cities now in various stages of 
     considering such deals, Wall Street's bond machine is 
     preparing to issue about $7 billion in these bonds in the 
     next five to seven years, according to Fitch Investor 
     Services.
       Of course, the federal treasury will have to make up the 
     lost revenue--something it can do only by collecting more in 
     taxes from ordinary citizens. Unfortunately, ordinary 
     citizens are no match for the huge lobbying effort that has 
     been launched against Moynihan's bill, and so Washington 
     insiders are giving it little chance of passing, either this 
     year or next.
       But Moynihan, the ranking Democrat on the Senate Finance 
     Committee, is a persistent cuss--as his success in wringing 
     money out of the feds for the refurbishment of Penn Station 
     shows--and he is right. So right that the usually bland 
     National Journal says ``he should be hailed as a hero of the 
     times--an invaluable whistleblower and friend of all U.S. 
     taxpayers.''
       The nation's mayors don't think so. They say it's none of 
     the feds' business which local projects they choose to 
     finance with their tax-exempt bonds. And they argue that the 
     construction of stadiums created jobs.
       Finally, they speak of civic pride, of that certain je ne 
     sais quoi that goes out of a city when it loses a team to a 
     rival, and the boost it gets when it lures a new team or 
     retains an old one by offering its owner a cornucopia of 
     goodies.
       They're wrong--on all three counts. Since tax-exempt city 
     bonds deprive the federal government of revenue, a U.S. 
     senator has every right to try to stop this practice.
       As for jobs, a study by the Congressional Research Service 
     shows that the cost per job created by Baltimore's new 
     subsidized football stadium came to $127,000--compared with 
     $6,250 for jobs created by the state's economic development 
     fund.
       Which brings us to civic pride, the toughest of all the 
     arguments to appraise. There

[[Page S11105]]

     can be no doubt that sports fans like having a home team to 
     root for. And that merchants in the area of the stadium 
     benefit from its presence.
       But there is no free lunch--at least not for people unlucky 
     enough not to own a franchise in the NBA, NFL or Major League 
     Baseball. Tax money that the federal government does not 
     collect is not available for other things--education, health 
     care or tax cuts.
       When a city gives a team the gift of rent below market 
     rates, or a special property tax deal, it deprives itself of 
     revenues it would otherwise have to repair its streets, hire 
     more cops, or spruce up its parks.
       Which would boost New Yorkers' morale more: a stadium 
     athwart the West Side railroad tracks or streets that don't 
     break car axles and school buildings that don't leak?
       Not an easy question, but one to which Houston mayor Bob 
     Lanier thinks he has the answer. When the Oilers tried to 
     roll his city for a new stadium he turned them down, telling 
     the press that with the money it would cost him to keep the 
     Oilers he could just about get the job of cleaning up 
     Houston's slum neighborhoods done.
       Steinbrenner does have a real problem. Until lately, the 
     Yankees had been having a spectacular season, thanks in part 
     to The Boss' willingness to engage in the Daryl Strawberry 
     and Dwight Gooden rehabilitation projects.
       But attendance has not responded proportionately: The 
     number of fans going to the Stadium is not as high as the 
     Yankees' won-lost record would warrant, according to a quick 
     comparison I have made with the league-wide relationship 
     between success on the field and success at the box office.
       So Steinbrenner, who should not be expected to keep his 
     team in a place in which he cannot maximize his profits, has 
     every reason to shop around for a new site to which to take 
     his athletes when his lease is up in The Bronx. Just as the 
     Mets have every right to want a new field on which to display 
     their somewhat more problematic wares.
       Moynihan has no objection to new sports emporia. ``Building 
     new professional sports facilities is fine with me,'' he 
     says. ``But, please, do not ask the American taxpayers to pay 
     for them.''
       Whether or not the Senator gets his bill passed over the 
     kicking and screaming objections of the nation's politically 
     potent mayors, its bond-issuing investment bankers and its 
     itinerant team-owners, Mayor Giuliani would do well to take 
     Moynihan's advice.
       Perhaps Donald Trump and Steinbrenner can strike a deal for 
     a privately financed stadium. Or perhaps New York has enough 
     reasons to be proud of its national and international 
     position to follow Houston's lead, and wave goodbye to its 
     sports mogul and his millionaire athletes.
                                                                    ____


                 [From the Buffalo News, Aug. 11, 1996]

 Close Loophole That Has the Public Subsidizing Ever Glitzier Stadiums

       If the public really is fed up with subsidizing wealthy 
     team owners and athletes, it will cheer a proposal to 
     eliminate the tax exemptions routinely granted bonds sold for 
     stadium projects.
       The proposal comes from Sen. Daniel Patrick Moynihan, D-
     N.Y. It should be especially cheered in places like Western 
     New York, whose sports teams will be constant targets for 
     raids by other cities as long as those cities lure them with 
     facilities built with the help of tax exempts.
       Take away these indirect subsidies, and those cities will 
     not be able to dangle such enticing packages before team 
     owners.
       In fact, take away the public subsidy and force teams to 
     build their own facilities, and maybe they won't be able to 
     spend a zillion dollars on second-string players. Instead, 
     the money now going into exorbitant salaries would have to be 
     used to build or fix up stadiums.
       That could start a downward spiral--or at least a leveling 
     off--in player salaries that might even have a spillover 
     effect on ticket prices before they become totally out of 
     reach of the average family.
       Moynihan's bill is not without its critics. County 
     Executive Gorski worries that eliminating the tax-exemption 
     on stadium bonds will make it harder for Erie County to 
     finance the $2.1 million needed to upgrade Rich Stadium. The 
     improvements are aimed at enticing the Buffalo Bills to sign 
     a new lease and stay in Western New York.
       Gorski's view is understandable for a public official 
     interested only in the current negotiations.
       But leases can be broken, as the former Cleveland Browns 
     illustrated. That team moved to Baltimore after being offered 
     a $200 million new stadium and financial enticements ranging 
     from free rent to all luxury-box, parking and stadium-ad 
     revenue.
       Could Erie County really compete with that kind of civic 
     insanity--and does it really want it--if another community 
     eyes the Bills in a few years?
       Eliminating the tax exemption for stadium bonds will make 
     it that much harder for another city to make that kind of 
     offer.
       Granted, it might mean Erie County would pay a little more 
     for its bonds now. But it also would help assure the long-
     term presence of sports teams in small markets like Buffalo.
       And from a broader perspective, the measure would mean 
     taxpayers would no longer subsidize private sports 
     enterprises by funding what one congressional critic calls 
     ``a public-housing program for millionaires.
       A Congressional Research Service study estimates the public 
     is losing nearly $100 million a year on sports facilities now 
     under construction. During one five-year period in the '80s, 
     those tax breaks cost taxpayers $18.2 billion.
       Moynihan says that was never meant to be. The 1986 Tax 
     Reform Bill eliminated industrial development bonds, the 
     original vehicle for tax-exempt bond financing for stadiums. 
     But he says Congress didn't prohibit using governmental bonds 
     for stadiums because the ``possibility was too remote to have 
     occurred to us.''
       But that loophole wasn't too remote for wide-eyed local 
     officials and profiteering team owners to uncover. Moynihan's 
     bill would close the loophole, saving taxpayers millions.
       Those savings could be put to far better uses than helping 
     wealthy team owners play one city against another in the 
     stadium sweepstakes.

                          ____________________