Exploring How Taxpayers are Funding Billions in NFL Stadium Renovations and Construction

In 2022, the Tennessee Titans of the NFL unveiled their plans for a new stadium in the heart of Nashville. The stadium, which will be 1.7 million square feet, will be able to accommodate 60,000 fans and is estimated to cost $2.1 billion.

The stadium would be funded primarily through public sources, including a one-time contribution from the state of $500 million and $760 million in revenue bonds issued by Nashville’s Metropolitan Sports Authority.

Since 2000, public funds diverted to helping build professional sports stadiums and arenas have cost taxpayers $4.3 billion. While the NFL and team owners contend that building stadiums will provide economic growth for a city, economists and urban planners think otherwise. A study by the Brookings Institution found that "there is no clear evidence that professional sports franchises and facilities have a measurable economic impact on the economy."

The issuance of tax-exempt bonds from state and local governments is the main reason cities end up paying for stadiums. The federal government has signed off on this practice for decades, which has led to increased costs for cities.

Municipal bonds are a popular financing option for airports, roads, hospitals and schools, and have been used for this purpose since 1913. Private entities can still access these bonds, but are subject to a volume cap limiting how many public bonds can be issued annually. These tax exemptions help lower the burden of high debt by making it easier for cities and teams to finance stadiums through low-interest municipal bonds.

The Tax Reform Act of 1986 aimed to end the exemptions for private use, including stadiums. However, the bill inadvertently created a loophole allowing stadiums to be backed by tax-free public bonds.

The loophole allows private companies to access tax-exempt municipal bonds by failing one of two tests stipulated by the Tax Reform Bill of 1986.

The private use-case test is a test that private entities can use no more than 10% of the money from a bond. This test is one that NFL teams will most certainly pass. Then there is the private-payment test which states that no more than 10% of the bond’s debt service can be backed by the stadium itself.

If a state or local government is willing to finance at least 90% of the stadium’s cost, it will not be able to get tax-exempt financing through municipal bonds.

However, in order to keep that tax exemption, the repayment of bonds cannot come directly from revenue generated by the stadium or rent collection. Instead, cities rely on taxes like hotel levies to pay off these bonds. The recoupment of revenue generated by these taxes varies from city to city.

Cities like Las Vegas and Chicago rely on taxes from tourism to help pay for their respective stadiums. This revenue from tourism helps to pay off the bonds that were used to finance the construction of the stadiums.

The Las Vegas Raiders organization calls Allegiant Stadium home. This $1.9 billion stadium was financed by the Las Vegas Stadium Authority through $750 million in bonds backed by hotel taxes.

Steve Hill, chairman of the Las Vegas Stadium Authority, told CNBC that the Raiders' move to Las Vegas has had a net-positive effect on the city's economy. He said that the city is collecting an additional 50 million dollars in room tax, which is largely paid for by tourists. He added that the stadium itself is generating more tax revenue than the 50 million dollars.

Chicago's tourism taxes have not had the desired effect; instead, the city has seen negative spillover effects.

In 2002, Soldier Field, the home of the Chicago Bears, urgently needed upgrades to modernize the stadium, which was built in 1924. The total cost of the renovation was $587 million. The NFL and the Bears organization contributed $200 million toward the work, and the city of Chicago financed $387 million through municipal bonds levied by a tourism tax in Chicago. According to an investigation by NBC Chicago News, 20 years after the renovation, Chicago owes $640 million on its initial $387 million bonds after years of deferring payments. The city declined to comment to NBC Chicago.

Since 2015, reining in spending on public funds being diverted to professional stadiums has become an increasingly bipartisan issue. Both sides of the aisle have expressed shared interest in closing the 10% loophole.

In 2015, the Obama administration proposed removing the 10% loophole for sports and other private projects. In 2017, Sens. Cory Booker, D-N.J., and James Lankford, R-Okla., introduced a bill that would have outlawed the use of tax-exempt bonds for any pro sports venues. However, the bill did not pass.

In 2017, the Trump administration proposed eliminating tax-exempt bonds for NFL stadiums through its tax reform bill. However, the language regarding NFL stadiums was ultimately removed from the final bill.

Most recently, Rep. Earl Blumenauer, D-Ore., introduced a new bill called the No Tax Subsidies for Stadiums Act of 2022. This bill would prohibit the use of federal tax dollars to subsidize the construction or renovation of professional sports stadiums.

However, no significant progress has been made in terms of passing those proposals into law.

Most fans just want to ensure that their team stays put. Protests from fans have erupted over the years when other cities have taken away their teams. A shared identity links NFL teams and their fan bases, and a team can reflect a city’s persona.

Die-hard fans from all 30 major cities would continue to fight hard to ensure their teams stay in their hometowns, even if that means they have to foot the bill. These fans are passionate about their teams and will do whatever it takes to keep them in their city.

The video above explains how American taxpayers pay billions of dollars to fund NFL stadiums. This is a significant amount of money that could be used for other purposes.