Biden’s Impact on the Industry: The Stadium Subsidy Question

As we near the end of the first month of Joe Biden’s presidency, it may be interesting to investigate further what Biden’s impact on the sports may be. Beyond the previously highlighted potential changes in environmentally-mind legislation, the current administration may invoke impactful financial regulations. 

First, let’s take a look at the existing landscape. In 2017, when players knelt during the national anthem in protest against police brutality, Donald Trump extended his attack on the National Football League to tax policy. He took to Twitter citing the NFL’s “massive tax breaks” and, as a result, highlighted the stadium-subsidies that exist at state and local levels. Some of these subsidies rely on the ability to issue municipal bonds and generate income, which is then exempt from federal taxes, allowing owners to take advantage of cheaper financing. The foundational assumption here is that the federal government shouldn’t indirectly tax local governments on projects that support public infrastructure. However, the delineation of what is in the public’s interest, and therefore can be exempt from federal taxes, lacks clarity. Although most states have restrictions rooted in the Public Purpose Doctrine that bar them from using public money to support private enterprise, the extent to which sports stadiums are in the public’s interest has been a malleable issue. 

The 1954 Supreme Court ruling in Berman v. Parker may help contextualize why this issue is such a debate. In this landmark case, the Court unanimously ruled that the term “public purpose” may be extended to uses that serve “public welfare,” including those private uses that promote “public safety, public health, morality, peace and quiet, [and] law and order.” Therefore, the legal definition of “public interest” is subject to contestation. During the time of Trump’s tweet in 2017, subsidies for sports stadiums had cost the federal government $3.7 billion since 2000 (follow this link for a closer look at which stadiums were financed with tax-exempt municipal bonds). Under this system, fans may even be unknowingly financing the construction of their rival team’s new stadium. Many suggested that Trump’s tweets did not mean much since his administration’s actual tax plan did not reflect the same energy. 

Unsurprisingly, stadium subsidies are a highly contested issue and have received pushback over the years from both the House and the Senate. Furthermore, in 2015, the Obama administration’s budget included a provision aimed at changing how tax-exempt bonds are issued in hopes of dismantling these stadium subsidies. Six years later, and the sports industry continues to benefit from stadium subsidies. For example, the most expensive Minor-League Stadium in history set to become the Pawtucket Red Sox home may cost taxpayers upwards of $150 million.

Another particularly timely example comes from reigning Superbowl Champions and the first team to host their own Super Bowl appearance, the Tampa Bay Buccaneers. To better prepare for a football season during the pandemic, Raymond James Stadium received upgrades to health and safety measures that cost over $10 million of federal funds. Notably, the Florida Supreme Court holds a history of allowing public funding to go towards recreational, entertainment, and tourism projects (e.g., Rowe v. Pinella Sports Auth., State v. City of Miami, State v. Orange County Indus. Dev. Auth, and more). However, this case comes with a bit of a twist since the funds came from the Coronavirus Aid, Relief, and Economic Security (CARES) Act as the upgrades aimed to address public health concerns and decrease infection risk. Some of the upgrades included touchless equipment ranging from sinks and soap dispensers to ticket scanners and credit card readers as well as a new parking lot PA system. However, in an article published last week, The Hill notes that these upgrades were not completed until most of the season was over, calling into question whether fans’ health and safety were the sole priority. 

Regardless, the added layer of the pandemic and CARES Act only complicates the public interest question when it comes to private enterprise related to sports infrastructure. Phil Mattera, research director at Good Jobs First policy resource center, noted last fall, “The Trump Administration is paying little attention to how CARES Act funds are being spent or the track record of the companies receiving the aid.” Although not much has changed in terms of stadium subsidies since Obama’s efforts in 2015, the turnover of administrations in the White House could present new possibilities and restrictions, especially regarding CARES Act fund monitoring. The case of the Tampa Bay Buccaneers and how they have benefited from CARES Act funds highlights the potential for impact on the industry. 

Regarding tax policy, the Biden administration has conveyed that changes are incoming. The official Biden Harris campaign website systematically defines their plans to put more pressure on big corporations. These changes will, of course, affect the wealthiest members of the sports industry, such as team owners and other executives, as they may consider fluctuations in capital gains tax, estate tax, and gift tax when making decisions. Sportico reported in October that the NFL sent out a memo to all executives across the 32 teams reminding them to inform the league of any ownership transactions before the end of the year. Although the league denies that the upcoming election had anything to do with the memo, Sportico emphasized that NFL owners and their families could have saved millions by making changes before the turnover towards Democratic leadership and the tax changes it may entail. Under the Biden administration, there is an increased likelihood that plans to end stadium-subsidies may re-energize.

Biden’s Impact on the Industry: Sports Venues and the Environment

The Biden administration has repeatedly emphasized its commitment to environmental justice and climate change, generating some hope of increased momentum toward environmentally-minded legislation. For the sports world, this may mean more legislation encouraging or requiring the reduction of organizations’ impact on the environment. Specifically, these changes may occur in the infrastructure and maintenance of sports venues. Currently, there are several ballparks, arenas, and stadiums under construction across the United States. For example, David Beckham’s soccer-specific stadium Miami Freedom Park is scheduled to open in 2022 while the currently under construction multi-purpose Protective Stadium is set to become the UAB Blazers football program’s home later this summer. 

The 1970 National Environmental Policy Act (NEPA) is foundational in environmental policy law. The act requires federal agencies to consider the environmental implications of their proposed actions. These actions may include: decisions on permit applications, adopting federal law management actions, and constructing highways or other publicly owned facilities. Throughout his presidency, the Trump administration conducted several environmental rollbacks that have made significant cuts in the NEPA and affected the building industry. 

Last June, the Trump administration signed an executive order that weakened clean air and climate change regulations in response to the COVID-19 pandemic. The executive order waived parts of the NEPA to speed up infrastructure projects by citing economic arguments in light of the pandemic induced financial crisis. The New York Times highlighted that lawyers and activists questioned the legality of such an order and suggested that the administration used the pandemic to speed up slow-moving actions on their agenda through the regulatory process. These policies also violated the intent of the Clean Air Act of 1970, the goal of which is the regulation of hazardous air pollutant emissions.

Zoning back into the context of sports venues, a number of new arenas have opened over the last four years—the SoFi Stadium in L.A. and the Hard Rock Stadium in Miami, to name a few. Notably, Irwin Kishner, attorney at Herrick, Feinstein LLP, told Construction Dive that environmentally-minded pushback against sports arena construction is not uncommon. For example, when the Chase Center (the new home of the Golden State Warriors) was still in the planning phase in 2016, the project was met with lawsuits from neighboring businesses accusing the developers of violating the California Environmental Quality Act (CEQA). The case lasted over a year until the Warriors ultimately broke land. 

Sometimes, the push back has less of a grassroots nature and comes from other major organizations. For example, last year, Madison Square Garden Group (MSG) filed a lawsuit against Gov. Gavin Newsom and the state’s Joint Legislative Budget Committee over the California Assembly Bill No. 987. The bill fast-tracks requirements for the construction of certain sports and entertainment venues. MSG’s side argued that the new arena would cause “substantial harm” through traffic and pollution and “lightens the burden” on the project developers to meet CEQA requirements.  It’s important to note that the Los Angeles Clippers’ new Inglewood arena would have also been in direct competition with MSG-owned venue, the Forum. The dispute was settled when Clippers owner, Steve Ballmer, purchased the Forum from MSG for $400-million. Although it is difficult to assess whether the construction of any of the projects mentioned above has significantly benefited from Trump-era environmental rollbacks, the sports arena construction domain will be a worthwhile one to observe as the new administration rolls out environmental policies. 

On his first day in office, President Joe Biden signed an executive order on “protecting public health and the environment and restoring science to tackle the climate crisis.” Section 1 of the document lays out Biden’s overarching environmental policy. The policy includes, but is not limited to, ensuring access to clean air and water; limiting exposure to dangerous chemicals and pesticides; holding polluters accountable, including those who disproportionately harm communities of color and low-income communities; and reducing greenhouse gas emissions. Heads of all agencies must review all existing regulations and policies made between January 2017 and today to ensure compliance with Section 1. Additionally, Section 7 of the executive order revokes Trump’s two orders in 2017 that expedited procedures and deadlines for completion of environmental reviews for certain infrastructure projects. 

These new regulations may not present much of a hurdle for some organizations, given the momentum that sports arenas have gained in environmentally-minded efforts. For example, 2020 was also the year during which Amazon joined forces with NHL expansion team Seattle Kraken and the OakView Group to rename Seattle’s Key Arena to “Climate Pledge Arena” and renovate it to be a leader in sustainability. The venture’s goal is to create the “most progressive, responsible, and sustainable arena in the world.” A move that Bloomberg Law highlighted as the “highest-profile pro sports venue naming rights deal to be centered so prominently around sustainability.” The Seattle Kraken’s new home is set to open in the Fall of 2021 and will have the “greenest ice” in the NHL while being a carbon-neutral facility and eliminating single-use plastic completely by 2024. 

Not all sports organizations can partner with multinational tech companies such as Amazon; therefore, resources for plans unaffected by shifting legislation may vary. President of the Green Sports Alliance, Dr. Allen Hershkowitz, notes, “I know from first-hand experience that many environmental initiatives at ballparks and arenas are on hold due to COVID. Teams need revenue from fans in the seats to respond to environmental challenges.” Besides environmental-concerns pertaining to the infrastructure of sports venues, there will certainly be more changes to look out for as more policies roll out.