If I were in the California State Senate....

SB 858

AMENDED IN SENATE APRIL 8, 2009

AMENDED IN SENATE APRIL 1, 2009

SENATE BILL No. 858

LEGISLATIVE COUNSELS DIGEST

An act to add Section ¬110687 to the Revenue and Taxation Code, relating to the appropriations or use of taxpayer money to publicly finance stadiums or arenas for professional or university sports teams.

There is little existing law governing this matter and California city councils have spent and lost billions of dollars of taxpayer money financing large development projects for professional sports franchises. As it stands today, the education budget is constantly reduced, state workers are frequently laid off, yet nevertheless city council members still try to divert money for unnecessary sports facilities in hopes of promoting economic development and growth. There is no surplus money in the budget to be wasting millions of dollars on entertainment facilities. Public opinion is not in favor of this use of tax money and in almost every scenario these projects do a disfavor to the city because most often in the past the investment is not profitable for the city or even very stimulating economically.

This bill would require that no tax-payer money collected in the state of California could be used to fund professional sports and no government bonds could be issued to finance the construction of public performance facilities. The sports franchise must privately finance the operating and building costs of its own stadium as is expected of any other private business.

This bill would require cities still wishing to give professional sports franchises some sort of economic break to vote on any proposals of special tax rates, land deals, or other non-monetary assistance. The citizens would have to pass the proposal with a majority vote and there would be no way to overturn the vote; if it did not pass the only option would be to put it on the ballot the next year.

This bill would ease the pressure that professional sports place on city councils to help finance new stadiums and it would furthermore allow mayors to focus tax-payer money on more vital issues such as education and environmental concerns.

This bill would encourage the city to think of more creative ways to stimulate economic development and create public spaces based on outdoor parks and public recreation instead of professional entertainment.

This bill would encourage renovation of existing stadiums and sporting facilities so as to conserve resources and make use of the structures that we already have invested in so heavily.


Vote: Majority
Appropriation: No
Fiscal Committee: No
State-mandated local program: No

BILL

The people of the State of California do enact as follows:
SECTION 1: It is the intent of the Legislature to use the tax-payer money collected in the state of California for the greatest benefit of the greatest number of Californians. The Legislature hereby finds and declares that tax-payer money is not best utilized to fund professional sports. Private businesses should not be dependent upon support by the state and, as privately owned enterprises, professional sporting teams should not be unconditionally supported by the government.

SECTION 2: It is recognized by the Legislature that professional sporting franchises do provide certain, though limited, benefits to cities. They can boost morale and unify a city, so it is understandable that a city council may want to provide limited economic benefits to attract a sports franchise. However, any special arrangements made with a professional sports franchise shall be enacted only if a majority of citizens who vote in the local city elections support the proposition.

SECTION 3: It is recognized by the Legislature that the financing of the construction for stadiums can go through many layers and become rather complicated and that all proceedings the city government are involved in with the construction or renovation of a new stadium shall be clearly recorded and easily accessible for all citizens to see.

BILL ANALYSIS

SUBJECT: Stadiums cannot be financed with public funds.

ORIGINAL COMMITTEE REFERENCE: Banking, Finance, and Insurance Committee

DIGEST: This bill forbids any tax-dollars raised in the state of California or government issued bonds to be used to finance the construction, renovation, or operations of a stadium or venue for professional sports.

Specifically this Bill:

1. Makes it illegal for any tax-payer money or government issued bonds to go towards financing the construction of a stadium for professional sports.
2. Requires that all stadiums must be renovated, constructed, or operated using private financing.
3. Requires that any special offers on land, any sort of economic benefits a city extends to a professional sports franchise, to anyone involved in developing or building the stadium, or to any private financing agents involved must be voted on by the city’s population on the next ballot and cannot be enacted unless passed by the majority of the population.
4. Urges city councils and mayors to use the money that might have been spent on professional sporting stadiums to fund the construction of low cost housing, improving the education system, creating affordable healthcare, and benefiting the public transit system.
5. Encourages professional sporting teams to share stadiums and split the cost of construction with other business interests. This increases the usefulness of the venues and allows for more quality structures to be built. The stadium should be versatile enough to also be an ideal location for concerts and other entertainment or large gatherings of people.
6. This bill could also entice professional sporting teams to renovate existing venues instead of building entirely new and unnecessary structures. This will be more cost effective and a better use of resources.
7. This bill makes any negotiations between the government and professional sporting teams completely transparent so that citizens are aware of how professional sports are being supported by their government.

EXISITING STATE LAW

Federal Law:
1986 Tax Reform Act legislates that stadiums cannot be financed with any tax-free dollars. However, this simply put the pressure back on mayors and city leaders to fund the stadiums and so had the opposite effect desired because the professional sports teams found loopholes in the law and ways to work it to their advantage. This increased publicly funded stadiums and in the 1990s almost $4 billion tax payer dollars were used to pay for stadiums, most of which will never be paid back, either physically or in economic benefits.

S 1880, the Stop Tax-Exempt Arena Debt Issuance Act, Sen. Daniel Moynihan (D-N.Y.) This bill was not passed but was read in the Senate, so it shows that legislators have been thinking about this issue. However, this bill was introduced in 1996, and the 1990s was when the public financing of stadiums was at its height, and so it was an inopportune time to present this legislation. There were also many publicly funded construction projects already underway that made this bill really complicated because it was a retroactive bill. The author of the bill had noble attentions but his strategy for passing the bill was ineffective. He knew from the beginning that the bill most likely would not pass.

California State Law:
SB 4 by Murray in 1996
BILL SUMMARY: SB 4 would create a California Public Performance Facilities Authority, within state government, to acquire, construct, manage, or operate public performance facilities, including sports stadiums and performance halls. SB 4 would authorize the Authority to issue revenue bonds, incur other forms of indebtedness, and sell premium seat licenses, facility naming rights, and sponsorship rights, and to impose a facilities fee on tickets for these facilities.

AB 2805 by Ridley Thomas
BILL SUMMARY: Revises existing law provisions in the California Redevelopment Law for project area time extensions, applicable only to the City of Los Angeles for the purpose of rehabilitating the Los Angeles Memorial Coliseum for occupancy by an NFL franchise.

FISCAL EFFECT

This bill will force professional sports to become more independent as private companies and save the state of California millions of tax dollars that can be better spent on other projects. The ultimate goal is to make the most of the hard-earned tax-payer money. Cities will no longer be trapped into funding enormous projects that they cannot financially support. The money California does not spend on funding the construction of stadiums can also be used towards recovering the massive budget deficit and crisis the state is facing.

There important fiscal effect of this bill is that it would allow for a better allocation of public money. Even if there are no new stadiums built in the state, there will not be a negative fiscal effect because there is no evidence that they provide huge economic benefit.

The state will not lose any money in tax revenue if these operations leave because any revenues they might have made were more than lost with the financing the state provided to build the stadiums.

Appropriations: No Fiscal Committee: No Local: No

SUPPORT

Affordable Homes Collaborative
After-School All Stars, Los Angeles
Alameda Community Learning Center
Alliance for Affordable Services
United Teachers Los Angeles
University of Southern California
DC Fiscal Policy Institute
Coalition Against Public Funding for Stadiums

ARGUMENTS IN SUPPORT

California is in a huge budget crisis as a state and the cities are also severely suffering financially. It is time to get priorities in line and realize that the state should not be spending more money on professional entertainment, even with the intention to stimulate economies. Based on the lack of success of past developments that tax-payers have invested in, it is obvious that what the economy needs is not a new stadium. Hotels, businesses, and tourism can be attracted without needing to build entire new large developments. In fact, most fans will travel less than 20 miles to attend a professional sporting event. Professional sporting events do not generate new income; they are in fact a substitute entertainment event. Families or individuals who spend money going to a professional sports event would be going out for entertainment anyways and would be spending that money elsewhere, at a bowling alley, in a restaurant, or at the movies. Tax dollars should be concentrated where they are needed, for example in schools, public transportation, and healthcare. Investment in stadiums almost never turns out to be profitable for public financiers and there is no reason why tax-payers should be taking on the almost certain result of no return. The estimated construction costs of stadiums are almost always underestimated and therefore cities can be trapped into paying much more than they ever agreed.

In fact, these new stadiums start off a vicious cycle. When the construction is completed, the new ticket prices are astronomical to help pay for the construction costs, fans can’t afford these new ticket prices nor are they willing to pay them, especially in this economy, and then the stadium is half empty, the concessions don’t make very much money, staff are laid off because they aren’t needed; then the morale of the team decreases, restaurants near the stadium aren’t patronized because there are fewer fans going to games, fans buy less merchandise because they will not be wearing it at games and city income is low, defeating any positive benefits a stadium is supposed to bring.

Even if professional sports teams threaten to leave California because they will not receive public assistance to build stadiums, it will difficult for them to find a new home as there are few cities and states that are in the financial position to invest in these sorts of grandiose and unnecessary projects. In California it is completely unethical for our state to invest in these projects when the state is experiencing a huge budget deficit. Public opinion is not in favor of these projects and the citizens would be in outrage if it appeared their politicians were approving construction projects that were basically lining the pockets of the owners of the sports franchises. California has much higher priorities right now and cannot put professional sports ahead of our other values.

OPPOSITION

Government Finance Officers Association
United States Conference of Mayors
National League of Cities
Uniform and Textile Service Association
National Association of Bond Lawyers
Bringing Awareness of the Chargers Stadium Search
Anschutz Entertainment Group
Majestic Real Estate

ARGUMENTS IN OPPOSITION

If California stops supporting professional sports the teams will all leave the state and live in other states. The revenue from the taxes on stadiums’ concessions, tourists, and income taxes from all the people who are employed by the stadium and professional sports teams will be lost. Cities need stimulation economically, especially in these dire times, and the perfect way to do that is to build new attractions to keep professional sporting teams and fans happy. These stadiums employ thousands of people and all of those jobs would be lost if professional sports teams were to leave, increasing the unemployment rate. The teams are also a great way to unite communities and generate spirit and city pride. Since the stadiums are not only used for professional sporting events, the city would lose a venue to house many non-profit and community service events, concerts, and other large attractions such as Motocross or Monster Truck events. Swap meets, fairs, carnivals, private functions and parties are also held in these stadiums. Many new stadiums also are restoring and incorporating historic buildings and these buildings may not receive the funding to be preserved without being a part of a new stadium development. Professional sports help lower crime rates by giving the youth something else to do and care about. Going to professional sporting events is a part of every American youth’s childhood and we do not want to deprive children of that and drive them to the streets because of boredom and lack of entertainment. It is also not the role of the state to tell the local counties what to do with their tax-money, and it should be up to the tax-payers to decide how they would like their hard earned dollars spent.

SENATE DISTRICT 39

I am pretending to be Christine Kehoe and represent San Diego in the California State Senate and provide legislation to benefit my constituency. San Diegans will be very favorable toward this bill because the city recently supported the construction of Petco Park, a new ballpark in the downtown area. While the neighborhood has seen economic revival and is becoming a great destination, this is not purely the result of the ballpark. The convention center, trolley service, and an influx of housing, hotels, restaurants, and nightlife to the area have brought urban renewal to San Diego. The city not only paid for most of the stadium but is now stuck footing the bill for the large chunk of the operating costs. Citizens enjoy Petco Park but they do not think it is worth the bill that they have assumed.

The city has been under pressure from the Chargers to build them a new stadium for many years and, so far, is not giving in. This bill would help take pressure off the city officials from funding another stadium for the Chargers. The Chargers have long been threatening to move to Los Angeles but Los Angeles has not been offering them a great deal. The team has also looked at going to Chula Vista, which is a city that is part of San Diego County. However, neither city has offered a public financing deal that the Chargers have accepted.

STRATEGY

This bill requires a very straightforward strategy to pass. It must be presented soon because the budget crisis is fresh, as is the global economic recession, and so people are feeling conservative with their money. There is a Democratic majority in Sacramento and they would be the most in favor of this bill because they generally prefer to support affordable housing, education, healthcare, and environmental measures over business, while Republicans are often in favor of business and believe in the trickle down effect.

All the evidence and proof is available to back up this bill; it just needs to be compiled by the committee. The most compelling argument would be an analysis showing the little to no positive economic benefits for a city from building a new stadium. Evidence and case studies of privately financed stadiums must also be presented to show that stadiums can be privately financed and how successful they have been. It would be helpful if a few developers or financing agents would also speak out about their willingness to fund the construction of a new stadium and to work with professional sports teams. Also, numbers are going to be very important evidence in supporting this bill and an analysis of the salaries of professional sports players and team owners should be released and compared to those of teachers in the public school system or the cost of building affordable housing. The revenues from the stadiums and professional sporting teams should be released along with an explanation of where all the money goes.

Some ideas of alternative benefits that cities can offer professional sporting teams to aid in the construction of stadiums should also be presented so that businesses know there are many ways to work with this bill.

A lot of public opinion polls should be conducted because the public is definitely in favor of this bill and this would help put pressure on the legislators to vote in favor of this bill. There should also be a lot of publicity around this piece of legislation so that the public can get involved and write to their assembly representatives and senators.

CONCLUSION

Though initially controversial, once the research behind Senate Bill 858 is presented the argument will be convincing and the bill will pass. The bill also is not as drastic as it first seems. It still leaves open many ways for cities to attract professional sporting teams and assist them in the building of stadiums; it just prevents them from being directly financed with money collected from the tax-payers. Also, research has shown that the stadiums that are privately funded have a better business plan and the budgets are more sustainable, so those stadiums are the few that actually end up turning a profit. There is plentiful economic research which has proven that stadiums actually do very little to revive a city economically; the only examples of professional sports teams really reviving a community is when they move to small cities and communities.

In fact, if there are any economic benefits to building these brand new stadiums for professional sports teams, they are mostly felt by the team owner and players whose salaries are astronomical. Because of complicated laws around the public financing of stadiums, it makes it difficult for the team owner to pay back revenue to the city and then the city ends up footing most of the bill for the stadium and the operating costs, as the case in San Diego with Petco Park.

The time is also right to present this bill because California has just gone through a huge crisis attempting to get the budget passed and the state has a huge budget deficit to make up. If this bill is not passed, it will look like the state is being irresponsible and frivolous with the tax payer funds. Also, there have been recent examples of publicly financed stadiums that are bankrupting the city government and huge failures that aren’t even filled by the fans, such as the new Yankee Stadium in New York, which is costing over $1.3 billion.

All of the arguments in favor of publicly financed stadiums are easily rebutted and supported with little to no hard facts and evidence. The favorable arguments are theories and cannot be proven. It has been argued that professional sports can lower crime rates by giving the city’s youth something to do, but a study was done and there was no effect on the crime rate before and after the construction of a professional stadium; the major factor in determining crime rate was the size of the city.

There are also many ways to compromise on this issue, which professional sporting teams and legislators will realize when they are debating over this bill. For example, the city can help build the infrastructure surrounding the stadium, easy public transportation to the stadium, and public parks and recreation space around the stadium, creating a larger destination and attraction. Professional sports teams can also join together and share a stadium which would split the cost, allow them to finance a better facility, and put the huge investment to work more often. If the stadiums are privately owned rather than publicly financed they will also be easier to rent out for conferences, concerts, other entertainment acts like Motocross or Monstertrucks, fairs, farmers markets, swap meets, and high school or university sports events because it will not have to go through the bureaucracy of the government agencies.

This bill will be popular with both parties because in fact it represents the government taking a step back and out of meddling with businesses which conservatives will like and also shows a refocusing of tax dollars on essential issues like education that liberals will appreciate. In the recent economic crisis it has shown that the government should not be involved in business and it is best to just let that sector succeed or fail on its own accord, and the same is true with professional sports. City leaders will like this bill as well because it will take some of the pressure that team owners have attempted to place on them to finance a stadium. Any negotiations between the mayor and team owner must also be completely transparent and will help both parties remain accountable and reasonable and keep the public informed. This is very important because a few construction projects have claimed to be privately financed when they were really using tax-free government bonds and other loopholes in the system, like the PILOTS deal in the financing of the new stadium in New York.

The success of this bill would encourage other legislators to enact even more stringent legislation limiting even more benefits and deals the city can give the sports team until they are completely independent businesses.

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