Private Claims to Public Revenue

May 13, 2024

Image of people milling around a square, with an outside amphitheater and other components.
Source: Alexandria Economic Development Partnership

When the billionaire owner of the Washington Wizards and Capitals was in the middle of his now-failed bid for public subsidies for a glitzy new entertainment district located in Virginia, just outside of Washinton, DC, he made an all-too familiar argument:

That $1.35 billion Ted Leonsis sought from Virginia taxpayers, he wrote, would only exist because of the new district. In his vision, somehow, owning the teams gave him a right to all the resulting tax revenue.

The owners of the Chicago Bears, pushing for an even-bigger taxpayer handout for a new stadium, said essentially the same thing in arguing for (among other things) the city’s hotel tax to go toward paying for the stadium construction.

But in Chicago, an official within the governor’s office pushed back: “The money that comes from this hotel tax does not belong to the Bears. It does not belong to the White Sox. It does not belong to any sports team. That belongs to the taxpayer.”

Why is it that sports franchise owners feel entitled to public tax revenue? These men sure could use some basic public finance lessons. Let me help them out.

When a big project comes to town, it almost always creates population growth. That means increased demand for public infrastructure and services: more lane-miles, sidewalks, sewer and water lines, police and fire coverage, teachers and classrooms, trash hauling — all those require more tax revenue.

If a sports district keeps all the new revenue it generates (to pay down tax-free bonds that reduce the company’s cost of capital) and the project site is paying no property tax (or very little because it is owned by a public authority), guess who pays for those higher costs?

And let’s not forget all the staff hours– engineers, public works employees, planners and others – that go into producing a high-quality, safe project.

But for that massively subsidized project, the site would develop normally: the land and buildings would be on the property tax rolls and the building materials and equipment would pay sales tax. So the project would help pay for the public costs it induced.

If the franchise owners get their way, working families and small businesses pay higher taxes to cover the new costs; or we pay through worsening public services because already  strained local budgets are cut. And a neighborhood restaurant or bowling alley or independent movie theater, also paying their full share of taxes, must now compete against a subsidized project.

It is dishonest to say there is no public money involved, and condescending to imply taxpayers should be grateful, as if tax dollars that will never benefit them are found money.

That revenue and public employee staff time could have been spent on adding after-school programming, expanding pre-K, going after wage thieves so workers are justly compensated, creating policies that ensure care workers are paid living wages, generating more affordable housing … the list is endless.

So let’s be honest and say NO when wealthy companies try to privatize our public revenues.  If the project is as good as its supporters claim, then it doesn’t need a junk campaign to go with it, and developers will reap the benefits they so enthusiastically tout.