A Simple Way to Frame the Gwinnett Stadium Tax Burden

If you are a Gwinnett taxpayer, how much will the stadium cost your family? Here is the simple answer: $110 this year plus $3 per year for the next 30 years, for a grand total of $200 per household.

What percentage of the construction costs will be borne by taxpayers? 76%

Here is where these numbers come from.

Expenditures
Taxes Revenue: $31,000,000 ($12 million initial commitment + $19 million from reserve fund)
Amount Borrowed: $33,000,000
Total: $64,000,000

Annual Debt Service on $33,000,000: $2,438,240 (30-year mortgage at 6.25%)

Annual Stadium Revenue
Rent: $250,000
Ticket Fee: $479,000 (variable with $400,000 minimum)
Parking: $284,000 (50% share of net receipts)
Naming Rights: $100,000 (assumes $450,000 deal with $350,000 remitted to Braves/Liberty Media)
Total: $1,130,000

Annual County Subsidy: $1,325,240 ($2,438,240 — $1,130,000)

Estimated Gwinnett County Households in 2008: 279,820 (based on population and current 2.88 persons per household)
Population Growth: 3.8% (based on previous five years of growth)

Initial Tax Burden per Household: $31,000,000/279,820: $110
Annual Tax Burden to Cover Debt Service per Household: $3 (mean burden, based on population growth)
Sum of Tax Burden over 30 years per Household: $200 ($110 + $90)

% Public Contribution
Initial Contribution from Tax Revenue: 48% ($31,000,000/$64,000,000)
Contribution to Debt Service: 54% ($1,325,240/$2,438,240 = 54%; .54*$33,000,000 = $18,000,000 )
% Stadium paid by taxpayers: 76% ([($31,000,000+$18,000,000)/$64,000,000 = 76%)

What about the reported economic impact?

Few fields of empirical economic research offer virtual unanimity of findings. Yet, independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development (Baade and Dye, 1990; Baim, 1992; Rosentraub, 1994; Baade, 1996; Noll and Zimbalist, 1997; Waldon, 1997; Coates and Humphreys, 1999).

These results stand in distinct contrast to the promotional studies that are typically done by consulting firms under the hire of teams or local chambers of commerce supporting facility development. Typically, such promotional studies project future impact and almost inevitably adopt unrealistic assumptions regarding local value added, new spending, and associated multipliers. They often use a regional input-output model that depends on outdated technical coefficients which are treated as invariant to shifts in supply and demand (Center for Economic and Management Research, 1991; Deloitte & Touche, 1994, 1996; KPMG, 1996; Economic Research Associates, 1996; KPMG, 1998; C.H. Johnson Consulting, 1999).

Siegfried and Zimbalist, “The Economics of Sports Facilities and Their Communities,” Journal of Economic Perspectives, 2000.

Until the touted study is made public, I think it is safe to assume that the expected impact will be zero, at best.

2 Responses “A Simple Way to Frame the Gwinnett Stadium Tax Burden”

  1. Don S says:

    JC- Great comments but what about the lost revenue on the interest from the $31,000,000 that has come from the cash in the parks fund and the 19 from the reserve fund?

    Would this loss not be able to be shown as income needing to be made up?

    don
     

  2. JC says:

    I am assuming that the reserve-fund money would have been spent on other projects. But you are right that one of the reserve’s potential foregone opportunities is interest revenue.  There are ways to add this in, but I’m trying to keep this simple. I am also ignoring the county’s contribution to the stadium maintenance.

    A simple test as to whether or not you favor the stadium is your answer to the following question. Are you willing to pay $100 down and another $100 paid out over a 30-year period  to bring the Triple-A Braves to Gwinnett? The question is  more complicated than this, but these smaller numbers give a familiar frame of reference for citizens. My guess is that a majority of Gwinnett voters would not be willing to pay this much for the team. It’s too bad it didn’t get put to the voters.