Analysis: Who Really Pays In Tennessee’s Sports Stadium Sales Tax Zone Funding Scheme?
Image Credit: Ron Cogswell / CC
The Center Square [By Jon Styf] –
A new $2.1 billion Tennessee Titans stadium with at least $1.26 million in public funding is planned for Nashville. Memphis is asking for at least $350 million in state funds to renovate three sports facilities and build another new stadium.
A $75 million or more Nashville Fairgrounds Speedway renovation paid for with a $17 million state payment and revenue bonds based on taxes and other funds. Geodis Park, a nearby soccer stadium with a sales tax deal of its own, opened in May.
Along with sales tax deals toward Minor League Baseball stadiums in Knoxville and Chattanooga, it’s a good year for backers of professional sports stadiums in Tennessee.
In many of the cases, rather than using direct funding methods from city or state coffers, Tennessee has now opted to have a portion of funding for the bonds on building stadiums to come from sales tax zones.
At Nissan Stadium, Bridgestone Arena (NHL’s Predators), Geodis Park (MLS’ Nashville SC), the FedexForum (Memphis Grizzlies) and minor league baseball stadiums in Chattanooga, Knoxville and Nashville, the state has allowed all of the sales tax collected to go toward stadium debt, repairs or upgrades. With a new Titans stadium and the minor league stadium in Knoxville, those deals extend to new developments surrounding a new stadium.
Those funds are often termed by those proposing deals, like Nashville Mayor John Cooper, as user fees. But economists say that doesn’t show the full impact.
“I get concerned when I see local governments funding stadium projects from special tax districts for two reasons,” said economist J.C. Bradbury from Kennesaw State University in Georgia. “First, I think many representatives view the revenue that may be produced as a windfall, when economists have found that most spending in and around stadiums comes from locals diverting their consumption from other local businesses whose lost tax revenue collections are no longer funding general budget expenses.
“Second, stadiums have a poor track record of stimulating external development that would produce such development. So, it’s mistaken to think that these developments pay for themselves.”
When the Titans and Tennessee Smokies tax zone legislation was passed in the 2021 legislative session, Senate Finance, Ways and Means Chair Bo Watson called the deals “templates that will now guide us in the future with these complexes.”
A new Titans sales tax fund is expected to bring in $70 million annually once a new stadium and surrounding development is completed.
In Memphis, Mayor Jim Strickland said that the city plans to ask the state to increase the allowance for Shelby County to create a 5% hotel/motel tax, up from the current 3.5% tax, as well as asking the state to extend an allowance for a county car rental tax through 2053 and extend a deal where all sales taxes collected at FedExForum are kept by the Grizzlies through 2053.
Those tax funds are then used to pay off stadium bonds. In some cases, however, the funds are short of what’s owed.
That happened with the Nashville Sports Authority bonds on the Nashville Sounds stadium, where the highest one-year shortfall was $1.55 million and in 2021-22 it was $500,000. Those bonds were backed by Metro Nashville and the shortfall had to be paid by the city.
About the Author: Jon Styf, The Center Square Staff Reporter – Jon Styf is an award-winning editor and reporter who has worked in Illinois, Texas, Wisconsin, Florida and Michigan in local newsrooms over the past 20 years, working for Shaw Media, Hearst and several other companies. Follow Jon on Twitter @JonStyf.
