Memphis To Ask Tennessee Taxpayers For $350M As Part Of $684M Sports Arena Projects

Image Credit: Ron Cogswell / CC

The Center Square [By Jon Styf] –

The city of Memphis plans to ask the state of Tennessee to contribute $350 million toward renovation projects at three city-owned arenas and to help build a new soccer-specific stadium for Memphis 901 FC.

The projects – renovations to the FedexForum, home of the Memphis Grizzlies, along with renovations to Liberty Stadium, AutoZone Park and a new soccer stadium – are expected to cost $684 million in total.

Memphis Mayor Jim Strickland presented the legislative plan to the city’s council, citing economic impact numbers from Memphis-based marketing firm Younger, the same group that provided economic impact numbers for a new $2.1 billion Tennessee Titans stadium that is set to receive a $500 million lump sum from the state along with sales tax and hotel/motel taxes in what is expected to be the largest amount of public funds ever spent on a professional sports stadium.

Like with the numbers the Titans presented, extensive research on sports stadiums from economists show that the economic impact numbers presented by Strickland are not credible.

“These economic impact estimates are no more credible than horoscopes or tarot cards, yet here they are in a government document, treated as a factual basis for policy,” said J.C. Bradbury, a sports economist from Kennesaw State University in Georgia.

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.

Strickland again pointed to Nashville in presenting these requests, saying the taxes will go toward the $334 million city and team portion of the projects.

“I just ask, are we thinking big enough?” said Memphis City Councilman Martavius Jones. “I hate to always compare ourselves to Nashville but I’m going to compare us to Nashville from that standpoint. … Are we not thinking big enough if we are not saying that we need a new FedEx Arena for the Grizzlies? I just want to put that out on the table if we know the impact that it has for this city.”

In response, Strickland said that the Grizzlies and NBA have said a renovation of the arena will fulfill the team’s needs.

Strickland did not say how much funding will go to each of the four projects.

“Our analysis shows that the state will make $539 million in 15 years in sales tax, so they will make money,” Strickland said.

The Grizzlies deal to retain sales tax at its venue is similar to state deals with the Titans, the NHL’s Nashville Predators and a minor league baseball team, the Tennessee Smokies (Knoxville), among others.

In Nashville, the mayor’s office has attempted to frame sales taxes returned by the team after being paid for along with purchases in or around Nissan Stadium as a user fee rather than a public fund subsidy to the team. But economic research shows that new sports stadium only divert spending from other areas of a city or county and are not new spending.

“Tax incidence is a subject taught in principles of microeconomics,” Bradbury said. “Public officials should be aware that tax burdens are not determined by who pays the tax to the government.”

Shelby County can increase its hotel-motel tax to 4% without state approval but it will require Legislative action to reach the 5% mark, similar to what the state approved for Davidson County.

“While tourists may appear to pay hotel taxes, the cost is not necessarily borne by the patron,” Bradbury explained. “Higher taxes cause marginal customers to reduce their stays, which results in local hotel owners lowering their prices to retain guests. Also, most hotel patrons are not in town for sporting events, thus they are being expected to fund something that they don’t benefit from.”

The soccer stadium, planned to open in Liberty Park, will have a 10,000-person capacity with 7,500 fixed seats along with a club level and is expected to open in 2025.

The Liberty Stadium renovation will include replacing the club level and press box level of the stadium and eliminating the concrete ring around the west side of the stadium.

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.