Utah Taxpayer

The good news is that the soccer stadium debate is finally drawing to a close. The bad news is that taxpayers will be subsidizing a professional sports arena.

Whose tax dollars are these?
Stadium proponents argue that these subsidies are not really OUR tax dollars since hotel taxes are largely paid by out-of-state tourists. Make no mistake: these are our tax dollars. When government collects revenues from any source, they become our tax dollars.

State and local governments collect a lot of revenues from "outsiders", but no one suggests wasting these tax dollars on a soccer stadium. Most of the state corporate income tax is paid by out-of-state shareholders. The state constitution requires that state corporate income taxes ($380 million in FY2006) be spent on K-12 and higher education. (Note: corporate income taxes are eventually passed on to shareholders, employees, and customers, but the tax incidence is definitely shareholders, most of whom live out of state).

About 7% of all general sales taxes are paid by tourists. Currently, these revenues are spent on general government programs such as higher education, transportation, health, and corrections.

Mining severance taxes are largely exported to out-of-state consumers and shareholders. Currently, mining severance tax revenues are used for general state purposes.

Bottom line: the state receives hundreds of millions of dollars from out-of-staters, but the state fortunately spends these dollars for legitimate purposes.

Is this really economic development?
Hotel taxes should be spent on promoting tourism, and spending hotel taxes on a soccer stadium is not an effective way to promote tourism. The total subsidy for Real will reach or exceed $30 million (excluding parking garage) when subsidies from Sandy and other local governments are eventually included. Most of the economic activity that will occur at and around the stadium will be locally driven retail, entertainment, and office space. This activity will occur on its own in some form in Utah without subsidy. Utahns won't be eating more food or buying more consumer goods simply because a soccer team is playing in Utah.

Subsidy proponents argue that subsidizing the stadium promotes economic growth because World Cup qualifiers and matches with Real Madrid will attract out-of-state tourists. However, consider the following:

- It will take several years before enough qualifiers and Real Madrid games are played before the taxpayer "investment" is recouped.

- Considering Real's speculative and unrealistic financial assumptions, taxpayers should be skeptical about claims that a lot of Real Madrid and WC matches will be played in Utah.

- Instead of using millions to subsidize Real's stadium (or infrastructure, as supporters insist on calling it), the state would get a bigger return using hotel tax revenues for advertising and other tourism promotion. State tourism officials have demonstrated that the economic return of tourism promotion is exceptionally high.

Subsidizing stadium infrastructure?
Subsidy proponents argue that the tax dollars aren't being used for the stadium but rather for the land and infrastructure. Let's make a couple of points clear:

- Businesses are expected to pay for their own land and infrastructure. Should state and local governments cover the cost of land and infrastructure for all new businesses, particularly businesses like Real that are primarily geared towards local retail and entertainment?

- Whether the dollars are spent on the stadium or land/infrastructure isn't really that significant because these are still tax dollars.

Proponents argue that the state will own the land. When did the state get into real estate speculation? How much will the land be worth with an empty, unwanted stadium on it?

Finally, if this really made a lot of economic sense, why aren't private investors funding 100% of the cost?

Posted by Utah Taxpayer on Thursday, February 08, 2007 at 12:37 PM | Permalink