Hidden Stadium Subsidies in New Jersey

The most common image of public subsidies for sports facilities is the shiny new palace of a stadium or arena paid for with public dollars and leased to the local team for a nominal fee. While this still happens, a recent article in the New York Times highlights some of the less visible subsidies that rain on professional sports teams in North America.

A new home for the two New York NFL teams, the Giants and Jets, will open next season in New Jersey.  This $1.6 billion facility is frequently held up as a shining example of a “privately financed” stadium.  As they say in the NFL, “Upon further review…” New Jersey taxpayers provided $400 million in infrastructure improvements for the new stadium and also paid $100 million to retire the debt on the old stadium.  Since some of the infrastructure can be enjoyed by taxpayers throughout the week, and not just on game day, a case can be made for some of this spending, but the debt retirement is a direct transfer from taxpayers to pro team owners.

And then there is the property taxes on the new facility.  The new football stadium sits on land owned by a government agency, the New Jersey Sports and Exhibition Authority, so the stadium, as well as the practice facilities and offices for both teams, so no property taxes are owed.  This applied to the old stadium and other facilities as well, but under an agreement between the teams and the state, an annual payment of $1.3 million was collected from the teams in lieu of taxes and passed on to the local government.

In general, property taxes depend on the value of the property, so a reasonable person might expect that the payment in lieu of taxes (PILOT) made by the Giants and Jets would increase.  Nope.  No new agreement is in place between the teams and the Authority, and it looks like no additional PILOT funds will be paid on the facility by the teams.  This clearly has a sizable opportunity cost for the local government; if this land was privately owned, the property taxes on the stadium and related facilities would be substantially larger than $1.3 million.

Finally, the Jets and Giants were given the naming rights to the stadium and the rights to all parking and related game day revenues generated in and around the new facility.  These revenues could have been shared by the teams and the government.  Infrastructure and debt retirement, reduced taxes, and naming rights/parking revenues.  That’s what we call the “subsidy trifecta” in the sports facility biz.

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