If You (pay To) Build It, They Will Come: Rethinking Publicly-financed Professional Sports Stadiums After the Atlanta Braves Deal With Cobb County

• Publication year: 2018

If You (Pay to) Build it, They Will Come: Rethinking Publicly-Financed Professional Sports Stadiums After the Atlanta Braves Deal with Cobb County

Steven D. Zavodnick Jr.
University of Georgia School of Law, steven.zavodnick@uga.edu

If You (Pay to) Build it, They Will Come: Rethinking Publicly-Financed Professional Sports Stadiums After the Atlanta Braves Deal with Cobb County

Cover Page Footnote
J.D., University of Georgia, 2018.

IF YOU (PAY TO) BUILD IT, THEY WILL COME: RETHINKING PUBLICLY-FINANCED PROFESSIONAL SPORTS STADIUMS AFTER THE ATLANTA BRAVES DEAL WITH COBB COUNTY

Steven D. Zavodnick Jr.^*

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Table of Contents

I. Introduction..........................................................................409

II. Background..........................................................................411

A. THE HISTORY OF PUBLIC FUNDING FOR PROFESSIONAL SPORTS STADIUMS........................................................ 411
B. THE ECONOMIC COSTS AND BENEFITS OF NEW STADIUMS..................................................................... 413
C. THE BARGAINING ADVANTAGE TEAMS HAVE OVER LOCAL GOVERNMENTS............................................................. 415

III. Public Finance Law............................................................416

A. THE FEDERAL TAX EXEMPTION OF MUNICIPAL BONDS .... 417
B. STATE LIMITATIONS ON MUNICIPAL BORROWING............419

1. Avoiding Debt Limitation Clauses Through the Use of Revenue Bonds...................................................420
2. Lending of Credit Doctrine....................................421
3. The Public Purpose Doctrine.................................422
4. Most Courts Have Upheld Stadium Subsidies Against State Law Challenges............................... 422
5. The Massachusetts Approach................................425

IV. The Braves-Cobb County Stadium Deal.........................427

A. THE TERMS OF THE AGREEMENT..................................... 428
B. A LEAGUE OF THEIR OWN: FINANCING THE STADIUM WITH TAXABLE MUNICIPAL BONDS.........................................431

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C. THE LAWSUIT: SAVAGE V. STATE..................................... 433

V. Proposed Changes to Protect Taxpayers........................437

A. REMOVING THE FEDERAL TAX EXEMPTION...................... 437
B. STATE LEGISLATION SETTING CLEAR STANDARDS AND PROCEDURES IS NECESSARY TO PROTECT THE PUBLIC INTEREST...................................................................... 439
C. MORE ROBUST JUDICIAL REVIEW .................................... 440

VI. Conclusion.......................................................................... 441

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I. Introduction

"If you build it, they will come." In the classic film Field of Dreams,¹ Iowa farmer Ray Kinsella heard a voice from the heavens repeat this phrase while working his cornfield. On belief alone, Ray plowed over his cornfield and built a baseball diamond—risking financial ruin and bringing his sanity into question. When all was almost lost, Ray's faith was rewarded. The ghosts of past baseball greats emerged from the cornfield to play on Ray's field, and he was able to "have a catch" with the ghost of his long-dead ballplayer father.

Cobb county, Georgia (Cobb) pledged millions of dollars in public money to build a new stadium for Major League Baseball's (MLB) Atlanta Braves (the Braves). The team opened the 2017 season at the brand-new SunTrust Park.² Like Ray, Cobb has undertaken significant financial risk in building the new ballpark. To repay the $376 million in municipal bonds issued for the stadium, Cobb must pay $22.4 million a year for the next thirty years.³ Although Ray Kinsella's risk in building a baseball field paid off, it is doubtful that the new Braves stadium will live up to the lofty promises made by Cobb politicians to justify the public expenditure.

Professional sports stadiums have been subsidized with public money since before Babe Ruth famously "called his shot."⁴ While the economic and legal merits of stadium subsidies have been debated over the past fifty years, the scrutiny has intensified in recent years from members of congress, political commentators, and sports journalists alike.⁵

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For several reasons, the Braves' new stadium is a fascinating case study through which to analyze the current legal framework that enables and encourages municipalities to gift privately owned teams millions of dollars in public money to build stadiums. Like most publicly-funded stadiums, the Braves' stadium construction was financed with the proceeds from municipal bonds. Unlike other stadium bonds, however, the interest collected by SunTrust Park bonds are not exempt from federal income taxation.⁶ Additionally, the bonds' validity was upheld by the Georgia Supreme Court against numerous Georgia constitutional and statutory challenges.⁷ And lastly, the project exposed how inadequate statutory safeguards can result in significant public backlash.⁸

Section II of this Note provides a brief history of publicly-financed stadiums, evaluates the claims that stadiums are worthy public investments, and explains how teams' bargaining advantage over municipalities resulted in an oversupply of public funds for stadium construction. Section III examines federal and state law implicated by using municipal bonds to subsidize stadiums. Section IV analyzes the agreement between the Cobb-Marietta Coliseum and Exhibit Hall Authority (the Authority), the Braves, and Cobb County and concludes that: (1) the agreement was structured to evade the Georgia constitutional and statutory limitations on municipal debt; (2) the decision to issue taxable, instead of tax-exempt, bonds likely saved Cobb money, which illustrates the perverse incentives federal tax law impose on local governments; and (3) although correctly decided from precedent, the Georgia Supreme Court's decision in Savage v. State ignores the plain meaning and historical purpose of state constitutional protections intended to prevent municipalities from lending public funds for projects that result in predominately private gains.⁹

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To prevent the continued oversupply of stadium subsidies, in Section V this Note endorses the pending federal legislation that would revoke stadium bonds' tax exemption. It also advocates for state legislation that would create procedural and substantive standards to rein in local governments' tendency to capitulate to team owners at the expense of the taxpaying public. Finally, courts, recognizing that publicly funded stadiums are unlike other government facilities, should take a more active role in reviewing proposed stadium bonds to ensure that they are for a public purpose and not just gratuitous public aid to private enterprise.

II. BACKGROUND

A. THE HISTORY OF PUBLIC FUNDING FOR PROFESSIONAL SPORTS STADIUMS

In the early days of American professional sports, games were played in venues paid for by the home team's owners.¹⁰ Beginning in 1923, however, the cities of Los Angeles, Chicago, and Cleveland spent public money to construct large coliseums to bolster their chances of hosting the Olympic Games.¹¹ All three cities' initial efforts failed, and while Los Angeles was eventually awarded the 1932 Games,¹² Chicago and Cleveland were left with vacant stadiums. The best, and perhaps only, solution was to offer the stadiums to local professional teams, which Cleveland did by renting the stadium to MLB's Indians.¹³

Until 1960, however, publicly funded stadiums were the exception and not the rule.¹⁴ Post-World War II social and economic conditions profoundly affected the business of professional sports.¹⁵ Because of this rapid growth, it became

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imperative for major cities to retain or attract professional teams.¹⁶ Although local governments went about this in several ways, the most fruitful was to "dangl[e] the prospect of a publicly financed stadium . . . ."¹⁷ Milwaukee was the first to use this strategy. Unable to secure an MLB expansion franchise, the city built a new stadium entirely with public funds.¹⁸ The stadium was able to lure the Braves franchise to Milwaukee in 1953.¹⁹ And while two other MLB teams moved to take advantage of publicly financed stadiums in other cities shortly thereafter,²⁰ it was the Brooklyn Dodgers' departure for Los Angeles in 1958 that truly accelerated the frenzy of new stadium construction.²¹

Before 1948, there were only twenty-eight professional sports stadiums and only four were built with a modest amount of government funds.²² Over the next half of the twentieth century, American sports teams spent over $20 billion on stadiums for the four major American sports leagues of which, conservatively, taxpayers paid $14.727 billion.²³ During that time, stadium construction changed dramatically.²⁴ The stadiums of the 1960s and 1970s were "cookie-cutter, concrete-slab" facilities that were often home to both baseball and football teams.²⁵ Today, teams demand sport-specific stadiums with a bevy of modern amenities, and are increasingly declaring that their facilities are obsolete.²⁶

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Given the leverage teams hold over local governments, this has resulted in an increase in the number of new stadiums being built,²⁷ each carrying a higher price tag.²⁸ While the percentage of the total construction costs paid with public funds is less than it was in the 1950s, the total public investment is higher than ever before because of the number of new stadiums being built and the increase in the price per stadium.²⁹ Since 2000, forty-five stadiums were constructed or majorly renovated at the staggering cost of $27.8 billion, of which nearly $13 billion (in 2014 dollars) was financed with public money.³⁰

B. THE ECONOMIC COSTS AND BENEFITS OF NEW STADIUMS

Although the aggregate $13 billion public investment in stadiums since the turn of the century is an attention grabbing figure, subsidy proponents argue that the public expenditure is warranted...