Tax Increment Financing and Major League Venues by Robert P.E. Sroka A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy (Sport Management) in the University of Michigan 2020 Doctoral Committee: Associate Professor Judith Grant Long, Chair Professor Sherman Clark Professor Richard Norton Professor Stefan Szymanski Robert P.E. Sroka [email protected] ORCID iD: 0000-0001-6310-4016 © Robert P.E. Sroka 2020 DEDICATION This dissertation is dedicated to my parents, John Sroka and Marie Sroka, as well as George, Lucy, and Ricky. ii ACKNOWLEDGEMENTS Thank you to my parents, John and Marie Sroka, for their love and support. Thank you to my advisor, Judith Grant Long, and my committee members (Sherman Clark, Richard Norton, and Stefan Szymanski) for their guidance, support, and service. This dissertation was funded in part by the Government of Canada through a Social Sciences and Humanities Research Council Doctoral Fellowship, by the Institute for Human Studies PhD Fellowship, and by the Charles Koch Foundation Dissertation Grant. iii TABLE OF CONTENTS DEDICATION ii ACKNOWLEDGMENTS iii LIST OF TABLES v LIST OF FIGURES vii ABSTRACT viii CHAPTER 1. Introduction 1 2. Literature and Theory Review 20 3. Venue TIF Use Inventory 100 4. A Survey and Discussion of TIF Statutes and Major League Venues 181 5. TIF, But-for, and Developer Capture in the Dallas Arena District 234 6. Does the Arena Matter? Comparing Redevelopment Outcomes in 274 Central Dallas TIF Districts 7. Louisville’s KFC Yum! Center, Sales Tax Increment Financing, and 305 Megaproject Underperformance 8. A Hot-N-Ready Disappointment: Little Caesars Arena and 339 The District Detroit 9. Results, Discussion, A Working Theory of Venue TIF, and Policy for 392 Harm Reduction iv LIST OF TABLES TABLE 1. MLB Stadium TIF Use 109 2. MLB Stadium TIF and Development Use 109 3. NFL Stadium TIF Use 121 4. NFL Stadium TIF and Development Use 122 5. NBA Arena TIF Use 128 6. NBA Arena TIF and Development Use 128 7. NHL Arena TIF Use 140 8. NHL Arena TIF and Development Use 140 9. MLS Stadium TIF Use 152 10. MLS Stadium TIF and Development Use 152 11. Venues With Direct TIF Contributions 159 12. Number of Venues With TIF Characteristics by League 164 13. City Population (‘000) (2018) and Direct TIF Use 167 14. Allowable TIF Capture Source by Jurisdiction 184 15. Jurisdictions Allowing Special Assessment District Overlap With TIF 190 16. Jurisdictions Allowing Eminent Domain to be Used With TIF 192 17. Jurisdictions Allowing Area Wide and Project Specific TIF 196 18. TIF Creation Authorities by Jurisdiction 198 19. TIF Project Authorities by Jurisdiction 201 v 20. Requirements for a TIF District by Jurisdiction 202 21. Forms of Financing 213 22. Allowable Public Improvements by Jurisdiction 217 23. Allowable Private Improvements by Jurisdiction 221 24. Permissible Land Use Zoning for TIF Districts 225 25. TIF District Lifespan by Jurisdiction 226 26. Walk Score 277 27. Central Dallas TIF Districts 280 28. Central Dallas TIF District Performance 280 29. Walk Score Performance by District 279 30. Jefferson County and Kentucky Sales Tax Growth Rates 1990-2006 316 31. Arena Zone TIF Projections and Yield 2010-2016 316 32. Category A Revenues ($m) v. Projections 318 33. Category B Revenues ($m) v. Projections 319 vi LIST OF FIGURES FIGURE 1. Sports Arena TIF District After 2012 Amendment 249 2. Approximation of Dallas Core TIF Districts 279 3. Sports Arena TIF District 280 4. State Thomas TIF District 284 5. Cityplace TIF District 286 6. Deep Ellum TIF District 288 7. Grand Park TIF District 289 8. DDDA Historical Incremental Value – Development Area 343 9. DDDA Area Map 345 10. District Detroit Neighborhoods 348 11. Projected TIF Revenues by Source for Series 2018A Bonds 352 12. Columbia Park Rendering 356 13. Columbia Park in 2019 With Arena Top Right 356 vii ABSTRACT This dissertation studies the use of tax increment financing in major league venue projects in North America. Although there is a vibrant literature on TIF, little has crossed over to the sports venue context, leaving a gap where some of the most expensive and potentially risky TIF projects anywhere are concerned. Likewise, while there is considerable literature questioning the merits of public subsidies for sports venues, there is insufficient work focusing squarely on TIF and sports venues. This relative absence of literature concerning sport venue TIF matters because providing subsidies through TIF may effectively obscure the public cost of sports facilities. This thesis shines a light on venue related TIF through contributions under three central headings: scope and inventory, theory development, and normative development. In the past two decades, TIF has become a more frequent element in subsidizing venues and the real estate development surrounding these facilities. Specifically, over $1.8 billion in TIF has been spent on 22 major league venues across five major leagues, with well over a third of non-temporary major league venues where TIF was eligible to be used having a direct or strong TIF connection at the time of construction or substantial renovation. The TIF inventory also reveals direct TIF use concentrations in particular sub-federal jurisdictions. Likewise, less permissive TIF statutes often overlap with jurisdictions where direct TIF contributions were absent. I argue that if legally and fiscally available, TIF can be an effective means for local growth coalitions to sell politicians on approving subsidies through mitigating public approval viii and political risk associated with providing public dollars to sports venues. In particular, TIF’s salability as self-financing, provides political cover to decision makers and reduces the risk of popular opposition. Likewise, TIF allows financial risks associated with venue subsidies to be better mitigated by marrying the revenue source to the good being funded, and allows local governments to use taxes that would otherwise go to overlaying taxing jurisdictions (such as schools). While the case studies in this dissertation indicate major risks with venue related TIF, if politicians wish to move ahead with such projects, citizens should insist on harm reduction measures. These include ensuring but-for, preventing predatory overlaying capture from school districts, avoiding reliance on sales TIF, shifting underperformance and legal risk from public to private partners by making sure that promises of real estate development are matched by enforceable contractual obligations, and ensuring multiple points of transparency. ix CHAPTER 1. INTRODUCTION 1.1. CONTEXT, SIGNIFICANCE, AND PURPOSE The focus of this dissertation is the use of tax increment financing (TIF) in North American major league stadium and arena projects. Despite a broadly skeptical academic literature, TIF has become a favorite legal and policy tool of local economic development in the United States. In more recent years, TIF has also become a common presence in conversations surrounding the construction, renovation, and ancillary development surrounding professional sports venues. At the same time considerable work exists showing that sports venues do not positively impact economic growth in a city or region. As the literature questioning the returns on public subsidies of professional sports venues creates pause for government and political actors, TIF poses an opportunity to reframe the subsidy conversation in more favorable terms by venue proponents. Although there is a vibrant literature on TIF, little has crossed over to the sports venue context, leaving a glaring gap where some of the most expensive and potentially risky TIF projects anywhere are concerned. Likewise, while there is a lively literature on public subsidy of sports stadia and there are some publications making note of venue based TIF, there is limited work focusing squarely on TIF and sports venues. With this dissertation finding that over $1.6 billion of TIF (in 2020 dollars) has been used to directly subsidize 22 major league venues and that well over a third of non-temporary major league venues where TIF was eligible to be used 1 have a direct or strong TIF connection, the potential value of more deeply exploring venue TIF is underlined. From a policy perspective, this relative absence of sport venue TIF literature matters because providing subsidies through TIF statute capacities may be an effective means of obscuring the true public cost of sports facilities. Likewise, TIF may be a way for actors desiring a stadium or arena to obtain a public subsidy that may attract less scrutiny or resistance than other revenue sources. Conversely, TIF – as a subsidy frequently tied to the creation of assessed real estate value – might be central to the seemingly growing phenomena of team driven real estate development surrounding arenas and stadiums, which can also bring the potential to transform blighted areas of inner cities or anchor new suburban centers. More squarely for the academic literature, the void of sport venue TIF literature matters because if venue TIF use is indeed a more frequently occurring or financially significant phenomena, we want to know why. Likewise, we may be interested if TIF can be a better way to use or reform law to frame a policy of venue subsidy? First however, we have to establish the nature and scope of venue TIF use. Accordingly, this dissertation intends to shine a light on venue related TIF through several primary contributions to the literature under three main headings: scope and inventory, theory development, and normative development. Beyond a public notice and identification function which may serve cities and their citizens as a referential resource in contemplating the merits of TIF in a stadia related project, I intend to help begin closing the identified academic research gaps while setting a baseline for work on associative relationships and the normative value of venue TIF. From literature and document review, data collection, and case studies, this dissertation leads to a working theory of TIF use in the venue context.