Team and Owner Benefits of Building a stadium
- Generate substantial increases in revenues from tickets, concessions, sponsorship, merchandise, personal seat license, luxury suites and other premium seating, because customers demand and are willing to pay for -- better seating and atmosphere, food, r
Positive Externalities
overflow effects; benefits produced by an event that are not captured by the event owners or sport facility
- In sport, local businesses such as restaurants, hotels, bars, and retail stores benefit. As well as radio station and local newspapers as they de
Negative Externalities ?
negative overflow effects, like increased traffic
Bond
a promise to pay back borrowed money plus interest to the investor who has purchased the bond; a financial mechanism for raising capital by using debt as opposed to equity
General Obligation Bonds
bonds issued by a local government, lasting about 20 years and secured by tax revenues and the issuing entity's ability to impose new taxes, with interest paid each year directly out of the entity's general funds
- Debt and interest payments are paid dire
Equity Principle
is the measure of fairness... including three major ideas ; vertical equity, horizontal equity and the benefit or user pays principle
- Vertical equity ? is concerned with the taxpayer's ability to pay, typically calling for a tax that does not cause poor
Sin Taxes
taxes on alcohol and cigarettes - do not satisfy any of the equity principles
A television tax might satisfy the benefit principle and generate substantial funding.
Efficiency Principle
calls for a tax to be easy to understand, simple for the government to collect, low in compliance costs ( meaning that it is not expensive for taxpayers to calculate and pay) and difficult for taxpayers to evade.
- Moreover it should be applied to product
1. Revenue Bonds
a. Are a form of public financing that is paid off solely from specific, well-defined sources, such as hotel taxes, ticket taxes, or other sources of public funding - typically have terms of 15 to 30 years
b. Interest rates are higher for revenue bonds, a
1. Tax Increment Financing and Property Taxes
a. The use of only additional or new taxes generated from a certain source, such as property taxes, to help finance a sports facility. Once the facility is built, any increases in tax revenues resulting from the improvement of the area are used to pay off
1. Sales tax
a. Most common source of public financing for sport facilities
b. Methods for using sales tax to pay for facilities:
i. Pay as you Go? raise sales tax rate a small amount
ii. Issuing Government Bonds and pay them off through an increase in sales tax
1. Pa
1. Tourism and food and beverage taxes
a. Tourism tax? includes taxes on hotel stays and rental cars and they may also include food and beverage taxes in certain districts
b. Do not satisfy the benefit principle because tourists are not necessarily users of sport facilities.
Do typically fulfi
1. Sin taxes
a. Another type of financing source that generally receives less opposition than others, presumably because the items being taxed are considered socially undesirable . cigarettes and alcohol
b. Less common than tourism tax
Other sources of revenue
1. Sale of government assets
a. Direct source of funds
2. State appropriations
a. Direct source of funds
3. Ticket tax/surcharge of parking revenues/tax
a. Satisfy benefit principle, typically dont cover bulk of financing but they can make an important co
1. Indirect sources of public financing
a. Land donation - involved an opportunity cost - the lost opportunity to do something else with the land such as sell the land to a private entity at a market price
b. Infrastructure improvements -- to accommodate new facilities - such as freeway exits,
Contractually Obligated Income
-Private financing
is a revenue stream that a team receives under multi-year contracts.
- Ie. luxury suite holders for 5 - 7 year contracts or club seat holder to 3-5 year contracts
- Multi-year pouring rights sold to concessionaires, naming rights, and s
Asset-backed Securities
instead of borrowing from a bank, a franchise may package guaranteed COI or expected revenue streams together and sell bonds based on these assets
- Technique called securitization ? is most often used with financial instruments that pay interest
Public/Private Partnerships
the dominant paradigm going forward in stadium financing is public/private partnerships, with the major tenant generating equity via stadium- related revenues and additional capital provided by a municipal bond that is also backed by stadium revenues
- Pu