Be sure to know all the basics before our interview with Dr. Luy tomorrow!

Two types of money sources discussed here: taxes (can be general or selective), and bonds (government borrows money to pay for things).

Types of taxes:

• General taxes
  • Property taxes
    • Real property
      • Land
      • Buildings
      • Etc.
    • Personal property
      • Vehicles
      • Stocks/bonds
      • Patents
      • Etc.
  • Sales Taxes
    • Regressive by nature (property taxes are as well!)
    • Can be used to fund specific projects
• Selective Taxes
  • Tourist taxes
    • Hotels, car rental, etc.
  • Sin taxes
    • Alcohol, cigarettes, lotteries, etc.
    • Many states have lotteries can be used to fund all kinds of things
      • Except Hawaii and Utah!
  • Jersey tax
    • No one has actually gotten this through a legislature yet though
• Income Tax
  • It is actually legal to impose state tax on business done within the state, including sports games!
• Game-Day Surcharges
  • Primarily additional cost to tickets and parking at events

Debt Financing: many ways to make the money move.

• Three vital principles for using debt to make things happen:
  • Use more time to make the tax burden less onerous
  • Use more time to make the financial pain smaller and get the rewards up front, for politics
  • Use more time so that the beneficiaries are paying (people who leave or come are paying for what they have access to).
    • Note that the debt should still only reach out to the expected end of usefulness of the product, or else you’re paying money for nothing on the back end.

Bonds!

• Straight serial method
  • Paying more up front, interest decreases to end
• Graduated serial method
  • Paying less up front, more total interest

Bond rating is mentioned, including S&P rating. Ahh memories. I wonder if the USA’s credit score is back up to AAA.

Tax-exempt bonds can only be issues by governments. In 1986 the Tax Reform Act was passed to try and prevent cities from using tax-exempt bonds to pay for stadiums but there were loopholes (of course) and things got messier.

Some blast from the past of sport marketing! Specifically w/r/t getting a new bond passed.

• Market segmentation: different groups behave differently and have different priorities
• Benefit principle: sell based on desire
• Development of a strategic plan: campaign before the referendum to create the best chance for success

Bonds are guaranteed debt. There are also non-guaranteed debt instruments:

• Revenue bond
  • Paid specifically from revenues generated by facility
• Certificate of participation
  • Public trust model
    • A nonprofit or other org acts on behalf of the government entity
  • Public-private partnership model
    • The local government itself behaves as the intermediary
• Tax-Increment Financing Bonds
  • Paid for by the increase in property values and resulting increase in property taxes
    • Super attractive, but be suspicious, people will eagerly assume it can’t fail
• Asset-Backed Securities
  • Securitization
    • Selling future revenue streams to investors
  • Player sale-and-leaseback arrangement
    • European football instrument for trying to get more money

OUTLINE:

• Sports Facility Boom
  • Measurement challenges
  • Description of the trend tables
• The evolution of facility funding
• Who pays and how much?
  • Cost sharing trends for arenas & stadiums
• Factors contributing to increased team/owner investment in facilities
  • The equity issue
• Factors contributing to continuing public subsidies
  • Owner leverage
  • The community power structure
• The rationale for public subsidy
  • Trends in the minor leagues
  • Trends in colleges

Let’s just take a quick overview today…. no quiz available yet, not sure there will be one.

Ok I saw the thing about GWB and I’m so mad I don’t want to do this anymore.