Leaders of the Chambers of Commerce of St. Petersburg and Tampa are looking at ways to raise money to buy a new stadium for the Rays. The article in the St. Petersburg Times today indicated that they are talking to the city about ways to use “Community Redevelopment Areas” as a means of raising a bond. Such a bond is actually a loan of money given to the city by a private company to be used for certain costs. Apparently $209.5 million in taxpayer money so far is not enough (see below).
What is most interesting in the story is the quote from the article that indicated why it is a bad idea (from the Ray’s point of view) to fund a stadium entirely with private money.
“Along the way, the caucus has looked at financing for other stadiums around the country, talked to state officials and heard what can happen when building a stadium is a purely private effort and the owner goes out of business. (The place sits empty.)”
Tax dollars diverted to Intown Community Redevelopment Area – A special fund used exclusievely for development in that part of St. Petersburg while others in St. Petersburg spend more for basic services.
So, we have discovered that when a private corporation can’t have a steady revenue of taxpayer funds, they make no profit and go out of business– or so they will claim. Strangely, the implication is that it is okay for the taxpayer to go out of business to help the stadium owner. The main point here is that it is usually the taxpayer who creates a bigger profit margin for a sports franchise owner. Of course, we will never know all the facts since even though these team owners receive public money, they do not open their books fully to the public to evaluate their true profits and sources of profits.
At least one person recognized the dangers to the taxpayers to build a stadium with taxpayer money, Tampa Mayor Bob Buckhorn who “doesn’t see city money going into the construction of the stadium.”
So what is a “Community Redevelopment Area” (CRA)? This is a geographic area that has a dedicated pool of money built up slowly over years coming from a portion of the property taxes paid by residents in the designated area. CRA’s rely on the method of financing called “Tax Increment Financing” or “TIF”. The CRA is drawn on a map (in this case the “Intown” CRA) and, for purposes of determining a special fund balance, the property values of that area are held steady at the year it began. Any property taxes from values above the base value are put in the special fund that is dedicated exclusively to that area. That means that this CRA area receives the same services from the city (Police, Fire, EMS etc….) but pays only a percentage of taxes to receive those services. The REST of the money is put in the special fund that is used for projects exclusive to that area – like the stadium, Mahaffey theatre, Baywalk and the like. Many have viewed this as an unfair subsidy for some parts of town that transfer their taxes so other parts of town get extra benefits.
In the mean time, the city can use the PLANNED balance in these CRA’s to take out a loan (a bond) and then generally uses money from all taxpayers to pay the interest on the bonds. The taxpayers pay the interest on the bond and the bond holder does well on the steady income in addition to the baseball team owners.
In 2010, the total amount spent on the stadium (TropicanaField) to that point was $209,549,851. Of that, $22,500,000 came from CRA funds and $187,049,851 came from the taxpayers. That’s right, the taxpayers are still on the hook for the$209.5 million for the stadium all in so far.
The balance in the intown CRA on 8/31/2011 was $1,867,405.96. So it will not be the Intown fund itself that would be possibly used to finance a new stadium. It would be the promise of future property value growth that would do so – and a loan against the projected tax revenue that may bring. The condos in Downtown vastly increased the taxable value. The question is, will investors see all these condos as a good investment for future increase in value? More importantly, is it appropriate and moral for the taxpayers of St. Petersburg to give a single taxpayer dime to the Rays to build a new stadium? The property value “intown” were $523 million in 2004, peaked at over $1 billion in 2009 and are falling two years running now to $888 million in 2010. Property values are projected to fall until 2015. Finally, it will be hard to find more TIF money when $97.5 million in TIF financed projects are planned already up to 2035 (including $50 million for a new pier).
The Sun Beam Times is doing a detailed analysis on all of these Community Redevelopment areas and will be reporting on them over the coming weeks and months. As a preview, sometimes CRA’s don’t work out as planned. The Bayboro Redevelopment Area in St .Pete was created in 1988 with an estimated base property value of $28.1 million. Creation of USF Bayboro and other changes lead to an exemption from the tax base of these areas. As a result, the fund did not develop a balance until 2001. It took until 2009 for the fund to begin expending about $750K for street and beautification improvements. Stay tuned…..