From the Desk of:

George Hasiotis, Partner

Greater Buffalo Sports & Entertainment Complex, LLC

March 19, 2015

To the Editor
New Stadium Does Not Need Federal Tax Subsidy, Should be Built on
Private Financing Formula
As reported recently by the News, the Obama Administration proposes to
eliminate the federal tax subsidy to local and state governments for the purpose
of reducing the cost of local stadium bond financing. This program is not a
significant factor in stadium financing cost or ultimate financial viability. Consider,
hypothetically, that should a state or county bond of $500 million be issued for a
prospective new Buffalo stadium the savings to state taxpayers for the federal
subsidy contribution will be $5 million (local savings would be offset by additional
cost on the federal tax scale).
Congressional budget analysts estimate the cost of continuing this federal
program at $542 million over the next decade. Opponents of public stadium
financing provide documentation to support elimination of public financing.
The public interest is best served by elimination of this tax subsidy. This current
subsidy has been an incentive to elected officials to promote larger than
warranted public financing participation in such developments. An honest
benchmark for whether to build a stadium should be a fair determination of
profitability of such a facility. There is good and bad debt in the case of
stadium development. Good debt is defined by timely and profitable repayment
to the treasury. Bad financing is the type of ongoing tax subsidy by Erie County
and the City of Buffalo to sports franchises. If we cant plan for a positive return
on investment from a new facility, then it should not will not be built.
NFL Commissioner Goodell has a new catch phrase, next generation stadium
which he uses to describe what NFL cities need to weigh in their stadium
planning. It is useful here to consider that context. There are economic model
and performance criteria upon which a new stadium is based that can better
serve the interest of all stakeholders. So we are talking about a new facility that
must promise multi-source, multi-event revenue opportunities. This type of
market based planning and modeling is not within the competency of public
authorities.
The tax subsidy debate and Commissioners remarks offer a good backdrop for
us to focus our own new stadium discussion. We can build a privately financed
complex, deliver a return to investors and tax payers while enhancing revenue
for the franchise and league. We can overcome past mistakes and work within
the next generation paradigm and market based model for development of a
stadium that generates jobs and income, not a drag on the tax base.