(The Center Square) – Memphis accepted $350 million in state taxpayer funds for upgrades at its sports facilities and plans to ask Tennessee taxpayers for more.
The set of Memphis sports facility asks previously included funding for $684 million in renovations to the FedexForum, home of the Memphis Grizzlies, along with renovations to Liberty Stadium, AutoZone Park and a new soccer stadium for new soccer club 901 FC.
The Tennessee Legislature approved a $350 million lump sum in this year’s budget that Memphis’ city council voted to accept and put in an interest-bearing account Tuesday.
The state contribution also includes a hotel/motel tax, a county car rental tax and a deal where all sales taxes collected at FedExForum are kept by city for arena upgrades.
Outgoing Memphis Mayor Jim Strickland said those taxes will go toward the $334 million city and team portion of the projects.
The proposal that Strickland put forward when asking the state for the funding, however, could have changed or increased in cost as the city and incoming Mayor Paul Young told ABC 24 in Memphis that the city would now be asking for more state taxpayer funds for the projects.
The station reported the tax captures are expected to equal $250 million additional in taxpayer funding for the projects but that combined $600 million will still not be enough for Memphis to complete the work.
The Tennessee Legislature approved extending through 2059 a 2% Shelby car rental tax that brings in an estimated $3.4 million annually to pay off bonds for the FedExForum work and a bill extending a sales tax capture at the arena through 2059 that brings in an estimated $5 million in state sales tax each year.
The state recently agreed to a $500 million lump sum contribution plus significant state taxpayer contributions to a $3.1 billion expected tax capture at and around a new $2.1 billion Tennessee Titans stadium in Nashville.
“We want to make sure the Grizzlies stay in Memphis, and we want to make sure that the University of Memphis is able to move to a bigger conference,” Young told the station. “And you know we have a limited amount of funds to achieve those goals. I want to work with them to figure out how can we get the capital stack such that both projects can be executed.”
Tennessee Gov. Bill Lee was in Memphis on Tuesday and told reporters the state would continue to look into further spending on Memphis sports facilities.
“Sports venues around the state are really economic development opportunities,” Lee said. It’s what they are. They are investments in jobs and economic development for a community.”
Economists who have studies sports arenas and developments across the country, however, have shown that those facilities don’t spur other economic development and don’t make up for the taxpayer funds used on the projects.
“The opportunity cost of most sports consumption – particularly regular season team games hosted by sports venues – is other local spending, which results from the diversion of consumption from other local entertainment options,” an academic paper on the topic stated. “It is well understood by economists that spending on tickets, concessions, merchandise, and other items directly at a stadium largely ‘crowd out’ spending that would otherwise go to other local businesses, and there is no theoretical expectation that expanding business activity to include the district outside the stadium would change this accounting.”