Trump administration proposal would allow stadium funding to count as aid to poor for banks
There are 39.7 million people in the United States living in poverty, in need of aid and investment within their communities to ensure that they have the essential services and new opportunities to support themselves and their families. What they absolutely don't need is a football stadium. Yet, the Trump administration is weighing a new proposal that would consider sports stadiums and arenas near poor neighborhoods as an attempt to provide aid to low-income communities, according to a report from Bloomberg.
The rule change would apply to the 1977 Community Reinvestment Act, which requires financial institutions to meet the credit needs of all communities where they do business, including low- and moderate-income communities. The law was put in place to ensure that banks are doing things like providing loans and mortgages to people regardless of where they live and was passed in response to the practice of redlining, in which many banks would simply refuse to serve certain communities based on income level and demographics rather than credit worthiness — a decision that led to minorities and marginalized populations being segregated into poor neighborhoods in many American cities. Now the Trump administration wants banks to be let off the hook for actually providing loans to people who need it and wants to instead give credit to institutions that loan millionaires and billionaires cash to build sports stadiums, claiming that would sufficiently meet the requirement of helping the poor.
The official phrasing of the Trump administration proposal describes, "Investment in a qualified opportunity fund, established to finance improvements to an athletic stadium in an opportunity zone that is also an LMI [low- or moderate-income] census tract” as a qualifying criteria that would allow banks to meet their fiduciary requirements for low-income communities. It's a single line within a 239-page proposal, and it is written in legal jargon, but the intent is clear: help finance a sports stadium in a poor neighborhood and you won't have to give out mortgages to low-income households.
Many sports stadiums have been placed in areas that would qualify as "opportunity zones" under the law. According to Bloomberg, there are existing baseball, basketball, soccer, hockey and football teams all operating within these areas of investment. Allegiant Stadium — the $1.8 billion construction going up in Paradise, Nevada (just outside of Las Vegas) to house the Oakland Raiders when they move operations to the city in 2020 — is being built in a so-called opportunity zone. The residents of Clark County have already committed to providing $750 million in public funding to the project, paid in part through additional taxes. Another football stadium settled directly in a low-income community is M&T Bank Stadium in Baltimore, Maryland. The stadium, which serves as a home to the Baltimore Ravens, just underwent a $120 million renovation to upgrade the sound system. Under the Trump administration's proposal, a bank that lent the Ravens organization the money to undergo those upgrades would have met its duty to support low-income communities, despite all of the investment being put exclusively inside a stadium where the cheapest ticket to the next game is priced at $130.
At the core of the Trump administration's proposal is the idea that sports stadiums create economic opportunity. The logic seems sound enough on its face. The theory goes that by building a stadium, you will create jobs — teams have sales staff and janitorial employees and need people on game days for everything from security to ticketing to ushers to people to operate concession stands. In addition to that, it's often thought that additional developments will follow around the arena. New businesses will open up to capitalize on the influx of people showing up for games — things like hotels will provide fans a place to stay, bars and restaurants will open to serve people before and after contests, retailers open up shop to sell their goods to fans with disposable income. The Trump administration can talk itself into saying that stadiums are a service to the low- and middle-income communities where they are built under the guise of a rising tide lifts all boats.
The problem is, that's not what any of the evidence of the economics of sports stadiums suggests happens. These multi-million and billion-dollar ventures — often at least in part financed by the public despite teams being owned by members of the one percent — at their best provide a short-term economic boost to a community with little long-term effect. Building a stadium is a good way to create a wealth of construction jobs, but those provide little guarantee of work after the stadium opens up shop — and it's not uncommon for people to travel from other areas for that work, meaning those job opportunities are neither going to nor benefiting members of the community where the stadium is being built. And while the public often pays for part or all of the construction of these arenas, they don't see any of the profit that they generate. That all goes into the team's vault and the pockets of the rich owners, who likely threatened to up and leave if the community didn't contribute to the cost of the stadium. This arrangement socializes the costs of these giant structures while privatizing the profits.
The result of that, according to multiple studies, is little to no economic growth in the communities that play home to stadiums. An in-depth look at the economics of NFL stadiums conducted by Stanford University found that the structures "do not generate significant local economic growth, and the incremental tax revenue is not sufficient to cover any significant financial contribution by the city." A study from Temple University found that a stadium for a professional baseball team provides communities with about the same economic impact of a mid-sized department store, and that if the city of Chicago saw every one of its big four professional sports teams in the city disappear — that's one NFL team, one NBA team, two MLB teams and one NHL team — the economic impact would be less than one percent. As one might expect, because of these findings, many economists don't view stadiums as a good investment. A survey of economists published by the Federal Reserve Bank of St. Louis found that 86 percent of economists oppose cities and communities providing any sort of subsidy to help teams build new stadiums and 83 percent said that the costs are likely to outweigh any new income generated. Most economists reason that stadiums present an opportunity cost that ends up hurting communities. The money spent on a new stadium could be spent in other ways, and people who pay to go to games would likely still spend that money on other forms of entertainment and purchases.
Of course, listening to expertise hasn't always been one of the interests of the Trump administration. The president and his cohorts have seemed to be far more interested in serving the interests of industry rather than the interests of people. The communities that Trump has claimed that he cares about would actively be hurt by his proposed changes to the Community Reinvestment Act. But hey, at least those people will be able to live near a stadium that they'll likely never be able to see a game at.