Earlier this month, OpportunityDb highlighted 15 National Football League stadiums that are in Opportunity Zones. While the Opportunity Zone program is meant to spur long-term investment in economically distressed areas, these NFL franchises could be eligible for capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. Capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. breaks on stadium-related investments.
Here are a few examples (you can read the entire article here):
- Baltimore Ravens (M&T Bank Stadium in Baltimore, MD) M&T Bank Stadium is an eligible candidate for improvements. In fact, some improvements are already underway. Construction of a new escalator and elevator system is part of a $120 million renovation that may be completed by the start of the 2019 season. Renovations to club level concessions and an upgrade of the stadium’s sound system are already underway as well.
- Las Vegas Raiders (Las Vegas Stadium in Paradise, NV) The new Las Vegas Stadium is a $1.8 billion project that is expected to open in time for the 2020 NFL season. The new construction sits in an opportunity zone tract, potentially making certain investments in the project eligible for Opportunity Zones taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. breaks if the developers decide to structure funding under a Qualified Opportunity Zone fund.
- Denver Broncos (Broncos Stadium at Mile High in Denver, CO) Broncos Stadium opened in 2001. There are plans to tear up the parking lots to the south of the stadium to make way for a new entertainment district. So while there are no announced plans to improve the stadium itself, the adjacent district development may very well benefit from the new Opportunity Zones program.
The OpportunityDb article demonstrates that the program’s requirement that investments must “substantially improve” zone property in order to qualify for tax breaks is quite loose. For instance, while an investment may substantially improve the value of zone property, that does not mean the investment will aid zone residents. It’s unlikely, for example, that any tax break given for a new escalator at M&T Bank Stadium will significantly improve the economically distressed communities in Baltimore.
Ultimately, though, the Opportunity Zone program could be written and implemented perfectly, and it would still be unlikely to help economically distressed communities. Evidence suggests other place-based incentive programs fail to create new economic opportunity because they are structured in a way that encourages firms to cross borders for tax breaks. Even worse, place-based incentive programs could actually displace zone residents if the roles brought into a zone aren’t a good fit for residents.
It’s possible that this program could be different, and opportunity zones could be successful. But decades of experience with place-based incentive programs suggests we should be skeptical. For this reason, future rounds of regulation should focus on gathering the data we’ll need to make this determination.
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