A wave of pro sports teams seeking new homes will more than double the number of stadiums being built over the next three years, adding new risks for local governments backing them, a bond rating agency said Tuesday.
Local governments shoulder significant risks if they issue bonds to help bankroll stadium projects that are typically “highly leveraged,” Moody’s Investors Service said in a report. The stadiums could later be abandoned by the team, or they may not generate as much tax or other revenue as expected, the bond-rating firm said.
“This can weaken a government’s credit quality, owing to the reliance on the potentially volatile revenue streams, as well as budgetary strain due to higher debt and uncertainty about future government costs related to the stadium,” said Alex Cimmiyotti, Moody’s Vice President – Senior Analyst.
Metro Atlanta is among areas where governments are helping to finance stadiums. Such financing typically comes not from general tax revenue but rather involves issuing publicly-backed bonds to be repaid from certain revenue streams.
Monday, Atlanta Mayor Kasim Reed said the city may help finance up to $150 million of a renovation of Philips Arena to keep the Atlanta Hawks downtown. The project could cost up to $300 million, he said. Meanwhile, Atlanta has committed $200 million in bond financing for the Falcons’ new $1.4 billion home, Mercedes-Benz Stadium.
Cobb County used a $376 million taxpayer-backed bond issue to lure the Atlanta Braves from Turner Field to the new SunTrust Park under construction. Officials in both Atlanta and Cobb say the backing will pay off by generating economic activity and making the region more attractive to businesses and visitors.
Elsewhere, projects on the drawing board include a $1.8 billion stadium for the NFL Rams in a Los Angeles suburb and new soccer venues for pro teams in Orlando and New York. All told more than a dozen projects are planned or underway across the nation, Moody’s said.
Government risk is “greatly diminished” when team owners or other investors fully fund projects, Moody’s said, but most are backed by a combination of public and private money.
Moody’s noted that governments cite jobs, tax revenue and economic activity as reasons to help build stadiums. But such benefits have limited impact on large cities, the agency said.
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