Coronavirus could leave Arlington residents on the hook for Rangers’ Globe Life Field
Arlington’s Globe Life Field — the indoor-optional baseball stadium the Rangers wanted because the old one was too hot — was primarily supposed to be paid for by visitors to the city. In 2016, residents voted overwhelmingly for Arlington to cover $500 million of the $1.2 billion cost and to repay the bonds over 30 years by extending a half-cent sales tax, a 2% hotel occupancy tax and a 5% car rental tax, as well as charging the Rangers $2 million annually in rent. Mayor Jeff Williams said the share paid for by residents would be no more than 25%. In a project overview for the stadium, the city noted that “venue taxes are largely tourism based taxes; our visitors pay for a large share of the venues they come to visit.”
Those assurances were made in the pre-pandemic era. Four years later, with Globe Life Field completed on time but sitting unused, Arlington is reeling from an economy nearly devoid of the tourism that was supposed to cover its share of the stadium, a development that may lead to a longer payoff strategy than the city used on previous stadiums and residents paying a higher proportion of the cost than predicted before the coronavirus.
“Just like with any other type of investment that occurs there’s going to be peaks and valleys of how this is going,” said Arlington city manager Trey Yelverton. “We expected times of the hotel and sales tax being really strong and times when it would be less. Clearly this would be less than anything we really anticipated.”
Before COVID-19 weakened the economy, revenues from the half-cent sales tax had grown steadily to $34 million in 2019, from $22 million in 2006. Annual hotel tax revenue had increased in the same time frame to $2.7 million, from $1.3 million. The rental car tax brought in about $900,000 the last two years. Those taxes have been used for more than a dozen years to pay for the Cowboys’ AT&T Stadium.
These stadium payments are similar to mortgages. The sooner Arlington can pay off the bonds, the less interest is accrued and the lower the cost. For a city that has been criticized for brokering deals that are too preferential to the Cowboys and Rangers, Arlington has done well in mitigating the stadium costs it has assumed. It paid off its share of the Rangers’ last home, Globe Life Park, 10 years ahead of the payment plan agreed to by residents. AT&T Stadium was set to be paid off in the next couple years, ahead of the 2034 plan, Yelverton said, until the payments were folded into the new payments for Globe Life Field.
But just like with an average mortgage holder, things get complicated if revenue streams dry up and payments take up a larger portion of a declining income. And, needless to say, coronavirus has made things complicated for Arlington. Per-room hotel revenues are expected to fall by nearly 50% nationwide this year and are not expected to recover to 2019 rates until 2023, according to CBRE Hotels Research. Arlington’s entertainment district, highlighted by Six Flags and Texas Live!, is mostly shuttered. In the first half of fiscal year 2020, from October of last year through April this year, the city made about $22 million on the three tax revenue streams. It expects to make $11 million for the second half. But the amount the city owes, about $30 million per year over the next few years, has not changed.
The worst-case scenario for the city, defaulting on the bond payments because of widespread economic distress, is unlikely in the near-term: Arlington has about $50 million in a fund that can only be used to pay off the debt, according to Yelverton. That’s almost enough to cover about two years of payments, absent any new revenues. “We can make all the payments,” he said, noting Arlington’s AA+ bond rating. “The question is do we pre-pay faster or pre-pay slower?”
But even “the realistic scenario is pretty bad,” said Victor Matheson, a Holy Cross University professor who studies the economics of stadiums. This scenario involves Arlington having to depend on the sales tax revenue, which is also going to be down, to make up for the loss in hotel and rental car taxes and to potentially have to draw from other sources of revenue. Or it could delay payments or pay off the debt slower and wait for revenues to recover. But the interest costs would increase, and the taxes would remain in place longer than if there were a faster repayment plan.
Yelverton said to think of the way the Arlington payments might shift like this: If all the revenues that paid for the stadium needed to equal $10, one way of paying it from four sources could be $7 from the sales tax and $1 each from hotels, rental cars and the Rangers’ rent.
“The same thing that equals 10 is eight, zero, one, one,” he said, referring to sales tax for the eight. “It doesn’t matter if one of the sources is higher or lower as long as it all equals 10. Part of the debt may be paid more by sales tax — that’s just a function of how the revenues come in.”
The Star-Telegram pointed out that a hypothetical scenario of $8 instead of $7 in sales taxes would mean a higher burden for residents, who pay a large share of sales taxes, unlike hotel taxes. Yelverton said he disagrees “in the sense that the taxpayers are providing exactly what they have authorized. They have authorized the half penny (sales tax), the 2% (hotel tax) and 5% (rental car tax).”
If Arlington’s tourism doesn’t recover in the coming years, the city can pay for the stadium using revenues besides the sales, hotel and rental car taxes. Susan Schrock, communications coordinator for the city, said Arlington has no intention of using other revenue sources.
The requirement that revenues from the half-cent sales tax are used solely to pay back stadium bonds may also create controversy, as city services and salaries are under threat. To mitigate its $18 million shortfall, Arlington announced plans to suspend city employee raises, freeze hirings and delay the police and fire academies, which could lead to fewer workers on the police force. The city is also considering furloughs. “Will there be cries to use that extra half cent” for city services, asked Rick Eckstein, a sociology professor at Villanova University and the author of “Public Dollars, Private Stadiums: The Battle Over Building Sports Stadiums.”
Andy Prior, a stadium opponent in 2016 and former Arlington City council Candidate, said Arlington residents “already are” paying more for the stadium than promised, noting the lack of tourism, as well as his belief that the people who use hotels in the near-term may be residents seeking to quarantine away from family members they don’t want to get sick. Local attorney Jim Runzheimer called Arlington’s economic turmoil “a matter of great concern.”
“And it does go back to the original issue in this case: whether a municipal government should take on risk that really should only be borne by the private sector because it’s a private sector activity primarily,” he said.
There is one way the coronavirus economy may lead to residents of Arlington paying less for the stadium. In what was a controversial portion of the stadium financing plan, Arlington allows the Rangers to levy a surcharge on tickets and parking, which equals an estimated $10 million annually, and to use it to repay a portion of their debt. But the proposal for Major League Baseball’s return involves empty stadiums. That means for at least this year the Rangers will not be able to count on fans to pay off the stadium for them.
This story was originally published May 14, 2020 at 6:00 AM.
