Arlington

Arlington officials call taxes on new Rangers ballpark a smart deal

Two little-known taxes that could help fund a proposed $1 billion retractable-roof stadium for the Texas Rangers are drawing fire from critics, who say they would unfairly relieve a chunk of the team’s half of construction debt at the expense of taxpayers.

But city officials argue that the taxes — a 10 percent tax on tickets and a $3 parking tax — work like user fees and would have minimal effect on taxpayers, because a large share of game-day audiences come from outside Arlington.

It’s not the first time the city has used the taxes. They were part of the public-private deal, inked a decade ago, that built the $1.2 billion AT&T Stadium for the Cowboys — an arrangement city officials have called a great success.

While state law allows the taxes to be used to fund the city’s portion of construction costs, Mayor Jeff Williams said that because the teams are responsible for operating and maintaining the stadiums, they deserve the extra tax support.

“The city doesn’t want to be losing money trying to operate and maintain a facility,” Williams said in an interview. “We tried to do an agreement that was similar to the Cowboys’ that has worked very well. It’s a great formula.”

In August, the City Council is expected to call a Nov. 8 election on redirecting a half-cent sales tax, along with hotel-motel taxes and car rental taxes, to begin paying on the city’s $500 million share of the stadium construction cost.

In August, the City Council is expected to call a Nov. 8 election on redirecting a half-cent sales tax, along with hotel-motel taxes and car rental taxes, to begin paying on the city’s $500 million share of the stadium construction cost. The sales tax is now used to fund AT&T Stadium debt, which the city is looking to pay off early — as it did on the Rangers’ current home, Globe Life Park.

The ticket and parking taxes were first reported in the Star-Telegram when the ballpark deal was announced last month. But they came under scrutiny last week after WFAA-TV Channel 8 reported that the Rangers would derive a $300 million benefit from them and, in effect, shift a 50-50 share of the construction costs to a lopsided 80-20 ratio, with the taxpayers on the losing end.

Although the WFAA report didn’t detail how that $300 million figure was reached, city officials played ball with it. They estimated that after accounting for interest, fees and other bond costs, the Rangers would benefit from $120 million in actual bond funding.

But they said they couldn’t completely nail down that figure, since they still don’t know the average ticket price, number of seats and parking spaces at the new ballpark.

The Rangers haven’t even asked yet for the taxes to be placed on the ballot, officials point out.

If used, the city would sell a separate set of bonds tied to the ticket and parking taxes, which would be paid down over 30 years. Since the team retains all parking and ticket revenue, the taxes are built into the ticket prices and parking fees. The arrangement enables the team to access municipal financing for a portion of its stadium costs, which generally brings lower interest rates, City Treasurer Ethan Klos said in an email.

Rangers will cover cost overruns

Arlington spokeswoman Susan Schrock emphasized that the bond debt tied to the ticket and parking taxes would be the sole responsibility of the Rangers and would not affect the 50-50 cost split with the city.

But Arlington attorney Warren Norred, a member of the opposition group Save Our Stadium, insists there are consequences for selling bonds for the Rangers.

“Putting the city at risk with these bonds impacts our ability to borrow money in the future, in the same way that co-signing on a note for a niece will impact my ability to buy a house next year,” Norred said. “My interest rates will be higher and the maximum amount I can borrow will be lower.”

The admission/parking taxes, which would be collected until the bonds are paid off, would be among several funding sources the Rangers have marshaled, including private loans, cash/equity and revenue from stadium builder licenses, also known as a seat licenses for season ticket holders. The city’s half would be funded by the half-cent sales tax, 2 percent hotel occupancy tax, 5 percent car rental tax and a $2 million annual rent.

Putting the city at risk with these bonds impacts our ability to borrow money in the future, in the same way that cosigning on a note for a niece will impact my ability to buy a house next year.

Warren Norred of Save Our Stadium

The Rangers have committed to cover any cost overruns, according to the agreement. They expect to be playing in their new weatherproof stadium by 2021, three years before the lease on Globe Life Park expires in 2024.

Keeping Rangers is ‘critical’

At AT&T Stadium, the admission/parking taxes are funding $148 million in bonds on a 30-year note. Since the stadium opened in 2009, the tax levy has generated about $119 million to pay principal and interest of the financing.

In 2014, Fort Worth voters approved the use of admission and parking taxes for the city’s planned $450 million 14,000-seat multipurpose arena. But in that case, the city would use the tax revenue to help pay on its own $225 million commitment. (The law specifically allows Fort Worth to charge a $5 parking tax.)

Keeping the Texas Rangers in Arlington is critical to our community.

Mayor Jeff Williams

Arlington city officials say they are comfortable with current protections in the master agreement, including its cap on the city’s debt obligation at $500 million.

And if admission/parking tax collections at any time fall short of a bond payment, the Rangers would cover the gap by adding to their rent payment. Such a situation occurred early in the Cowboys bond payment schedule, when a bump in rent covered a shortfall in the taxes.

“Keeping the Texas Rangers in Arlington is critical to our community,” Williams said, citing the greater-than-expected increase in sales taxes and other benefits of both the Globe Life Park and AT&T Stadium deals. “Our sales taxes grew so much that both are going to be paid off 10 years early. You don’t have to talk about projections — that is irrefutable.”

This report includes material from the Star-Telegram archives.

Robert Cadwallader: 817-390-7641, @Kaddmann

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