Financially speaking, it’s the biggest unknown in the proposal for a Major League Soccer stadium site at McKalla Place: How much property tax revenue would the city forfeit if the stadium was kept off the tax rolls?
Michael J. Gaudini, a policy advisor with Council Member Leslie Pool’s office, fired up Excel and calculated some reasonable estimates that provide some scale to the debate, with some caveats I’ll explain in a minute.
We know a private appraisal in 2016 valued the land at $29.5 million, and we know Precourt Sports Ventures plans to spend $200 million building the proposed 20,000 seat stadium if the Columbus Crew SC moves here. Using those values, Gaudini estimates such a stadium would pay roughly $5 million in property taxes its first year, if the stadium and the land were both fully taxed.
That bill would include $2.7 million for Austin schools, $1 million for the city of Austin, nearly $850,000 for Travis County, almost $250,000 for Central Health and about $230,000 for Austin Community College. (Gaudini’s spreadsheet has exact dollar figures, but I’m rounding here for ease of discussion.)
Of course that’s just Year 1. Gaudini forecast three scenarios stretching into the next 25 years, rightly recognizing that forecasts become less reliable the further you reach into the future.
Under his first scenario, assuming a 4 percent growth in property taxes each year, the total lost tax revenue over 25 years would be $211 million, including $114 million to Austin schools, $42.5 million to the city of Austin, $35 million to Travis County, $10 million to Central Health and $9.6 million to ACC.
Under his second scenario, assuming a 6 percent growth in property taxes each year, the total lost tax revenue over 25 years would be $278 million, including $150 million to Austin schools, $56 million to the city of Austin, $46 million to Travis County, $13.5 million to Central Health and $12.7 million to ACC.
Under his third scenario, assuming an 8 percent growth in property taxes each year, the total lost tax revenue over 25 years would be $371 million, including $200 million to Austin schools, $74.6 million to the city of Austin, $62 million to Travis County, $18 million to Central Health and $17 million to ACC.
The 6 percent or 8 percent scenarios are the likelier ones, if recent history is any guide.
These forecasts are built on assumptions, including the idea that tax revenues will continue on a steady upward march for the next quarter century, between fluctuations in the tax rate and growth in property values.
One could also debate whether the construction cost of the stadium is the best way to value it for tax purposes. We know that hasn’t been the case at the Circuit of the Americas, which has successfully lowered its tax appraisals by arguing the Formula 1 racetrack is worth only a fraction of what it cost to build.
I asked Gaudini about this, and he acknowledged the Travis Central Appraisal District might look at other indicators to set the value, as the agency did for COTA (the appraisal district, understandably, didn’t want to speculate with me about a proposed stadium’s tax bill). But he found several indications, including this presentation by the Tampa-area tax appraisal office, that construction cost is a fair value to use.
All of this is an academic exercise: Precourt wants a property-tax free deal. That’s not uncommon: FC Dallas and the Houston Dynamo play their MLS games at city-owned stadiums that don’t pay property taxes. With a few exceptions, property tax-free stadiums are baked into the financing for pro sports franchise deals.
Also missing is any sort of comparison to the taxes that other developments might pay if McKalla Place was used for housing or mixed- use projects. Council Member Jimmy Flannigan asked city staff for that very thing at Tuesday’s work session with the hope of better understanding the opportunity costs. The council is set to consider two resolutions Thursday: One launches the city’s negotiations with Precourt for a soccer stadium deal, while the other allows other developers to pitch plans for the site.
Nonprofit-owned affordable housing on city-owned land wouldn’t pay property taxes, though it would help address a critical city need. (Precourt recognizes that and has added an affordable housing component to its stadium plan). However, if a for-profit developer built a mix of apartments, shops and offices at McKalla Place, it likely would pay property taxes.
These comparisons are beside the point for Mayor Steve Adler, however. He said there’s no doubt a mixed-use development on McKalla Place would bring more property tax revenue. But the soccer stadium, he said, would serve a larger community purpose.
“We did the (downtown) library on an incredibly valuable tract,” Adler noted. “I don’t remember an analysis being done about what we would be able to do if we put that to a mixed use development, which would have been an extraordinary value. We didn’t do that because a library was a really important thing for us to have, and now there are thousands of people a day going to the library.”
Of course there’s a difference between a city-owned library and virtually free use of city-owned land by a for-profit venture like Precourt.
But a soccer franchise would bring other community benefits. Weighing them all will be the City Council’s challenge on Thursday.