The football stadium discussion so far has regularly omitted details about the fact that Metro’s local option sales tax will be pledged to support Sports Authority revenue bonds to renovate or rebuild the football stadium. I have been asked if I am sure Metro sales tax dollars will be pledged to support stadium revenue bonds. Yes, I’m sure. State law passed in 2021 is clear on this.

I want to be say first that, at this point, I don’t express an opinion one way or another about whether this use of Metro’s local option sales tax is a good idea or not (because we don’t know hardly any of the deal terms yet). But it should be part of the discussion.

The details are…

Under Tennessee law, there is a Local Option Revenue Act which governs how much sales tax local municipalities can get under state law. If you want to read it, you can find the Local Option Revenue Act at Tennessee Code Annotated, at Sections 67-6-701 through 716. On May 11, 2021, Governor Lee signed Public Chapter 401, which amended Section 712(c)(1) of the Local Option Revenue Act.

After being amended in 2021, section 712(c)(1) has two parts. Part (A) remained unchanged. That part requires certain local sales tax revenue to be set aside to help pay for baseball, basketball, soccer, and hockey stadiums. Football isn’t on this list. Again, part (A) stayed the same.

Part (B) was added to section 712(c)(1). This part related to pro football stadiums and there are two sub-parts.

In subpart (B)(i), the new law requires that the Sports Authority will receive ALL of the Metro local option sales tax collected for ticket sales, food and drink sales in the facility, parking, “related services,” and franchise goods (think jerseys, hats, t-shirts, etc.). The authorized uses of this stadium local sales tax redirect are:

1. to fund capital projects and

2. for the payment of debt service for capital projects at the sports facility of the major league professional football franchise, associated with the sports facility of the major league professional football franchise.

In subpart (B)(ii), the new law requires that the Sports Authority will receive 50% of the Metro local option sales tax “derived from all sales in a designated area not exceeding one hundred thirty (130) acres contiguous to the sports facility and surrounding parking area of the major league professional football franchise…” (NOTE: 130 acres is a large area…we can expect the 130 acres to include hotels, bars, and restaurants.) The authorized uses of this 130 acre local sales tax redirect are to:

1. to fund capital projects and

2. for the payment of debt service for capital projects at the sports facility of the major league professional football franchise, associated with the sports facility of the major league professional football franchise OR

3. for any onsite or offsite infrastructure necessary for the operation of the sports facility of the major league professional football franchise.

The takeaway is that any renovation or stadium rebuild will include Sports Authority revenue bonds. All of Metro’s local option sales tax from inside the stadium will be pledged in support of the revenue bonds. In addition to this, 50% of Metro’s local option sales tax from 130 acres outside the stadium and parking areas also will be pledged in support of the revenue bonds.

The same rules will apply to the state’s portion of its own sales tax collections; that has been regularly reported on in the media. The purpose of this post is to bring to the forefront that these Metro’s local option sales tax revenues will be committed to support stadium revenue bonds. Again, at this point, I don’t express an opinion one way or another about whether this is a good idea (because we don’t know all of the deal terms yet). But it should be part of the discussion.

My last point is that the Mayor’s office could be, and should be, more clear about this. Check out this sentence from last week’s op-ed:

“I will not sell public land, RAISE the sales tax, or SPEND your property tax dollars to fund the stadium.“ (I added the emphasis.)

It would have been a much cleaner sentence to say “I will not…SPEND sales tax or property tax dollars to fund the stadium.” But under the state law described here, that would have been false. Full transparency requires Metro to acknowledge that Metro’s sales tax revenue from the stadium and half of Metro’s sales tax revenue from the surrounding 130 acres will be pledged to support the stadium revenue bonds.

Thanks for listening, folks.

- Bob