Tax provision means Steelers can avoid up to $25M in rent payment
By Jeremy Boren
Published: Saturday, Dec. 1, 2012, 12:01 a.m.
The Pittsburgh Steelers are getting a big-league break on the rent at Heinz Field.
As the team fights in court for more public money to add seats to the North Shore stadium, a state report released on Friday shows its owners cashing in on tax credits that allow them to avoid a rent payment of up to $25 million if the team hits tax revenue benchmarks.
“They have exceeded expectations on their tax revenue receipts and therefore we would not anticipate a payment by the team,” said Jay Pagni, spokesman for the state Budget Office, which prepared the report. “In this instance, for the 10-year startup period for Heinz Field, it was a success.”
The 30-year lease on the stadium, which opened in 2001 and is owned by the taxpayer-funded Sports & Exhibition Authority, called for $25 million payments every 10 years if tickets, payroll and other sales failed to increase annual tax revenue significantly from a baseline set in the late 1990s. A 1999 state law requires the Budget Office to examine team tax receipts and apply a multiplier to determine if those receipts exceed $25 million.
The review absolves the team of making a rent payment on top of the 5 percent ticket surcharge and 15 percent tax it pays to the SEA on revenue from non-sporting events at the stadium.
The Steelers say taxes generated by events have more than repaid the public investment on the $281 million stadium. Critics contend the 1999 law made it too easy to avoid the rent payment, and that there's no need for the public to pay for most of a proposed 3,000-seat expansion because the team is so successful.
“Anything that improves their position, they're going to do,” said Merrill Stabile, president of Alco Parking Corp. and a vocal opponent of the Steelers' plans to use ticket and parking surcharges to pay for the expansion.
“They said they've generated so much money and this stadium has already paid for itself, but there's a lot of businesses like that in the city when you add up everything they've done over a 10- or 20-year period,” Stabile said. “Since my company has been around, we've paid probably a half-billion in parking taxes, and I don't see anyone building anything for me.”
In October, the Steelers' negotiations with the SEA broke down over who would pay for the roughly $40 million expansion.
Steelers President Art Rooney II said then that Heinz Field produced more than $100 million in tax money paid to state and local governments.
“It is on track to more than pay for the public money that was invested in the project,” Rooney said.
Financial success has not eluded the Steelers.
The team has sold out every home game since its third game at the former Three Rivers Stadium in 1972, including all 93 played at Heinz Field, where the team has a winning record of 69-23-1. Fans wait more than a decade on the season-ticket waiting list.
Forbes Magazine estimated the team's value this year at $1.1 billion, 14th among National Football League franchises.
Team officials insist there's room for improvement, and they want taxpayers to help.
The team announced on Oct. 31 its intention to sue the SEA for refusing to contribute nearly $29 million toward the expansion and an upgrade of Heinz Field.
Both sides predict a protracted court battle over whether the stadium lease requires the SEA to contribute two-thirds of the cost of the expansion, which would include a new scoreboard, concession stands and a control room upgrade.
Politicians are reticent to discuss the expansion or the tax credits because of the potential lawsuit.
Allegheny County Executive Rich Fitzgerald declined to comment. Senate Minority Leader Jay Costa, D-Forest Hills, and House Majority Leader Mike Turzai, R-Bradford Woods, did not return calls.
Pittsburgh Mayor Luke Ravenstahl has said he supports the expansion and wants to find a way for the public to subsidize at least some of it. A spokeswoman said he was not available to discuss the tax credits.
The credits were part of the publicly subsidized package to build the stadium, which included a $75 million grant from the state Redevelopment Assistance Capital Program. The program's goal is to support projects that encourage economic and job growth.
The Pittsburgh Pirates claimed a similar tax credit in May, allowing the baseball team to avoid paying up to $25 million on PNC Park, which opened in April 2001.
State officials examined Steelers financial records and compared them with state Department of Revenue tax receipts. Under the 1999 law, the Steelers must generate average annual tax revenue that exceeds $25 million when multiplied by 7.5. Any overage is applied to the second 10-year period, which requires the team to exceed the threshold after multiplying average tax revenues by 10.
Pagni declined to release the baseline state officials used from the average of taxes paid in 1996, 1997 and 1998.
“That seems to be the outrageous multiplier,” said Robert Baade, an economics professor at Lake Forest College in Illinois who co-authored numerous articles about the economic impact of professional sports and sporting events. “I've seen all kinds of shenanigans with how to play with these numbers, but not quite like that. It's pretty egregious when you get into multiples that size.”
In effect, the larger the multiplier, the lower the threshold, Baade said.
Pagni said he does not know the origin of the 7.5 multiplier.
The prime state Senate sponsors of the 1999 legislation were Robert Jubelirer, Robert Mellow and Joseph Loeper. None is still in office.
Mellow was sentenced on Friday to federal prison; Loeper served 20 months in prison in 2002 and 2003 for obstructing a tax investigation and became a lobbyist; and Jubelirer lost his re-election bid because of voter outrage over the legislative pay raise in 2006.
Allegheny County Judge Don Walko, who as a state representative was a sponsor of the legislation, said he could not recall the reason for the 7.5 multiplier.
Pagni said tax confidentiality laws prohibit state officials from disclosing how much the Steelers paid in taxes on corporate net income, capital stock and franchise, personal income, beer and liquor.
The Steelers could release those figures but did not respond to a Trib request.
Jeremy Boren is a staff writer for Trib Total Media. He can be reached at 412-320-7935 or email@example.com.
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