The New York Red Bulls recently lost their property tax appeal in New Jersey, and owe the town of Harrison nearly $3 million in back taxes. Like the New York Jets and the New York “Football” Giants, the Red Bulls play their games across the Hudson River in New Jersey.
Although the stadium is owned by the town’s redevelopment agency, the Red Bulls are a private lessee that operate their stadium for their own economic benefit, the New Jersey Superior Court’s Appellate Division held (Red Bull Arena Inc. v. Harrison, N.J., A-1615-12T2 (N.J. Sup. Ct. App. Div. May 12, 2014)). The town’s right under the lease to use the stadium for four civic events per year was not enough to consider the stadium to be used for general public purposes for a property tax exemption.
For anyone out there looking to build or lease a professional sports stadium, this case provides some practical guidance—make sure you seek a property tax exemption from those actually authorized to provide one. The Red Bulls’ lease with the redevelopment agency provided that it was understood that the team’s leasehold interest would not be subject to property tax. However, the town’s tax assessor testified that the parties never consulted with him about an exemption, and that the stadium was never granted an exemption by the town.
Perhaps if the Red Bulls held as much sway as an NFL franchise, they might have convinced the town to provide an exemption. Despite being valued at nearly $1 billion, the Dallas Cowboys' new stadium is not subject to property tax in Tarrant County, according to a 2012 Bloomberg News report. The exemption saves the team approximately $17 million per year.
Then again, not all NFL franchises have it as easy as “America’s Team.” Miami Dolphins owner Stephen Ross has attempted to transfer ownership of the stadium to Miami-Dade County in an effort to save on the $4 million in property taxes the team pays annually, the Miami Herald reports. And while the Giants agreed to a $6 million payment in lieu of property taxes to East Rutherford, New Jersey, each year, the town still sought additional property tax payments of $750,000 in 2012 for the team’s practice facility located on the same grounds as the new MetLife Stadium, notes a Bloomberg Businessweek article.
With a new stadium set to be built in Minnesota, stadium site discussions ongoing in Buffalo, and the ever-present desire of an NFL team in the Los Angeles market, the property tax implications of stadium leases may come into play in other areas in the near future.
Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should MLS, NFL or other sports stadiums be given property tax breaks?
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