Abstract
This paper addresses the case of Arlington, Texas and its strategy of using a sales tax increase to fund the construction of its sports stadiums. While Arlington exported a large portion of the tax increase to nearby areas—and increased its monthly sales and use tax collections by nearly $1.7 million—the net outcome with respect to economic activity may not justify its use due to relatively large losses in taxable spending within the city. While certain industry sectors may be prime taxation targets due to unique characteristics of a given area, public managers must be aware of the potential to avoid these taxes due to how municipal boundaries are drawn.The financing lessons provided will be applicable to any tax increase implementation for facilities with temporary tenants or any other publicly-funded project, for example the Olympic Games and World Cup.
Notes
1The sales tax increase authorized to repay the bonds for the ballpark and stadium is eliminated once the bonds are repaid. Arlington can continue to collect the sales tax allowed for under state law (1%) for general government operations and services. Separate sales tax increases are permitted by the State of Texas for mass transportation and other services just as a 0.5% increase was allowed for sport facilities, convention centres, and other select cultural amenities.
2Stationarity of this time series was tested using the Phillips- Perron test with the Newey-West estimator, rejecting the presence of a unit root at the 99% level.