Financed the expenditure with special-purpose bonds

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The City of Arlington Texas spent approximately $325 million on the new Dallas Cowboys stadium which opened in 2009. The city financed the expenditure with special-purpose bonds anticipated to cost approximately $21 million per year to service. Assume further that the city will spend $0.5m per year in ongoing infrastructure and maintenance and $0.5m per year in ongoing public good provision. Assume the following: there are 100,000 households in Arlington with an average willingness-to-pay for the Cowboys of $10 per year, the Cowboys share $250,000 per year in naming rights revenue, pay $1 million in rent, the stadium is financed with a half penny sales tax, the level of spending in Arlington before the new tax in place was $3.12 billion, and the city’s portion of the local sales tax before the new stadium tax was 1.5%. Assume a multiplier of 1.25. What level of new spending must be generated by the Dallas Cowboys and other events in the stadium for the city to service the debt and public services incurred for the stadium? Does this expenditure target seem likely? Explain.

Reference no: EM13981544

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