Roundup: The Economics of Sports Stadiums

The topic of sports stadiums built with taxpayer money keeps coming up, so I thought I’d compile a list of helpful articles about the economic implications of a city or state building a stadium for professional sports teams.

Following are several excerpts from articles written about the economics of sports stadiums.

For those with short attention spans, I’ll save you some time: publicly-financed stadiums (i.e. more than 95% of them) are incredibly bad deals for taxpayers. Promoters of such deals make fantastical claims about how a billion-dollar stadium will be great for the local economy, but those claims are false. According to Michael Leeds, a sports economist at Temple University, this is probably the only subject on which all economists agree.


Brookings Institute: Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?
“Industry experts estimate that more than $7 billion will be spent on new facilities for professional sports teams before 2006.

Most of this $7 billion will come from public sources. The subsidy starts with the federal government, which allows state and local governments to issue tax-exempt bonds to help finance sports facilities. Tax exemption lowers interest on debt and so reduces the amount that cities and teams must pay for a stadium. …the discounted present value loss in federal taxes for a $225 million stadium is about $70 million, or more than $2 million a year over a useful life of 30 years. Ten facilities built in the 1970s and 1980s, including the Superdome in New Orleans, the Silverdome in Pontiac, the now-obsolete Kingdome in Seattle, and Giants Stadium in the New Jersey Meadowlands, each cause an annual federal tax loss exceeding $1 million.

State and local governments pay even larger subsidies than Washington. Sports facilities now typically cost the host city more than $10 million a year. Perhaps the most successful new baseball stadium, Oriole Park at Camden Yards, costs Maryland residents $14 million a year. Renovations aren’t cheap either: the net cost to local government for refurbishing the Oakland Coliseum for the Raiders was about $70 million.”

 

Forbes Magazine: Publicly Financed Stadiums are a Game that Taxpayers Lose
“The argument is frequently made that all the visitors coming to spend money at and around sports events will produce enough economic impact to pay for the stadium. This argument falls apart when you realize two key points: economic impact is not the same as tax revenue and when evaluating such events you must account for visitors’ budget constraints.”
 
 

University of Illinois: Pro Sports Stadiums Don’t Bolster Local Economies, Scholars Say
“Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy,” Humphreys and Coates wrote in a report issued last month by the Cato Institute.”

 

“Noll said that because football stadiums are used so infrequently – two preseason games, eight regular season games and possibly a couple of playoff games – they do not realize a large economic benefit from those games alone. Realizing this, the San Francisco 49ers’ new Levi’s Stadium, which opened last year, has played host to several other events, including concerts and college football, soccer and hockey games.

“By comparison, other billion dollar facilities – like a major shopping center or large manufacturing plant – will employ many more people and generate substantially more revenue and taxes,” Noll said.”

 
 

“…economists generally oppose subsidizing professional sports stadiums. When surveyed, 86 percent of economists agreed that “local and state governments in the U.S. should eliminate subsidies to professional sports franchises.” Perhaps economists just do not like sports? Actually, many economists love professional sports—including former Federal Reserve Chair Ben Bernanke, an ardent Washington Nationals fan. Rather, it is the provision of taxpayer money in the form of subsidies that economists generally oppose. In a 2017 poll, 83 percent of the economists surveyed agreed that “Providing state and local subsidies to build stadiums for professional sports teams is likely to cost the relevant taxpayers more than any local economic benefits that are generated.”


 

“Judith Grant Long, a Harvard University professor of urban planning, calculates that league-wide, 70 percent of the capital cost of NFL stadiums has been provided by taxpayers, not NFL owners. Many cities, counties, and states also pay the stadiums’ ongoing costs, by providing power, sewer services, other infrastructure, and stadium improvements. When ongoing costs are added, Long’s research finds, the Buffalo Bills, Cincinnati Bengals, Cleveland Browns, Houston Texans, Indianapolis Colts, Jacksonville Jaguars, Kansas City Chiefs, New Orleans Saints, San Diego Chargers, St. Louis Rams, Tampa Bay Buccaneers, and Tennessee Titans have turned a profit on stadium subsidies alone—receiving more money from the public than they needed to build their facilities. Long’s estimates show that just three NFL franchises—the New England Patriots, New York Giants, and New York Jets—have paid three-quarters or more of their stadium capital costs.

Many NFL teams have also cut sweetheart deals to avoid taxes. The futuristic new field where the Dallas Cowboys play, with its 80,000 seats, go-go dancers on upper decks, and built-in nightclubs, has been appraised at nearly $1 billion. At the basic property-tax rate of Arlington, Texas, where the stadium is located, Cowboys owner Jerry Jones would owe at least $6 million a year in property taxes. Instead he receives no property-tax bill, so Tarrant County taxes the property of average people more than it otherwise would.

“…extremely profitable and one of the most subsidized organizations in American history, the NFL also enjoys tax-exempt status.”

 
 

“For instance, just three of the NFL’s 31 stadiums were originally built without public funds. In two of those cases, public funding was later used to upgrade the stadium or surrounding facilities, even as all 32 of the NFL’s teams ranked among Forbes’ 50 most valuable sporting franchises in the world in 2012. (Only MetLife Stadium, shared by the New York Jets and New York Giants, received no public funding.)”

 
 

USA Today Raiders Wire: 3 former NFL cities still have $220M in debt on old stadiums

The NFL has not only left three cities behind in the past 15 months, but it has also left about $220 million in debt for those cities to pay off on the table, according to USA TODAY’s Brent Schrotenboer. Among the cities impacted will be Oakland, St. Louis and San Diego.

When the Oakland Raiders returned to the East Bay in 1995, the city paid for renovations and the addition of “Mount Davis” to the Oakland-Alameda County Coliseum. Those improvements have already cost the city $110 million, with close to $90 million still left to pay off over the next decade.

Shortly after the Raiders’ return to Oakland, the Coliseum had quickly become the worst revenue-draining facility in the NFL. Despite the enormous debt they will leave behind, the Raiders will move on to Las Vegas to enjoy their new $1.9 billion digs opening in 2020.

 
 

…attracting a team would probably mean piling a burden on local taxpayers to enrich owners who are already wealthy. Local taxpayers would have been on the hook for $350 million in debt to finance the new arena, on top of the $322 million left to be paid on the current convention center. And taxpayers elsewhere would have been effectively sharing the load, because the bonds used to get the money would have been exempt from federal taxes.

Bloomberg Business reported in 2012, “Over the life of the $17 billion of exempt debt issued to build stadiums since 1986, the last of which matures in 2047, taxpayer subsidies to bondholders will total $4 billion.”

 
 
There are a lot of things economists disagree about, but the economic impact of sports stadiums isn’t one of them. “If you ever had a consensus in economics, this would be it,” says Michael Leeds, a sports economist at Temple University. “There is no impact.”

 
 

The McKinney Independent School District (ISD) stadium, which broke ground in January, topped out its budget at some $80 million (with $7 million recently added to the tally as a result of a spike in the price of concrete). That will make it likely the most expensive nonacademic public school facility ever to be built in the United States.
But McKinney is just the latest entry into what has become a veritable stadium arms race among the fast-growth towns along or near the Route 75 corridor that runs north out of Dallas.

 

 
Do you know of other good resources on the topic? If so, share them in a comment!

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