Skip Navigation

Research & Commentary: Arizona Should Stop Funding Private Sports Facilities with Taxpayer Dollars

April 12, 2018

In this Research & Commentary, Matthew Glans examines legislation in Arizona that would have the state join an interstate compact that explicitly prohibits the “use of taxpayer dollars for private professional sports stadiums and facilities.”

Taxpayers are increasingly being forced to foot the bill for the construction of extravagant sports stadiums in cities across the nation. Professional sports owners, many of whom are billionaires, now rely less on private funding and more on taxpayer subsidies to build and renovate billion-dollar stadiums that only a small percentage of the public can afford to attend.

Several factors account for the massive increase in taxpayer-subsidized stadiums. First, sports teams have become a strong source of civic pride for cities. Public officials often use their town’s strong sports culture as a marketing tool to attract businesses and tourism. Second, professional sports teams now wield greater leverage and often resort to heavy-handed tactics when negotiating with cities and states. This typically results in taxpayers carrying the burden to pay for costly stadiums, which inordinately benefit team owners and politicians – not city and state residents.

Arizona lawmakers are pushing back against this disturbing trend with legislation that would have the state join an interstate compact that explicitly prohibits the “use of taxpayer dollars for private professional sports stadiums and facilities.”

Under the proposed bill, if similar legislation is passed and ratified by 24 other states, the appropriation of government money for “the construction, maintenance, promotion or operation of a professional sports stadium” would be prohibited. The bill specifically includes bans on “direct funding, tax credit, tax exemption, government bond, loan, loan guarantee or any other funding mechanism that comes from state or local government.”

The bill would require 24 other states to agree before most of its provisions become law in Arizona. State Sen. Warren Petersen (R-Gilbert) argues this provision is necessary to ensure non-compact states do not poach Arizona teams with the promise of expensive stadium subsidies. “S.B. 1453 would ban the use of government funding, otherwise known as subsidies, for professional sports stadiums,” Petersen told Budget & Tax News in 2018. “However, this bill would only take effect once 24 other states pass similar legislation. This would prevent many other states from offering sweetheart deals to Arizona teams to entice them to move from the Grand Canyon State.”

Despite the prestige professional sports teams bring to cities, publicly funded stadiums remain a bad deal for taxpayers – even though these projects are receiving more tax dollars today than ever before. The average cost to the public for a new facility has increased dramatically since the year 2000, according to Judith Grant Long, an urban planning expert at Harvard University. In the 1990s, the average tax subsidy given to stadium projects was $142 million, but by 2010, the average subsidy had risen to $241 million, a 70 percent increase. 

The majority of research on the economic effects of stadium construction has found no link between the new facilities and job or income growth, Samuel Staley and Leonard Gilroy note in a Reason Public Policy Institute report. Stanford University economist Roger Noll is even more direct, telling The Economist he has never in modern history found an example of when construction of a football stadium has had a significant positive impact on a local economy.

Stadium subsidies are a poor use of taxpayer money. They rarely realize the benefits their supporters claim, and they often shift tax revenue away from more-pressing needs. Cities and states seeking to improve their economic competitiveness shouldn’t rely on professional sports teams. Instead, they should reduce taxes and invest in more cost-effective improvements, such as new and improved infrastructure.

Legislation banning taxpayer-funded stadiums immediately would be the ideal policy solution, but joining the compact presents a clear message: Taxpayers should not be on the hook to fund the construction of privately held sports facilities. The subsidization of exorbitant sports stadiums – which primarily benefits wealthy team owners, who then reap all the profits – is crony capitalism at its worst.

The following documents provide further information on the economic impact of publicly funded stadiums.
 

The Economic Impact and Civic Pride of Sports Teams and Mega-Events: Do the Public and Professionals Agree?
https://www.heartland.org/publications-resources/publications/the-economic-impact-and-civic-pride-of-sports-teams-and-mega-events-do-the-public-and-professionals-agree
Peter A. Groothuis and Kurt W. Rotthoff survey residents and economists about the alleged benefits—both to a city’s economy and to civic pride—of mega-events and sports teams. The authors’ results find like “economists, the public is skeptical that public funding of mega events is a good idea.”

Sports Stadium Madness: Is Fan Ownership the Answer?
https://www.heartland.org/publications-resources/publications/sports-stadium-madness-is-fan-ownership-the-answer
This Policy Brief from The Heartland Institute questions government subsidies to sports stadiums since the mid-1980s. The author proposes fan ownership of teams as a solution to “sports stadium madness.” 

Sports Stadium Madness: Why It Started, How to Stop It
https://www.heartland.org/publications-resources/publications/no-85-sports-stadium-madness-why-it-started-how-to-stop-it-summary
Taxpayer subsidies to professional sports teams amount to some $500 million a year. The decision to subsidize a team is driven by competition among cities for a limited number of teams, league policies that reward relocation, and lobbying by special-interest groups. The solution is for fans and taxpayers to campaign for nonprofit ownership of teams, a model pioneered by the NFL’s Green Bay Packers in 1923. 

Is There an Economic Rationale for Subsidizing Sports Stadiums?
https://www.heartland.org/publications-resources/publications/is-there-an-economic-rationale-for-subsidizing-sports-stadiums
Robert A. Baade discusses whether subsidizing sports facilities makes economic sense for municipalities. 

Government-Funded Stadiums Not Worth Price of Admission
http://www.cato.org/publications/commentary/governmentfunded-stadiums-not-worth-price-admission
Cato Institute Senior Fellow Doug Bandow examines stadium subsidies and their supposed benefits and concludes city officials across the nation should welcome major league sports teams only if they are willing to pay their own way. 

Why Stadium Subsidies Always Win
http://reason.com/archives/2013/12/21/why-stadium-subsidies-always-w
Nick Gillespie of Reason interviews J.C. Bradbury, the author of several books on baseball and economics, about the economics of publicly subsidized sports stadiums. A video of this interview is available here

Take Me Out of the Ball Game: the Efficacy of Public Subsidies in the Success of Professional Sports Stadiums
https://www.heartland.org/publications-resources/publications/take-me-out-of-the-ball-game-the-efficacy-of-public-subsidies-in-the-success-of-professional-sports-stadiums
This paper weighs the relative advantages of multiple factors that lead to the success of professional sports stadiums in major markets, discussing the arguments for and against public subsidies. The analysis demonstrates public subsidies for stadiums don’t generate sufficient economic returns, and that successful stadiums can be built without using taxpayer funds. 

Sports and the City: How to Curb Professional Sports Teams' Demands for Free Public Stadiums
https://www.heartland.org/publications-resources/publications/sports-and-the-city-how-to-curb-professional-sports-teams-demands-for-free-public-stadiums
Writing in the Rutgers Journal of Law and Public Policy, Marc Edelman argues for a national law that would protect local communities from sports leagues' demands for publicly funded stadiums, by requiring pro-rata revenue sharing according to the share of construction costs paid.

The Stadium Gambit and Local Economic Development
https://www.heartland.org/publications-resources/publications/the-stadium-gambit-and-local-economic-development
Sports franchises frequently use their monopoly power to extract rents from state and local governments. Local officials and their hired consultants tout economic benefits of publicly subsidized stadia, but the consensus of academic economists is that such policies do not raise local incomes. This article describes even more pessimistic results, indicating sports facility subsidies may actually reduce the incomes of the alleged beneficiaries.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website at https://www.heartland.org/publications-resources/newsletters/budget-tax-news and The Heartland Institute’s website at http://www.heartland.org.

Whether sending an expert to your state to testify or brief your caucus, hosting an event in your state, or simply sending you further information on the topic, Heartland can assist you. If you have any questions or comments, contact Heartland Institute Director of Government Relations John Nothdurft at john@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR