In recent years, the trend in stadium financing has moved away from private funding and toward a focus on taxpayer subsidies for new stadium construction or renovation. In fact, nearly all new sports facilities in operation today were built using government subsidies.
A new bill being considered in Florida would push back against this trend by banning Florida sports franchises from constructing or renovating facilities on leased public land. The legislation would ban sports franchises from constructing, reconstructing, renovating, or improving facilities on leased public land, in addition to requiring any leases or sales of facilities on public land to be sold or leased at fair market value.
The increase in the number taxpayer-subsidized stadiums came about for several reasons. First, sports teams have become a strong source of civic pride for cities. Leaders often use their city’s strong sports culture as a tool to market a city to new businesses. Further, in the past few decades, professional sports teams have gained a great deal of bargaining power when negotiating with cities and states. Sports team relocation is relatively easy to accomplish today; it was once considered expensive and risky. Cities are now forced to compete for new and relocating franchise by enticing teams with tax breaks and stadium funding.
Despite the prestige professional sports brings to cities, publically funded stadiums remain a bad deal for taxpayers, and these projects are now receiving more tax dollars than ever before. In her book on sports stadium financing, Public/Private Partnerships for Major League Sports Facilities, Judith Grant Long, an urban planning expert at Harvard University, notes the average public cost for a new facility has increased dramatically since the year 2000. In the 1990s the average tax subsidy given to stadium projects was $142 million, but by 2010 the average public cost had risen to $241 million, a 70 percent increase.
Long also points out, as noted in Bloomberg, the tax subsidies may be even higher than reported, as economists underestimate costs associated with stadium projects, such as infrastructure improvements, capital improvements, municipal services like police security, and lost property taxes. Taking these added hidden costs into account, Long estimates the average taxpayer subsidy for sports facilities could increase by 25 percent, raising the 2010 average cost to $259 million per facility.
Supporters of providing taxpayer funding for stadiums have long claimed the new facilities act as engines of economic development, but several economic studies have found their influence is limited. In a Reason Public Policy Institute report, Samuel Staley and Leonard Gilroy note the majority of research on the economic effects of stadium construction has found no link between the new facilities and job or income growth. Roger Noll, an economist who studies sports-stadium subsidies at Stanford University 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 dollars. They rarely realize the benefits their supporters claim and shift tax revenue away from where it is better utilized. While the proposed law in Florida does not ban the use of taxpayer dollars for private stadiums, it does slow it.
Cities and states seeking to improve their economic competitiveness shouldn’t rely on professional sports teams. Instead, they should reduce their taxes and/or invest in more cost-effective improvements, like new and improved infrastructure.
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://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.”
Nevada Lawmakers Consider Wooing Sports Team with Taxpayer Subsidies
https://heartland.org/news-opinion/news/nevada-lawmakers-consider-wooing-sports-team-with-taxpayer-subsidies
Michael Bates writes in Budget & Tax News about recent efforts made by the Oakland Raiders to relocate to Las Vegas to play in a new taxpayer-funded stadium.
Sports Stadium Madness: Is Fan Ownership the Answer?
https://heartland.org/publications-resources/publications/sports-stadium-madness-is-fan-ownership-the-answer
In this Policy Brief from The Heartland Institute, a free-market think tank whose researchers have questioned 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://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?
http://heartland.org/policy-documents/there-economic-rationale-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 publically 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
http://heartland.org/policy-documents/take-me-out-ball-game-efficacy-public-subsidies-success-professional-sports-stadium
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://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://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://heartland.org/publications-resources/newsletters/budget-tax-news and The Heartland Institute’s website at http://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 [email protected] or 312/377-4000.
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
