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Research & Commentary: New Virginia Bill Would End Taxpayer Funding for Pro Sports Facilities

January 18, 2018

In this Research & Commentary, Matthew Glans examines a proposal in Virginia that would prohibit the use of taxpayer money by professional sports teams to fund a new stadium.

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. Nearly all new sports facilities in operation today were built using government subsidies. In Virginia, a new bill has been introduced that would buck this trend by prohibiting the use of taxpayer money to fund a new stadium.

While not mentioning the team by name, the bill was likely introduced to push back against efforts to attract the Washington Redskins professional football team to the state. Some analysts expect them to leave their current home in Landover, Maryland within the next decade. Virginia Gov. Terry McAuliffe (D) has been one of the most vocal advocates of the Redskins moving to Virginia.

The new bill, sponsored by state Del. Michael Webert (R-Marshall), would prohibit the state and any of its political subdivisions from spending public funds to provide incentives for professional sports teams, beginning January 1, 2019. In addition to new stadium construction or renovation, the bill would also prohibit public funding for infrastructure improvements. (Many communities and counties have spent millions of dollars on water and sewer lines and roads near sports facilities.)

Current agreements between teams and local governments in Virginia would be grandfathered into the law, and those cities and counties already contributing to infrastructure would be permitted to continue to do so only if fee from the team is collected. There is some uncertainty over whether the bill would affect major professional sports teams only or all teams, but this will likely be clarified as the bill moves further through the legislative process.

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. 

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 money. They rarely realize the benefits their supporters claim, and they often shift tax revenue away from more-pressing needs.

The proposal in Virginia is a strong rebuke of corporate welfare and could provide a model for other states to follow. 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, such as 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://www.heartland.org/policy-documents/economic-impact-and-civic-pride-sports-teams-and-mega-events-do-public-and-professi
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
http://news.heartland.org/newspaper-article/2016/06/01/nevada-lawmakers-consider-wooing-sports-team-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?
http://heartland.org/policy-documents/sports-stadium-madness-fan-ownership-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
http://heartland.org/policy-documents/no-85-sports-stadium-madness-why-it-started-how-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
http://heartland.org/policy-documents/sports-and-city-how-curb-professional-sports-teams-demands-free-public-stadiums-0
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
http://heartland.org/policy-documents/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