The Problems of Sports Stadiums

By Peter Starr

Sports stadiums designed specifically for events like The Olympics or The World Cup have significant social repercussions on the communities that they are built around. World class stadiums built for single events are perhaps one of the most harmful institutions that can possibly be introduced into an impoverished area, especially in countries like Brazil or Kuwait.

Additionally, these stadiums typically involve treacherous labor in which natives are subjected to extreme work conditions. While they work in these conditions, they are essentially slaves to the company “employing” them, and often become injured or even killed because of the labor they are subject to. Stadiums are also a problem in urban areas across the United States as they almost always gentrify poor areas, in turn causing mass displacement problems for former inhabitants. Nationally and internationally, stadiums harm innocent individuals, cost immense amounts of tax payer’s money, and ultimately lead to the severe mistreatment of foreign peoples.

Public subsidies perpetuate a vicious cycle of extortion in which team owners can threaten to relocate their teams in order to extract greater subsidies from local politicians who operate under the flawed assumption that stadiums are beneficial. Jonah C. Chodosh of Claremont Mckenna University explains the circular nature of subsidies, ““Leagues and teams receive governmental legislative and financial support to segment the market, and drive up prices. By achieving this scarcity, professional sports are apt to receive further subsidies, tax exemptions, and fan interest.” Peter Callaghan of The News Tribune furthers that “each new deal negotiated at gunpoint creates the new high-water mark that the next city in line will have to meet in order to keep its team in town or at least keep it “competitive.” Bast explains that buying into the flawed logic of teams’ claiming they need more subsidization results in a world in which “There is no limit to the amount of money that can be demanded using this logic, with each team owner ratcheting up his or her demands in round-robin fashion without end.”

The impact of this is clear: communities are perpetually forced to subsidize the building of new harmful stadiums with the old stadiums still left standing. Bast explains, “No social value is produced when facilities that are still functional are torn down on the grounds that they are “economically obsolete.” Expensive investments in infrastructure are similarly being abandoned, only to be built anew across town or in some other city. This is not “economic development.”

It is make-work: no different in principle from digging and re-filling ditches.”  Joanna Cagan of the New York Times quantifies that “[A]t any given time one quarter of major league teams is playing in a new building, one quarter is awaiting the construction of one, [and the] other quarter is lobbying to get one built – and a final quarter is waiting in the wings for its turn at the plate.” Judith Grant Long quantifies that “the price of sports facilities could increase by 25 percent raising the average cost to $259 million per facility” as a result of bidding wars.

Sports leagues across the nation classify themselves as non-profit organizations to avoid having to pay taxes through a legal loophole, which then in turn have to be covered by public subsidies- straight out of the taxpayers’ pocket. Think Progress reports “The National Football League (NFL), the National Hockey League (NHL), and the Professional Golfers’ Association (PGA) classify themselves as non-profit organizations to exempt themselves from federal income taxes on earnings.”

Yet, there is an inherent contradiction within the action of these sports leagues declaring themselves as non-for profit. Senator Tom Coburn explains “In 2010, the registered NFL nonprofit alone received $184 million from its 32 member teams. It holds over $1 billion in assets. Together with its subsidiaries and teams – many of which are for-profit, taxed entities – the NFL generates an estimated $9 billion annually.” And although the NFL generates $9 billion annually, which the owners, players, and everyone involved in the organization lavishes in, taxpayer dollars are spent on subsidizing their tax exemption through the non profit loophole.

Think Progress clarifies the cost “Taxpayers may be losing at least $91 million subsidizing these tax loopholes for professional sports leagues that generate billions of dollars annually in profits.” These are millions of dollars that can be spent otherwise building needed infrastructure, fighting poverty, creating jobs, and adding educational opportunities to any local community. This perpetuates the growing gap between income between classes in the United States.

When public subsidies are used to create stadiums, the local economy suffers tremendously. This is a result of two primary reasons. First, new stadiums cause local citizens to substitute where they spend their money. The University of Maryland explains “Sports competes with other entertainment goods and services in the local economy. Each dollar spent at the ballpark is a dollar not spent on a meal in a local restaurant, bowling alley, etc. [For example,] Reduced consumer spending at local bars and restaurants [as a result of spending the money at the stadium instead] could lower earnings of employees at these establishments.” Second, there is an apparent harm in the poor allocation of public subsidization and tax payer money. CATO furthers “These public funds [used for stadium building] have alternative uses, such as maintaining local infrastructure; increasing the quality or provision of public health, safety, or education; and attracting new businesses to the area. The deterioration of local public capital or services could diminish the ability of the local economy to produce other non- sports-related goods and services, which in turn would reduce local income.”

CATO actually quantifies the reduction in per capita income as a result of public subsidizes used for stadium building. They find that on average, the local income of a typical person is reduced $73 as a result of building a new stadium. Although this may seem like only a small reduction in income, it confirms the fact that there is no economic benefit of stadium building; and overall, actually a harm.

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