Taxpayers should not fund stadiums

 

One issue that relates to sports and society, especially society’s pocketbooks, is the issue of taxpayers funding stadiums. It is an issue that directly affects taxpayers’ pocketbooks and the other services that local and state governments provide for their citizens. It is an issue that sometimes is difficult to decide on for both voters and elected officials. Historically, stadiums weren’t always built with tax dollars. Before WWII, of the 28 major league sports teams’ facilities built, only 5 were paid for in part or whole with taxpayer dollars. Since WWII, of the 140 refurbished or newly constructed facilities, only 14 did not use taxpayer dollars. I think that in most cases taxpayers should not fund stadiums.

There are many reasons why I feel this way, but the main reason is my philosophy on how governments and private business should interact. Personally, I think governments should stay out of funding business adventures of any kind because the government should be picking the winners and losers in the market. The government should just be there to ensure that there is no foul play amongst private companies and individuals but never to fund business ideas, especially in something like sports’ stadiums that risks a lot of taxpayer dollars for a return that is not so good. Besides my personal ideas on the matter, there is also plenty of evidence to support my premise that taxpayers stand to lose when governments fund stadiums. Economists that work independently and not for a chamber of commerce or company have shown the rate of return on a city’s investment in stadiums is generally below that of alternative projects. Also, metropolitan areas that are invested heavily in sports stadiums have, on average, experienced slower income growth than those that have not. For example, according to economist Robert Baade, Chicago’s professional sports industry accounted for less than one-tenth of 1 percent of Chicago’s 1995 personal income. Baade also found that the 30 metropolitan areas where the stadium or arena was built or refurbished in the previous ten years, only three areas showed a significant relationship between the presence of a stadium and real per-capita personal income growth. And in all three cases, St. Louis, San Francisco/Oakland and Washington, D.C., the relationship was negative. This further proves that expensive stadium investments by the government are not worth the slow economic development. Economist Mark Rosenstraub noted in 1997 that there is nowhere US county where professional sports accounts fro more than 1 percent of the county’s private sector payroll. The government is supposed to be by the people and for the people, and investment in an industry that accounts for less than one-tenth of 1 percent of a city’s income or accounts for 1 percent of a county’s payroll is not an investment that is for the people.

There is also evidence of teams and team owners gaining a lot more than the governments in the construction or refurbishment of sports’ stadiums. The value of the subsidy a team receives when a city government pays for a new stadium or arena often shows up as a higher team resale price, which then the owner retains. For example, Eli Jacobs bought the Baltimore Orioles for $70 million in 1989, just after the team had convinced the state of Maryland to build a $200 million ballpark from lottery revenues. Oriole Park opened in 1992 and a year later Jacobs sold the Orioles for $173 million, a 150% return with no money for the ballpark. Teams (and their owners) will not only receive a new facility paid for by the taxpayer, but will often get to keep income from stadium naming rights, concessions, luxury boxes, and non-sports events held on the property. This topic of team gains versus government gains relates back to my philosophy on government’s relationship with private industry. When government picks winners and losers, most of the time the taxpayer stands to lose but the very few, rich and powerful, stand to win.

Despite all the evidence that says taxpayer funding of stadium is not a good idea, many local and state governments still fund sports stadiums’ construction and renovations. This happens for mainly two reasons. First, teams often can make very convincing cases to elected officials about the economic benefits of a government investment in stadiums, which are either based on shaky economic studies or are disproved when analyzed later on. More often than not, the economic impact studies that accompany the city proposals to use taxpayer money are commissioned by franchise owners and conducted by accounting firms or local chambers of commerce that use illegitimate economic technique to demonstrate the number of new jobs and additional tax revenues that will be generated by the investment. The estimates of income are overstated due to issues like league rules that often require ticket revenues be shared with franchise owners in other cities as a way to subsidize teams in smaller markets, the NFL, for example, requires every visiting team to leave town with 34 percent of gate receipts. The economic impact studies tend to focus on the increased tax revenues cities expect to receive, yet they often gloss over that the revenues raised by these facilities are usually just substitutes for those that would have been raised by other activities. For example, if a couple decides to go out on a date to the ballpark, those funds cannot be spent on a date at the local theatre or restaurant. The second reason the local and state governments still fund sports stadiums’ construction, despite the overwhelming evidence against it, is the emotional chord that home teams strike with the community.  Many times I like to observe numbers and figures but the intangible civic pride that people have with a home team is powerful and evidently more powerful than statistics. Hence, arguments against stadium proposals, no matter how persuasive, likely fall to the wayside because of the pride one gets with a city’s home team. Even I can admit that there really is a certain level of pride, excitement, and overall happiness when attending your home team’s games. Despite that feeling and emotion though, I will always think taxpayers should fund good civic initiatives on things like education and influence their elected officials to focus on bringing real economic growth, not fund the construction of stadiums.

Taxpayers and stadiums

Forbes- Taxpayers and stadiums

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