Stadium subsidy

A stadium subsidy is a type of government subsidy given to professional sports franchises to help finance the construction or renovation of sports venues. Stadium subsidies can come in the form of tax-free municipal bonds, cash payments, infrastructure improvements and operating cost subsidies. Funding for stadium subsidies can come from all levels of government and remains controversial among legislators and citizens.[1][2]

Background

In the United States

Eighty years ago, stadium subsidies were essentially unheard of, with funding for professional sports stadiums coming from private sources. Over time this situation changed, and today most new or renovated professional sports stadiums are financed at least partly through stadium subsidies. This change has been caused by the increase in bargaining power of professional sports teams at the expense of their host cities. As the years have passed, municipalities have come to love their local professional sports teams. Citizens feel a special bond with their teams and share in a sense of civic pride when they are successful.

The Los Angeles Coliseum became the first fully publicly funded stadium in 1923, but such stadiums did not become the norm until the 1950s. Twenty-seven of the 30 stadiums built between 1953 and 1970 received more than $450 million in total public funding for construction. During this period, publicly funding a stadium grew in popularity as an effective incentive to attract professional sports teams to up and coming cities. Famous examples include the Brooklyn Dodgers leaving New York in exchange for 300 acres in Chavez Ravine and the New York Giants moving to San Francisco for what would eventually become Candlestick Park.[3]

Sports teams have realized their ability to relocate at lower and lower costs. Because local governments feel that keeping their sports teams around is critical to the success of their cities, they comply and grant the stadium subsidies. This process is what has led to the large number of stadiums financed through subsidies that we have today.

Size of the subsidies

In the USA, the annual subsidies provided by the state for the construction of stadiums are in the range of billions of dollars.[4][5] A 2012 Bloomberg analysis estimates that tax exemptions annually cost the U.S. Treasury $146 million.[2]

Benefits

In granting stadium subsidies, governments claim that the new or improved stadiums will bring positive benefits to the city. Proponents tout improvements to the local economy as the primary benefits. The first way this is accomplished is through the creation of jobs. New stadiums generate construction jobs, and game attendees and team employees increase spending in the area, thereby leading to more jobs created. Supporters further argue that the stadiums attract tourism and businesses that lead to further spending and job creation. All of the increased spending causes a multiplier effect that leads to more spending and job creation and eventually finances the subsidy through increased tax revenues from ticket and concessions sales, improved property values and more spending nearby the stadium.[6]

Advocates for stadium subsidies also claim less quantifiable positive externalities, such as civic pride and fan identification, so that hosting a major sports team becomes something of a public good. Local sports fans enjoy the benefit even if they do not pay for it.[6][7]

Criticisms

Many criticisms exist regarding the use of stadium subsidies. First, critics argue that new stadiums generate little to no new spending (consumption). Instead, what fans spend in and around the stadium are substitutes for what they would otherwise spend on different entertainment options. Thus, this argument contends, new stadiums do not cause economic growth or lead to increased aggregate income. Because there is not an increase in consumption related to new stadiums, it is not worth the cost for cities to subsidize their construction.[8]

Another criticism of stadium subsidies is that much of the money the new stadiums bring in does not stay in the local economy. Instead of going to stadium employees and other sources that would benefit the local community, a lot of the money goes toward paying the players. The problem is that most of these players do not live in the local community, so the money they make is taken away and spent in other locations. Critics question why a city should subsidize a sports stadium when large portions of the revenue the stadium receives will not be reinvested in the city. They go on to claim that subsidizing job training or improved transportation are smarter investments to make, as they will yield higher returns for the city.

Critics also argue that the construction of new stadiums could cause citizens and businesses to leave a city because of eminent domain issues. If a city is forced to take land from its citizens to build a new stadium, those who have lost land could become angry enough to leave the city. If they are business owners, then they will likely take their businesses with them. This cost, it is argued, must be added in when a city determines whether or not it is worth the cost to subsidize a new stadium.

Finally, critics contend that any benefits resulting from a new stadium are felt by the entire region where the stadium is located and not just the immediate city. However, often it is only the city, and not the whole region, providing the subsidy. Thus, the city is not realizing the full benefits of the new stadium while, at the same time, undertaking the full cost of the subsidy.

A review of the empirical literature assessing the effects of subsidies for professional sports franchises and facilities reveals that most evidence goes against sports subsidies. Specifically, subsidies cannot be justified on the grounds of local economic development, income growth or job creation. A survey of economists also reveals a general opposition toward sports subsidies.[9]

NASCAR stands in opposition to the "common man" logic that stadiums need public money. NASCAR tracks are owned and operated by private businesses and are profitable enough that some owners built and own several tracks.

See also

References

  1. ↑ Kianka, Tim (6 March 2013). "Subsidizing Billionaires: How Your Money is Being Used to Construct Professional Sports Stadiums". Jeffrey S. Moorad Center for the Study of Sports Law. Retrieved 3 February 2016.
  2. 1 2 Kuriloff, Aaron; Preston, Darrell (2012-09-05). "In Stadium Building Spree, U.S. Taxpayers Lose $4 Billion". bloomberg.com. Retrieved 2016-02-03.
  3. ↑ Phelps, Zachary A. (2004). "Stadium Construction for Professional Sports: Reversing the Inequities Through Tax Incentives". Journal of Civil Rights and Economic Development. 18 (3).
  4. ↑ Isidore, Chris (2015-01-30). "NFL gets billions in subsidies from U.S. taxpayers". CNN. Retrieved 2016-02-02.
  5. ↑ Gillespie, Nick (2013-12-06). "Football: A Waste of Taxpayers' Money". Time, Inc. Retrieved 2016-02-02.
  6. 1 2 Zimbalist, Andrew; Noll, Roger G (1997). "Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?". Brookings Institution. The Brookings Institution. Retrieved 17 February 2016.
  7. ↑ Owen, Jeffrey G. (2006). "The Intangible Benefits of Sports Teams" (PDF). Public Finance and Management. 6 (3): 321–345.
  8. ↑ Zaretsky, Adam M. (2001-04-01). "Should Cities Pay for Sports Facilities?". The Regional Economist. Federal Reserve Bank of St. Louis. Retrieved 2016-02-02.
  9. ↑ Coates, Dennis and Brad R. Humphreys. 2008. "Do Economists Reach a Conclusion for Sports Franchises, Stadiums, and Mega-Events?" Econ Journal Watch 5(3): 294-315.
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