Multi-Billion Dollar Stadiums: The Seen vs. the Horrid Unseen

Multi-Billion Dollar Stadiums: The Seen vs. the Horrid Unseen
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In 1995, the Los Angeles Rams moved to St. Louis, extracting hundreds of millions of dollars from taxpayers to help build a new stadium. After 20 years in the Gateway City, the Rams moved right back where they came from – leaving the people of St. Louis and Missouri stuck with a $6 million a year tab to pay for an empty football field. American taxpayers spend billions of dollars a year to lure professional sports teams from one place to another in one of the most expensive shell games in history.

At least Roman Emperors provided bread. Modern-day politicians are spending a fortune in public funds to lure circuses. Over the past few years, U.S politicians have spent about $10 billion to $12 billion subsidizing sports stadiums, according to academic studies. And the pace of stadium construction is gaining speed. From 2011-2016, six stadiums were completed. Over just the next three years, 12 more are scheduled to be. Is it worth the cost?

It is easy see the benefits of a sports franchise – large-scale construction, stadium jobs, increased consumer spending at local restaurants, bars and hotels. New and improved stadiums occupied by a major-league team have a multiplier effect, spurring consumer spending on food, drinks, and parking. They also stimulate nearby development. But the stadium construction jobs are short-lived. Jobs for ushers and concessionaires don’t pay well and last only part of the year. And how much development is actually drawn away from other parts of the city?

What we don’t see is the value the same amount of investment and spending would have yielded if it was made elsewhere. The money that people spend at baseball or football games is not new money, it is diverted money. People who attend a baseball or football game are not pulling what they spend out of the stratosphere. They are taking it out of their personal budget. If they don’t go to a game, the money they save doesn’t disappear into the stratosphere either. It is spent – at a movie, or a play, or a concert, or at a restaurant. As for tourism, if a city doesn’t build a stadium, how many tourists will actually stay away – compared to how many will come anyway, and spend their money elsewhere in the city?

The question isn’t whether spending to attract or hold on to a franchise creates some economic activity. If government throws enough money into the air, some of it is going to land at someone’s feet. The question is whether the same amount of money wouldn’t create more economic activity if deployed in another way – through tax cuts, or on infrastructure, policing, education or public parks. Overall, a baseball team, which plays 81 regular-season home games a year, has about the same economic impact as a midsize department store, according to sports economist Michael Leeds. How many cities would spend hundreds of millions of dollars to lure a midsize department store?

Sports franchises do generate some tax revenue, from the stadium itself, the people who work there, and businesses nearby. But how much do they require in additional government spending – on more police, traffic control, and associated infrastructure – over and above the money cities and states fork over to finance new stadiums?

Moreover, the cost of building one is not borne exclusively by the people who live in the host city. Since many stadiums are financed through tax-free municipal bonds – an unintended consequence of a tax provision passed in 1986 to discourage such spending – the U.S. federal government has foregone $3.2 billion in revenue on them just since 2000, about $3.7 billion when additional tax benefits to high-income bond holders are taken into consideration, according to a Brookings Institution study. People from New Mexico are paying to build a stadium in Chicago, and people from Maine are paying to build one in Houston. Even if there are some spillover benefits, none spill over from New York into Idaho. Some are actually paying the tab for a franchise that moved away. The people of New Jersey, for example, are helping bear the cost of the arena in Brooklyn where their once-beloved Nets now play.

Why do local politicians open the vault? Partly for their own political interest. How many want to be in office when the local team leaves town? How many would love to be able to welcome a new team? But they should ask themselves: Do they also want to be the mayor that raises taxes, or can’t fund police, schools or garbage pickup, because they frittered the money on a stadium? The other reason cities seek a franchise is to send a message: This is a good place to invest. Unfortunately, the message many actually get is: This is a good place to pick taxpayers’ pockets.

Allan Golombek is a Senior Director at the White House Writers Group. 

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