Oklahoma City voters just approved a new deal to make sure the Oklahoma City Thunder, a professional basketball team, remains in Oklahoma City. While stadium subsidy deals usually tend to be big losers for taxpayers, this one is notable for just how bad it is.
As per the terms of the deal, Oklahoma City will impose a new 1 percent sales tax for six years. Oklahoma City taxpayers will therefore foot $850 million of the projected $900 million cost, with the Thunder’s ownership group responsible for just the remaining $50 million. In return for essentially buying the owners of a professional basketball team a brand new stadium, Oklahoma City taxpayers will receive a promise from the Thunder to stay in Oklahoma City through 2050.
As with all stadium subsidy deals, proponents argued that the economic benefit of having the Thunder in the city outweighed the cost to taxpayers. Professional sports teams bring in tourists and create jobs, so the argument goes, benefiting the local economy. But that argument, while often compelling to voters, is not borne out by the facts.
Proponents of stadium subsidy deals often point to studies made with the express purpose of promoting the deal in question — studies that often rely on wildly inflated estimates to make the deal appear more economically beneficial than it is. More sober analyses tend to find that the impact of sports teams on local economies is the equivalent of a rounding error.
For instance, one Temple University economist found that if every major sports team left Chicago — and Chicago has two baseball teams, a basketball team, a football team, and a hockey team — it would alter Chicago’s economy by less than 1 percent. This economist went on to conclude that a baseball stadium’s economic impact is “roughly equal to a mid-size department store,” while football stadiums were even less valuable. Taxpayers are hardly clamoring to subsidize a new T.J. Maxx in their city.
In fact, among studies done by economists, the conclusion is nearly unanimous: professional sports teams, and their stadiums, just do not add nearly enough to justify subsidizing stadiums.
Part of the reason the conventional wisdom about stadiums bringing economic benefits is so far off the mark is that stadiums do not provide nearly as much tourism as people believe. For the most part, local sports games are attended by residents of the city and its immediate environs. The most successful stadium at bringing in tourists, Baltimore’s Oriole Park, brings in just an estimated $3 million in new tax revenue and economic benefits — peanuts compared to the cost of a stadium.
What’s worse, taxpayers who fork over the cash for a new stadium often find themselves having given a mouse a cookie. Owners who get local taxpayers to cover stadium expenses often keep coming back to demand new renovations or “state-of-the-art upgrades,” paid for by — you guessed it — taxpayers.
The other problem is that cities competing with each other to offer the most attractive subsidies is a race to the bottom. Teams have to go somewhere, and when they compete against each other they often end up doing little but paying a team to stay where it wanted to be anyways. After all, a new stadium is a nice perk, but teams will go where there is a market.
Taxpayers need to realize that stadium subsidies are a raw deal. They’re not buying a local economic powerhouse — they’re buying a team owner a perk.
