Policy Documents

Research & Commentary: Subsidizing Sports Stadiums

February 16, 2010

Since the 1990s, the building of new sports stadiums has increasingly relied on taxpayer funds, with subsidies growing from just a few million dollars in tax exemptions to unabashed corporate welfare in the hundreds of millions of dollars. Team owners now effectively hold cities and states under siege by threatening to move their teams, creating bidding wars to get as much government money as possible.

Claims that taxpayer-funded stadiums recoup their costs and more in the form of economic development are dismissed by respected economists. A July 2007 article from Reason Public Policy Institute researchers Samuel Staley and Leonard Gilroy notes, "More than 20 years of academic research has failed to find a significant relationship between an investment in a sports stadium and significant job or income growth."

Research also shows that the more heavily a stadium is subsidized, the more it will cost. According to the National Taxpayers Union, "Average taxpayer subsidy per stadium is on the rise; the amount taxpayers paid for each facility rose 41 percent in just the eight years leading up to 2004." Since 2004 there has been enormous further growth in the size, scope, and cost of stadiums built with taxpayer money.

Tourism taxes have become the popular choice for elected officials hoping to raise revenue for stadiums. But hiking taxes on hotels, restaurants, airline flights, car rentals, and other hospitality-related businesses makes those businesses less competitive with those in other cities, suppressing economic growth and tax revenue. A new NFL stadium may bring additional visitors during the few home game weekends, but the rest of the year local businesses are burdened with higher tax rates without the increased consumer traffic.

Far too many politicians see hospitality taxes as an easy way to tap additional revenues from nonvoting visitors while avoiding backlash from their own constituents. Such tax hikes, however, do in fact fall on local residents directly and in the form of lower wages and the burden of decreased economic activity in their communities during the off-season.

The following documents provide further information on the economic impact of publicly funded stadiums.

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Research & Commentary: The Damaging Effects of Tourism Taxes
http://www.budgetandtax-news.org/article/25756/
This Heartland Research & Commentary examines how tourism taxes affect the economy and dismisses the myth that such taxes are predominantly paid by visitors.

Sports Stadium Madness: Why It Started, How to Stop It
http://www.budgetandtax-news.org/article/9474
The trend toward using taxpayers' money for sports stadiums started to take off in the 1990s and continues today, with more than $500 million per year going to subsidize stadiums. This Heartland Policy Study, written by Heartland President Joseph Bast, outlines how we got to this point and what we can do to stop this spending waste.

Green Bay on the Potomac: Why D.C. Should Own the Nationals
http://www.washingtonpost.com/wp-dyn/articles/A57857-2005Jan7.html
Instead of subsidizing sports stadiums and wealthy team owners, Ralph Nader argues, why not follow the lead of the Green Bay Packers and have the city or its citizens take ownership of the team?

Stadiums and Subsidies: Home Run for Wealthy Team Owners, Strike-out for Taxpayers
http://www.ntu.org/main/press_papers.php?PressID=969&org_name=NTUF
Teams worth only a few million dollars are getting taxpayer-funded stadiums worth twice as much as the team's value. This paper analyzes the rising cost of stadium construction and shows the relationship between taxpayer subsidies and a stadium's final cost.

If You Build It, They Will Leave
http://www.reason.com/news/show/28992.html
Matt Welch describes how publicly funded stadiums actually make it easier for teams to move, as team owners become facility renters rather than owners. Renters move more often than owners. Because the team owner invests little in the stadium itself, the team is less "tied down" to a city.

DC's Stadium Financing Proposal Would Cost the City $900,000 for Every Job Filled by a DC Resident
http://dcfpi.org/?p=83
When Major League Baseball was considering relocating the Montreal Expos franchise to Washington, DC, the DC Fiscal Policy Institute analyzed how much each job the proposed stadium was said to create would cost taxpayers. The analysis concluded there would be little if any positive economic impact for DC from the proposed $339 million in taxpayers' money.

Testimony Regarding Taxpayer Subsidies of Sports Facilities
http://oversight.house.gov/documents/20071010171736.pdf
Harvard University professor Judith Grant Long, an expert on sports, convention, and tourist facilities, testified before the House Domestic Policy Subcommittee in October 2007, focusing on how much is being spent on sports facilities, how much tax-exempt financing is used, and how much money such subsidies divert from public infrastructure.

Should Cities Pay for Sports Facilities
http://stlouisfed.org/publications/re/2001/b/pages/lead-article.html
St. Louis Federal Reserve economist Adam Zaretsky concludes that the urge to fund stadiums with taxpayer money is driven by emotion, not economics. He shows that most of the big money created by a team and its stadium goes to the owners, not the local economy.

Is There an Economic Rationale For Subsidizing Sports Stadiums?
http://www.budgetandtax-news.org/article/17280
In an expansive study done to determine whether subsidizing stadiums makes sense for municipalities, Lake Forest College economist Robert Baade, one of the country's leading experts on sport stadium finance, concludes that subsidized stadiums merely realign economic development rather than growing a local economy.

National Expert Doubts Claimed Benefits of Subsidies
http://www.budgetandtax-news.org/article/20933
Budget & Tax News interviews Professor Allen Sanderson of the University of Chicago, who has extensively studied sports facility subsidies and denounces the notion that sports arenas stimulate economic growth or generate new public revenues.

No Stadium Boondoggle
http://washingtontimes.com/news/2008/may/30/no-stadium-boondoggle/
This editorial explains how reckless with taxpayer dollars the District of Columbia has become. After giving $611 million in taxpayer subsidies to fund the Washington Nationals stadium and its wealthy owners, District officials wanted to give $150 million to subsidize a major league soccer stadium while ignoring important services and infrastructure needs.

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For further information on the subject, you can visit the Budget & Tax News Web site or The Heartland Institute's Web site at www.heartland.org, where you will find articles on the issue available through PolicyBot, Heartland's free research database.

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, you may contact Legislative Specialist John Nothdurft at 312/377-4000 or jnothdurft@heartland.org.