Policy Documents

Research & Commentary: Taxpayer Funding of Sports Facilities

March 21, 2014

In the early days of professional sports, nearly all new sports facilities were privately financed. In recent years, by contrast, the trend in stadium financing has moved toward taxpayer subsidies for new stadium construction or renovation. According to Pacific Standard magazine, over the last 20 years 101 new sports facilities have opened in the United States (a 90 percent replacement rate), and nearly all the projects received direct public funding.

In addition to receiving public funding, these projects are now receiving more tax dollars than ever before. In her book on sports stadium financing, Public/Private Partnerships for Major League Sports Facilities, Judith Grant Long, an urban planning expert at Harvard University, notes the average public cost for a new facility has increased dramatically since the year 2000. In the 1990s the average tax subsidy given to stadium projects was $142 million, but by 2010 the average public cost had risen to $241 million, a 70 percent increase. 

Long also points out, as noted in Bloomberg, the tax subsidies may be even higher than reported, as economists underestimate costs associated with stadium projects, such as infrastructure improvements, capital improvements, municipal services like police security, and lost property taxes. Taking these added hidden costs into account, Long estimates the average taxpayer subsidy for sports facilities could increase by 25 percent, raising the 2010 average cost to $259 million per facility.

The increase in the number of taxpayer-subsidized stadiums has come about for several reasons. Sports teams have become a strong source of civic pride for cities, with urban leaders using teams as a means to market a city to new businesses. In the last few decades, professional sports teams have also gained a great deal of bargaining power because relocation is no longer as expensive and risky as in the past, as cities are now competing for franchises, enticing teams with tax breaks and stadium funding.

Supporters of taxpayer funding for stadiums have long claimed the new facilities act as engines of new economic development, but several economic studies have found their influence to be limited. In a Reason Public Policy Institute report, Samuel Staley and Leonard Gilroy note the majority of research on the economic effects of stadium construction has found no link between the new facilities and job or income growth. Critics also challenge the notion that stadiums create new consumer spending; any new spending generated by a stadium is simply shifted from other spending, ultimately ending up in the team owner’s pocket, not the local economy.

Stadium subsidies are a poor use of taxpayer dollars. They rarely realize the benefits their supporters claim, and they shift tax revenue away from where it is better utilized. To improve their competitiveness, cities would do better by reducing tax rates or investing in more cost-effective improvements such as new and improved infrastructure.

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

Research & Commentary: Subsidizing Sports Stadiums
http://heartland.org/policy-documents/research-commentary-subsidizing-sports-stadiums
John Nothdurft of The Heartland Institute examines the economic impact of publicly funded stadiums. 

Sports Stadium Madness: Is Fan Ownership the Answer?
http://heartland.org/policy-documents/sports-stadium-madness-fan-ownership-answer
In this Policy Brief from The Heartland Institute, a free-market think tank whose researchers have questioned government subsidies to sports stadiums since the mid-1980s, the author proposes fan ownership of teams as a solution to “sports stadium madness.” 

Sports Stadium Madness: Why It Started, How to Stop It
http://heartland.org/policy-documents/no-85-sports-stadium-madness-why-it-started-how-stop-it-summary
Taxpayer subsidies to professional sports teams amount to some $500 million a year. The decision to subsidize a team is driven by competition among cities for a limited number of teams, league policies that reward relocation, and lobbying by special-interest groups. The solution is for fans and taxpayers to campaign for nonprofit ownership of teams, a model pioneered by the NFL’s Green Bay Packers in 1923. 

Is There an Economic Rationale for Subsidizing Sports Stadiums?
http://heartland.org/policy-documents/there-economic-rationale-subsidizing-sports-stadiums
Robert A. Baade discusses whether subsidizing sports facilities makes economic sense for municipalities. 

Government-Funded Stadiums Not Worth Price of Admission
http://www.cato.org/publications/commentary/governmentfunded-stadiums-not-worth-price-admission
Cato Institute Senior Fellow Doug Bandow examines stadium subsidies and their supposed benefits and concludes city officials across the nation should welcome major league sports teams only if they are willing to pay their own way. 

Why Stadium Subsidies Always Win
http://reason.com/archives/2013/12/21/why-stadium-subsidies-always-w
Nick Gillespie of Reason interviews J.C. Bradbury, the author of several books on baseball and economics, about the economics of publically subsidized sports stadiums. A video of this interview is available here

NFL Sacks Taxpayers for Stadium Subsidies and Other Goodies
http://news.heartland.org/newspaper-article/2013/09/27/nfl-sacks-taxpayers-stadium-subsidies-and-other-goodies
Writing for the Pennsylvania Independent, Eric Boehm discusses how the NFL has been able to get massive handouts for new stadiums, even in states facing billion-dollar budget shortfalls. 

Take Me Out of the Ball Game: the Efficacy of Public Subsidies in the Success of Professional Sports Stadiums
http://heartland.org/policy-documents/take-me-out-ball-game-efficacy-public-subsidies-success-professional-sports-stadium
This paper weighs the relative advantages of multiple factors that lead to the success of professional sports stadiums in major markets, discussing the arguments for and against public subsidies. The analysis demonstrates public subsidies for stadiums don’t generate sufficient economic returns, and that successful stadiums can be built without using taxpayer funds. 

Sports and the City: How to Curb Professional Sports Teams' Demands for Free Public Stadiums
http://heartland.org/policy-documents/sports-and-city-how-curb-professional-sports-teams-demands-free-public-stadiums-0
Writing in the Rutgers Journal of Law and Public Policy, Marc Edelman argues for a national law that would protect local communities from sports leagues' demands for publicly funded stadiums, by requiring pro-rata revenue sharing according to the share of construction costs paid.

The Stadium Gambit and Local Economic Development
http://heartland.org/policy-documents/stadium-gambit-and-local-economic-development
Sports franchises frequently use their monopoly power to extract rents from state and local governments. Local officials and their hired consultants tout economic benefits of publicly subsidized stadia, but the consensus of academic economists is that such policies do not raise local incomes. This article describes even more pessimistic results, indicating sports facility subsidies may actually reduce the incomes of the alleged beneficiaries.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the FIRE Policy News Web site at http://news.heartland.org/insurance-and-finance, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org. 

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.