Researchers, Washington State Treasurer Slam Subsidies for Sports Facilities

Published January 1, 2008

State and local governments are stepping up efforts to attract and retain professional sports teams, but economists and public policy experts question that spending.

Stadium construction costs climbed nearly 60 percent in inflation-adjusted dollars between 1990 and 2004, according to “Stadiums and Subsidies: Home Run for Wealthy Team Owners, Strike-out for Taxpayers,” a study released October 30 by the nonpartisan research arm of the National Taxpayers Union.

“Publicly funded stadiums are, at best, an inefficient investment of taxpayer dollars for the meager benefits produced and, at worst, massive payments to rich team owners and players at the expense of ordinary taxpayers,” said NTU Government Affairs Manager Andrew Moylan, who wrote the study.

$18.5 Billion Since 1990

Another recent criticism of public spending on sports stadiums comes from Harvard University professor Judith Grant Long, who estimates public funding for private sports facilities totaled about $12 billion between 1990 and 2006. When the cost is adjusted to include subsidies for land, infrastructure, capital improvements, and foregone property taxes, the true cost is actually closer to $18.5 billion, said Long in October testimony before the U.S. House of Representatives’ Domestic Policy Subcommittee.

In recent years subsidy proponents have tried to package new facilities as multi-use venues for concerts, conventions, and corporate meetings, to garner more public support. Washington state Sen. Margarita Prentice (D-Renton) used that argument in a February 2007 op-ed in the Seattle Times, claiming taxpayers would “reap the economic benefit of a nearby world-class venue” if funding were approved for a new $500 million basketball arena near Seattle for the SuperSonics of the National Basketball Association.

Her op-ed apparently did little to sway citizens, as Seattle residents and local newspaper editorial writers overwhelmingly opposed attempts by lawmakers and local officials to provide taxpayer subsidies for a new basketball arena and NASCAR race track. Legislation for the subsidies did not advance during the 2007 legislative session.

Team Leaving Town

Area residents also sent a strong message in November 2006 when they overwhelmingly supported Initiative 91, which blocked Seattle from providing taxpayer subsidies by requiring any subsidy have a return on investment on par with a 30-year U.S. Treasury bond, which at the time was about 4.75 percent. Neither the city nor the team’s management could ensure such a return.

The opposition may stem from prior experience with taxpayer subsidies to sports facilities. Qwest Field, Safeco Field, and Key Arena, all in Washington State, have benefited from multimillion-dollar public subsidies.

Because of the opposition, in early November 2007 the SuperSonics’ owners announced they plan to move the team to Oklahoma City if they can get out of their lease of Key Arena in Seattle, which expires in 2010.

‘Skewed Benefits’

State Treasurer Mike Murphy thinks voters made the right choice in opposing subsidies for a new basketball arena for the SuperSonics.

“My objection to alleged public-private partnerships is that they are seldom a true ‘partnership,'” Murphy said. “More often than not they are skewed to the benefit of the private side and the detriment of the public. The private side earns the profit, and the public side pays the bills. Simply stated: Public debt should only be for public purposes.”

Wrong Priorities

Bob Williams, president of the Evergreen Freedom Foundation, says governments are getting priorities wrong when they subsidize private sports facilities.

“Families must set priorities and live within their means. So should government,” Williams said. “Subsidizing a private sports franchise is not a core function of government. Spending outside core functions is harmful because we must inevitably give up something vital in order to finance the nonessential service or project.”

Federal Reserve economist Adam Zaretsky agrees, noting financing sports facilities brings minimal returns to the public.

“The weight of economic evidence … shows that taxpayers spend a lot of money and ultimately don’t get much back. And when this paltry return is compared with other potential uses of the funds, the investment, almost always, seems unwise,” Zaretsky wrote in “Should Cities Pay for Sports Facilities,” an April 2001 report for the St. Louis Federal Reserve Bank.

Amber Gunn ([email protected]) is a policy analyst at the Evergreen Freedom Foundation in Olympia, Washington.

For more information …

Harvard University professor Judith Grant Long’s testimony regarding taxpayer subsidies of sports facilities before the House Domestic Policy Subcommittee:

“Stadiums and Subsidies: Home Run for Wealthy Team Owners, Strike-out for Taxpayers,” by Andrew Moylan, National Taxpayers Union:

“Should Cities Pay for Sports Facilities,” by Adam Zaretsky, St. Louis Federal Reserve: