Stadium Subsidies Continue Despite Economic Downturn

Published September 1, 2009

From California to New York, taxpayers remain on the hook for billions of dollars in subsidies for stadium projects, even in the midst of the worst fiscal downturn in state and local budgets in decades.

Supporters claim the projects will generate significant economic development from stadium construction and future events to be held in the new facilities. But economists and taxpayer advocates raise serious questions about those claims, especially in a tough economy.

Subsidies Plus Budget Woes

New York City just completed two gleaming new Major League Baseball stadiums for their beloved Yankees and Mets.

According to Neil deMause, author of Field of Schemes, an exposé on stadium subsidies, New York City taxpayers paid a whopping $1.8 billion in subsidies for construction of the stadiums, despite the franchises being worth more than $2.1 billion collectively. The teams pitched in just over $800 million.

Soon after New York officials dispensed those enormous subsidies, the bottom dropped out of the city’s balance sheet. In May of this year, Mayor Michael Bloomberg (R) unveiled a budget loaded with tax hikes to close a gap threatening to approach $5 billion in 2011. He called for a hike in the city’s already-high sales tax, plus a 5 cent fee for every plastic grocery bag used in the city.

Meanwhile, as California’s state budget situation began crumbling into a looming $21.3 billion deficit, the city of Santa Clara recently inked a deal promising more than $150 million in taxpayer money to help build a stadium for the National Football League’s San Francisco 49ers, a franchise worth nearly $800 million.

Subsidies Hike Stadiums’ Costs

A 2007 study by the National Taxpayers Union Foundation found heavily subsidized stadium projects were significantly more expensive on average than largely privately funded projects. The study found stadiums where taxpayers bore a majority of the cost were $65 million more expensive on average than those for which private entities paid the bulk of the tab.

While private financiers have every reason to scrutinize costs closely, “Government bureaucrats … are often more concerned with reelection prospects and PR plaudits than with cost containment,” the study notes.

In addition, the study found the average taxpayer subsidy per stadium is on the rise and shows no signs of slowing. The amount taxpayers paid for each facility rose 41 percent in just the eight years leading up to 2004.

With the plethora of new, billion-dollar stadium projects, that number is likely even higher today.

Don’t Spur Economy

Though stadium subsidy advocates claim the projects create significant economic development, a growing body of research suggests the opposite is true. In an article for The American magazine last year, economist Dennis Coates noted several major studies “reject stadium subsidies as an effective tool for generating local economic development.”

Coates laid out three reasons subsidies don’t boost economic growth.

First, Coates notes, consumers may simply shift their entertainment spending from another outlet to a sports venue. Instead of going to the movies or a restaurant, a family might decide to attend a baseball game, leaving the local theater or sidewalk café with less business than before.

Second, much of the money spent on stadiums goes into the pockets of wealthy athletes and team owners, most of whom live in suburbs far from the communities funding their stadium. In addition, high-income individuals tend to spend a much smaller percentage of their income than do average folks, so less of that money filters back into the local economy.

Destroying Income Generators

Finally, Coates writes, the tax hikes most often funding these projects are counterproductive because they destroy more economic activity than the stadium creates. When measuring a stadium’s effect on local income, Coates’ research found “every man, woman, and child in the metropolitan area was poorer by $10 as a result of the sports environment.”

Nevertheless, the push for stadium subsidies doesn’t seem likely to abate any time soon, the National Taxpayers Union Foundation study concludes: “Legislators seem to still buy into the ‘voodoo economics’ of stadium funding, while taxpayers get to ‘take one for the team.'”

Andrew Moylan ([email protected]) is director of government affairs for the 362,000-member National Taxpayers Union.

For more information …

“Stadiums and Subsidies: Home Run for Wealthy Team Owners, Strike-out for Taxpayers”: