Public Funding for Private Stadiums Is Bad Policy
The Washington Redskins are seeking a new stadium, and cities are clamoring to court the team. The most recent gossip places Virginia as the forerunner in the race for the new stadium, largely because of the subsidies the team can obtain due to personal ties to members of Virginia's government. Subsidizing sports stadiums is common practice, but that doesn't make it a good deal for the average citizen. Even though cities think they have to sweeten the pot to keep teams around, what they don't realize is how their attempts to hold onto sports teams harm the whole economy. Far from being economic boons, sports stadiums do little for cities even when provided generous public subsidies.
Economists have been researching public funds and their relationship with economic growth for decades. Their findings don't bode well for would-be stadium builders. One Stanford economist was unequivocal: he has never seen a significant improvement in economic health from building a stadium in a city. To make matters worse, a paper in the Journal of Sports Economics estimated that public subsidies are much larger than reported to the tune of about $50 million per project. That's an approximately 40 percent increase in the total public cost. The paper includes a damning conclusion, “It is a myth that sports facilities’ operating revenues repay construction debt. In reality, operating revenues are almost completely offset by significant ongoing public expenses.”
These negative findings about publicly funded stadiums aren't outliers either. According to a Chicago Booth poll of top economists across the United States, the strong consensus is that public funding for stadiums is “likely to cost the relevant taxpayers more than any local economic benefits that are generated.”
This is a surprise to the average observer. How can building a massive stadium for sports and concerts not be like injecting steroids into a city's economy? The answer is deceptively simple. While football games air nearly every night on tv, any one stadium is dormant much of the time. The construction jobs to build the stadium are economic steroids in that they provide a fleeting boost and add little to no long-term improvements. Just as juicers need to continue using steroids or lose all their muscle, unless a city wants to build stadium after stadium, it will only leave their economies weak in the long-term. Spending public funds in areas where they create little to no benefits for the city is not likely to be a profitable endeavor.
Faltering economies hurt the average person the most. In order to incentivize sports teams to come to their city, cities have to defer spending in other areas or raise taxes. In one way or another, that falls hardest on those with the fewest means available to protect themselves while the well-to-do benefit the most. It is after all, the wealthiest people in the private boxes and holding networking socials during the games. In fact, research shows that it is often wealthy people who lobby hardest for public funding for stadiums. This shouldn't surprise anyone since they’re more likely to have the time and resources to spend convincing local governments to build new stadiums.
In fact, sociologists studying public funding for stadiums have found that once the economic argument was revealed to be misleading and short-sighted, elites simply pivoted to vague and unverifiable claims about protecting and promoting the city's character. For example, after Salt Lake City granted a $22.7 million tax break for renovations to the Utah Jazz's basketball stadium, even those who were supposedly fiscal conservatives fell for the ploy. The vice president of the Utah Taxpayers Association referred to the debunked and unsupported claims of economic benefits from stadiums in a meeting with the Redevelopment Agency of Salt Lake City, but he also claimed there were "intangible values" brought by having the stadium.
These aren't well-reasoned defenses of policy options. Instead, they are an attempt to salvage a bad investment with feel-good but vacuous claims while placing the greatest burden on those with less political clout––meaning those who don't find themselves in private box seats when they can afford to go to a game at all.
Virginia Governor Terry McAuliffe is reportedly “vigorously pursuing” the Redskins. Unfortunately, this falls in line with what other politicians have done in the past: set aside the real needs of the average person in order to line the pockets of those with connections. City and state officials should pay more attention to the academic research showing that public funding of stadiums is a bad deal and give less credence to those who whisper in their ears about supposed economic benefits and imagined social benefits from protecting community character. Such claims are not just unfounded, they're simply not good policy.