Public Subsidies for Stadiums

A closer look at the debate of whether the public should subsidize stadiums for sports franchises.

Dec 13, 2021

Stadium financing was a hot topic in 2021: Augusta, Albuquerque and Denver rejected stadium-related ballot questions this year, the Buffalo Bills are looking for subsidies, and the Bears seem poised to leave Chicago for the suburbs. Over the years, teams have ramped up rhetoric of leaving cities or states to gain public subsidies — sometimes it works to get what they want, but sometimes they leave. In the end, it’s local taxpayers stuck with a bill.

Often the benefits of these stadiums are overstated and rely on a black box of methods that estimate the value of “intangibles.” In 1997, researchers at Brookings found:

A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment.

So why do voters and politicians continue to approve subsidies for stadiums: pride, scorn from fans at the polls? It’s a difficult question, but this year more voters overwhelmingly rejected these measures.

This week we take a look at stadium financing questions that arose in 2021 and some broader issues to consider when thinking about is subsidizing a stadium a good use of public money.

ICYMI

“Last Week Tonight” has done a great job bringing public finance issues main stream, here is their 2015 segment on stadium financing.

IN FOCUS

CHART OF THE WEEK

The following are two charts form the AECOM study commissioned by the New York Empire State Development Corporation regarding whether to renovate or build a new Buffalo Bills stadium.

First, the cost to renovate or build new is $862 million versus $1.35 billion. Building the stadium downtown could add an additional $750 million in costs

However, the tax revenue benefit to City, County and State attributed to the presence of the Bills: $27 million a year.

Again, only $27 million a year — if you think that's small, you're right! By comparison, the City of Buffalo's general and education budget is $1.36 billion.

Then again, the study noted "there are significant intangible benefits associated with serving as the home of an NFL franchise."

The question to think about:

Are the “intangible benefits” and $27 million in annual tax revenue enough to justify a taxpayer subsidy for any portion of a new $1.34 billion stadium.

INTERESTING READS

Sports Stadiums and Local Economic Activity: Evidence from Sales Tax Collections (SSRN)

The Issue: Does a suburban area benefit when a traditional standalone downtown stadium moves to a new stadium-anchored mixed-use development?

Key Statement:

Though net new spending is evident, approximately one-third of the project’s sales appear to derive from crowding out other local economic activity. In total, added tax collections fall well short of covering the public subsidies provided by Cobb. The stadium’s limited economic impact, despite its favorable location and ancillary mixed-use development, further supports past findings that sports venues are poor investments as economic development projects.

The Economics of Subsidizing Sports Stadiums (St. Louis Fed)

The Issue: What are the opportunity costs of publicly financing a new stadium directly or through subsidies?

Key Statement:

They [economists] often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact. Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.

Any opinions expressed herein are those of the author and the author alone.

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