“Public Funding for Private Stadiums Is Bad Policy”

An alert reader sent me this article from RealClearSports.com.

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.”

. . .

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.

Read the whole article. And then don’t be surprised when your property taxes go up every year for the next twenty years, or for however long it takes you to move out of town.


  1. Globe life insurance is building another stadium or redoing the ballpark in Arlington Texas. There making money along with the Ts,as Rangers. They purchased the stadium from the city a few years back and it was funded by the public. The city made a profit and increased tax revenues. This is strategic management by the insurance company and the city. The city also in the beginning gave the Rangers and globe Life insurance tax reduction on the property tax. The gets tax revenues from sales on the tickets, sales of any product sold at the sfadium. In almost all of the M.L.B. stadium are operating in this fashion. Companies also advertise in the stadium paying money to the city , the Rangers, and Globe Life Insurance. T.V. revenues, and cable . Again the city of Arlington profits, the Rangers profits, and Globe Life Insurance profits. This creates jobs and kids get to see their favorite baseball player. Yes, their examples of idiots and short sighted individuals, politicians, etc., who don’t want to see such operation prosper. Plus baseball is old money which is smart to have in the community. El Paso has a history of running off old money and thus a low income base. The situation in Salt Lake City is is a money maker regardless of the false point of view . Those that are trying to stick their fingers in the pie will soon be removed. Yes, there have been stadiums built before they contracted the sports organization to play at that ‘venue. ( San Antonio ) . Built by public funds with a promise of an N.F.L. team. The Mayor who pushed the tax bill on the public of that city never even talked to the N.F.L. owners. He did talk to Red McCombs who wanted to finance a club but not to the right people. You do have a M.L.B. organization putting money into El Paso but will the city machine manage it correctly so it will grow into a profit making or a organization? By the way Red owns the Vikings and runs a successful formula race track in Austin Texas. It depends on who you elect.

    1. The City of El Paso gave away all the ballpark’s revenue streams to MountainStar Sports Group. Yeah, the City gets their share of sales taxes (one percent of sales, I think), but that’s not much.

      Reason.com thinks the City of Arlington got a raw deal.

      As The Ringer’s Claire McNear noted, the extraordinarily wealthy sports franchise owners of Texas just can’t seem to find a way to build a for-profit building without making the taxpayers assume all the risk:

      In the end, The Ballpark cost $191 million, financed largely by taxpayers in the form of a half-cent sales tax increase. Today’s proposal for a new new stadium comes with — surprise! — the same half-cent tax bump. Should it be approved, taxpayers will fund the project just as soon as they finish paying for the Cowboys’ AT&T Stadium, the most recent sporting venue that Arlington taxpayers have agreed to cover.

      And (as these projects tend to) it gets worse. A more recent WFAA review of the master agreement found that the Rangers will retain stadium naming rights and all the revenue from seat licenses, both of which could combine for more than $375 million over the next 30 years. WFAA also made a “conservative estimate” that when it’s all said and done, the city will probably spend more than $1 billion on its bond debt after interest, fees, and other inevitable costs are added to the mix. And that’s a “conservative estimate.”

      . . .

      Though Arlington city officials promised the estimated $1 billion cost of building the new stadium would be a “50-50” public and private split, a WFAA investigation into the fine print of the master agreement between the Rangers and the city revealed what one economics professor referred to as a “sleight of hand” and “verbal gymnastics” over who is actually responsible for what costs. Per the WFAA report:

      Tucked in the agreement is a clause called the “admissions and parking tax” that allows for a 10 percent surcharge on event tickets and up to $3 additional surcharge on parking. State law allows cities to collect and use the taxes to build their stadiums. Arlington’s agreement, however, allows the Rangers to use the admissions and parking tax revenues to help pay their half of the construction costs.

      “If it really is a tax and could be used by the municipality, then in essence it’s just transferring revenue from the public sector to the private sector,” said Rick Eckstein, a Villanova University professor who studies sports stadium economics.

      “There’s a sleight of hand here. There’s verbal gymnastics going on,” Eckstein added. “It’s relatively unprecedented in terms of stadiums I’ve studied over the last 20 years.”

      Thanks to the “sleight of hand,” which allows the Rangers to use tax revenue to pay off their own debts, the team will only be directly responsible for $200 million, making the promised “50-50” split a “80-20” split in favor of the private company which will keep any profits made on the stadium (technically owned by the city of Arlington) for itself.

      . . .

      Stadium supporter and Mayor of Arlington Jeff Williams is paying no mind to rational thinkers such as economist Robert Baade, who WFAA quotes as saying the Rangers deal “is one of the worst public projects anyone could imagine” or Arlington taxpayer Jim Runzheimer, who said, “This is a total giveaway by the taxpayer to a private business that does not need any taxpayer assistance.”

      There are links to sources in the original story.

      Thanks for playing, Mr. Clark. Enjoy your Kool-Aid.

  2. Let’s see, Albuquerque Isotopes build a stadium, a couple of miles from downtown (why didn’t the PCL tell them it needed to be downtown). The city gets $700,000 a year rent, parking fees are split equally, city gets a dollar from every ticket sold. They also get the sales tax from all sales AND a percentage of the concessions.
    Compare this to El Paso. Supposedly the PCL said the ball park had to be downtown or the deal was off. Of the 79 million in construction cost, MountainStar paid around 40%. The city gets $400,000 in rent ($250,000 of which has to be put into escrow for repairs “down the road”). This means that MSSG doesn’t need to worry about backed up toilets and such. The city gets all the parking fees since the stadium doesn’t have room for parking, The city gets one dollar from each ticket sold. They also collect taxes on concessions but don’t get a cent of the profits. Concessions are where the money is. Our city sold out even worse than you mentioned Rick.

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