Calling a Foul on Taxpayer-Funded Stadiums
The WasteWatcher
State and local governments routinely approve plans to force taxpayers to subsidize professional sports arenas across the country. In a report released on December 20, 2013, Judith Grant Long, a professor of urban planning at Harvard University, found that taxpayers had doled out $12 billion to fund 51 major sports stadiums between 2001 and 2010, raising many questions about why taxpayers foot the bill for these facilities.
On October 15, 2015, the Mercatus Center at George Mason University released its findings on the long-term economic effects of sports franchises and the impact of building stadiums and arenas over the prior 15 years. Researchers reached the following conclusion about the local economic impact of sports in general: “Though sports are often perceived as a major economic force, sports at most account for less than 5 percent of the local economy, with the majority of estimates putting that number under 1.5 percent. Simply stated, sports teams are not the star players in local economies.” They found that subsidizing professional sports teams may reduce economic growth: “Individual coefficients, such as stadium or arena construction, sometimes have no impact, but frequently indicate harmful effects of sports on per capita income, wage and salary disbursements, and wages per job. When the effect of these coefficients appears to be positive, it is generally so small as to be insignificant.”
Taxpayers not only get stuck with the bill for stadiums and arenas, they are also sometimes on the hook for a team’s practice facility. Take the owners of the Washington Wizards and Washington Mystics, for example. They are poised to begin construction on a $55 million practice facility in Washington, D.C. and expect taxpayers to cover 91 percent, or $50 million of that amount. Given the minimal return on investment to taxpayers from stadium construction, the chances of getting any return on a practice facility are extremely low.
The story is the same in municipal areas across the country; sports teams are relying on taxpayers and consumers to cover most, if not all, of the cost of their brand-new facilities. On June 14, 2016, Salt Lake City approved $22 million in tax incentives to upgrade the Utah Jazz’s arena, putting the burden on local taxpayers. Yet, the owners of the Jazz, the Larry H. Miller Group, are a successful billion-dollar corporation that doesn’t need public money to fund the project.
It’s not just the NBA that’s creating a problem. The NFL is a major player in the public funding derby, with taxpayers spending nearly $7 billion on stadiums in the last two decades. (The NFL made $10 billion in revenue last season.)
On November 5, 2016, voters in San Diego will decide whether the city should increase hotel taxes and tourism fees to help pay for a $1.8 billion new football stadium and convention center annex downtown. The San Diego Chargers would pay $350 million and borrow $300 million from the NFL, making the ballot measure worth $1.15 billion. Meanwhile, the city council is completely ignoring a proposal spearheaded by former Councilman Carl DeMaio to use $1.5 billion private funds to build a new stadium.
One of the most illustrative examples of opportunity costs associated with such flashy ventures is Lucas Oil Stadium, home to the Indianapolis Colts. When the stadium opened in 2008, the franchise was worth $1 billion. Taxpayers were still forced to hand over $619.6 million for the construction and long-term infrastructure costs of the facility, which remains the largest sum of public stadium funding in NFL history. The city of Indianapolis raised hotel, restaurant, and rental car taxes to come up with the money.
Even professional athletes have begun to rethink the practice. Famously outspoken Seattle Seahawks cornerback Richard Sherman gave an interview to ESPN on June 9, 2016, in which he said he opposes “spending billions of taxpayer dollars on stadiums.” He went on to say he would rather see “the billionaires who actually benefit … pay for them.” Sherman’s Seahawks raked in $300.3 million in taxpayer funds to build their stadium in 2002.
In many cases, states and cities have to raise taxes or cut budgets and programs to fund these new stadiums, siphoning precious and often scarce public resources away from more pressing needs. In one of the sadder examples, Hamilton County Ohio struck one of the worst professional sports deals in order to fund two new stadiums for the Cincinnati Bengals and Reds. This is a county in which one in seven people lives beneath the poverty line. The city also had to cut budgets for schools and sheriff departments. New sports stadiums should not take priority over education and law enforcement.
The Hamilton County debacle is just one of many examples of how local governments have done a disservice to taxpayers. And this is all before the NHL moves to Las Vegas, where it appears the odds will really be stacked against taxpayers.