After a thrilling overtime Super Bowl, the NFL draft and maneuvering by NFL teams to improve their rosters with free agent players, the high-stakes off-season activities are still going on. NFL teams are once again lobbying for public funds to help build new stadiums.
Voters in San Diego soundly rejected an increase in the city’s hotel tax to partly fund a new stadium and conference center and after 50 years in San Diego the Chargers are headed to Los Angeles to share a new $2.7 billion privately-funded stadium with the recently relocated Rams. Voters in Las Vegas, on the other hand, approved an increase in their hotel tax to contribute $750 million to a new $1.9 billion stadium to lure the Oakland Raiders. (By comparison, the Hoover Dam was built for $805 million in today’s dollars.) These kinds of moves are nothing new; in 1957 the reluctance of New York City to work with the Brooklyn Dodgers to acquire affordable land for a new stadium was a major factor in the Dodgers’ move to Los Angeles.
The changing economics of professional sports contributes to the quest for new stadiums. As the Wall Street Journal described the Chargers’ move, lack of market competition, community goodwill and loyal fans are less important to a team’s value than stadiums with adjacent development opportunities, stadium naming rights, sponsorship deals and media exposure.
The sales pitch for new stadiums usually includes a claim of economic benefit to the city in terms of jobs, other development and auxiliary business generated to support stadium attendance. Unfortunately, most studies of these hoped-for economic benefits conclude that there is no net economic benefit and can often be an economic cost through debt repayment and other government obligations. Even the most successful stadiums are dependent on their location and their frequency of use; a single-purpose football stadium with 10 games a year is the least likely to be economically beneficial. Location is often based on where there is the least opposition rather than on long-term economic impact.
Potential economic benefits are diminished by the “substitution effect” which simply means sports teams do not induce residents to increase their entertainment spending but consumers instead shift their spending on professional sports from other forms of entertainment. Governmental commitment to stadium debt can impact the ability to fund other, more basic public services. Small wonder that a recent national poll by Fairleigh Dickinson University found that 69% were opposed to the use of public funds for stadiums and 71% were opposed to tax breaks.
So how do these stadium deals get approved by voters? There is a big difference between a generic response as in the Fairleigh Dickinson and a decision that in one’s own city. Promoters have found that when the tax revenues to subsidize stadiums are presented to voters, especially if those taxes are targeted at visitors rather than city residents, the tax increases are far more likely to receive a positive response. Indeed, those tax increases can be presented in a way that seems to have little impact on individual taxpayers. Governments may consider the direct costs of land, construction, operation and debt payments but often overlook other economic costs like infrastructure improvements, business relocation, property tax breaks and public services for events.
Supporters will include economic benefits but the real emphasis is on the civic benefits of gaining or keeping a professional sports team. A stadium is a very visible project and leads citizens to feel their elected officials are trying hard to generate economic growth. Broadcasts of sporting events are seen as valuable exposure for the city and can help attract more tourists. Teams can enhance community identity and unity, especially when the team is winning, and can be a focal point for other civic initiatives. Regardless of the team’s performance, it can contribute to a deep civic pride that can encourage further public engagement and attract new talent and growth. Finally, there is the feeling that if a city has a professional sports team it is indeed “major league” and can compete on the same level with any other city.
Civic leaders are loathe to “lose” such a visible part of the community as a professional sports team but a team’s threat to relocate may be a less valuable bargaining chip than in the past. With the expansion of all the major sports leagues there are few cities left that can support a new team. Las Vegas is by far the largest US city with none of the four major professional sports (football, baseball, basketball and hockey), primarily because of concerns about gambling, but that will end this year with the NHL expansion team the Golden Knights as well as the possibility of the Raiders move. There are 11 other US metro areas with population exceeding 1 million but no major professional teams but all of those are either near other cities with teams (Riverside, CA or Providence, RI) or are “college towns” whose fan loyalties are already entrenched (Louisville, KY or Austin, TX). As a result, taxpayers are actually in a better position to call the bluff of teams looking for public funding.
There is little question that professional sports can add to the fabric of civic life. As with most non-essential government spending, though, the decision to use public funds relies on conflicting data and opinions. In the meantime let the games begin!