Source: Journal of Policy Analysis and Management, Volume 38 Issue 1, Winter 2019
Should the Construction of New Professional Sports Facilities Be Subsidized?
Source: Brad R. Humphreys, Journal of Policy Analysis and Management, Volume 38 Issue 1, Winter 2019(subscription required)
North American governments subsidize the construction of new professional sports facilities. Since 1970, 129 new or replacement stadiums and arenas for Major League Baseball (MLB), National Basketball Association (NBA), National Football League (NFL), and National Hockey Association (NHL) teams opened in Canada and the United States at a cost of 52.44 billion (in 2017 dollars). Total direct state and local subsidies accounted for $32.5 billion, about 65 percent of costs. Gold et al. (2016) estimated that the federal government provided an implicit $3.2 billion subsidy and lost $3.7 billion in forgone tax revenues on 36 new facilities that opened since 2000; the use of tax exempt bonds to finance construction generates indirect subsidies.
New professional sports facility construction projects will likely increase over the next 10 to 15 years. Figure I, which shows the average age of the existing facilities replaced by a new stadium or arena since 1970, suggests why. The trend line drawn through these data has a negative, statistically significant slope of about - 0.4. The average age at which an existing sports facility was replaced with a new one has steadily declined over the last 50 years.....
Is There a Case for Subsidizing Sports Stadiums?
Source: Victor Matheson, Journal of Policy Analysis and Management, Volume 38 Issue 1, Winter 2019
The case in favor of subsidizing large sports facilities is much harder to make than the one against. The peer-reviewed literature typically finds little or no evidence that the construction of new professional sports facilities results in significant increases in any type of measurable economic activity including personal income, wages, employment, tax revenues, or tourist spending (Coates & Humphreys, 2008). In addition, the privately funded consulting reports that frequently accompany stadium proposals, and which invariably tout large economic benefits from subsidized stadiums and arenas, have been shown to suffer from significant theoretical flaws that make their conclusions suspect at best, and simply false at worst (Crompton, 1995). In fact, some academic economists suggest, only partially in jest, that if one wants to know what the true economic impact of a stadium project will be, simply take whatever number the consultants project and then move the decimal point one place to the left.
However, in specific circumstances, it may be possible to justify some level of public subsidies for the construction of sports venues. This should not be interpreted to mean that the optimal level of public spending is the roughly two-thirds of average stadium construction costs that taxpayers paid for during the period from 1990 through 2008 or cwn the roughly one-third of stadium construction costs that taxpayers paid for on average since the Great Recession in 2008. Rather, the only claim being made here is that the optimal level of funding may be higher than zero percent…..