Amid Building Boom, Debate over Publicly Funded Stadiums Goes On

Source: Elaine S. Povich, Pew Charitable Trust, July 11, 2016

Missouri and St. Louis tried mightily to keep the NFL Rams from decamping for Los Angeles, offering $400 million in state and city money for a new stadium. To justify the public expense, officials argued that the team, which moved from Los Angeles to St. Louis two decades ago, was an economic engine for the region. They offered to put up the money even though the Rams’ billionaire owner, Stan Kroenke, could afford to build a new stadium on his own. … Two other NFL teams, the San Diego Chargers and the Oakland Raiders, also are eyeing a move to the nation’s second largest city. But Nevada is hoping to grab the Raiders for itself, by dangling a $1.4 billion stadium that would be paid for, at least in part, by the taxpayers. Meanwhile in Atlanta, construction is underway on a new $950 million stadium for the NFL Falcons, to be financed partly through bonds secured by extending a tax on hotel and motel rooms. Amid all the jockeying, a decadeslong debate rages on: Does it make economic sense for cities and states to use public money to build sports facilities? …

… But many economists maintain that states and cities that help pay for new stadiums and arenas rarely get their money’s worth. Teams tout new jobs created by the arenas but construction jobs are temporary, and ushers and concession workers work far less than 40 hours a week.  Furthermore, when local and state governments agree to pony up money for stadiums, taxpayers are on the hook for years — sometimes even after the team leaves town. St. Louis, for example, is still paying $6 million a year on debt from building the Edward Jones Dome, the old home of the Rams that opened in 1995, despite the team’s move to California. The debt is financed by a hotel tax and taxes on “game day” revenues like concessions and parking. …

Related:

New stadiums cost more than just money
Source: Yousef Baig, The Weekly Calistogan, July 29, 2015

…The first place to start is with the financing. A few years ago, a Harvard urban planning professor named Judith Grant Long put out a book called “Public/Private Partnerships for Major League Sports Facilities” that shed some light onto what these deals really cost taxpayers and the subsequent spillover effect into other areas. … The average public/private partnership has the cities forking over 78 percent of the costs, and the teams themselves just 22 percent. Additionally, she added, taxpayers spent about $10 billion more than originally estimated on the construction of all 121 stadiums that were in use during 2010. Ownership groups (made up of billionaires) tell city officials that they can’t afford the hundreds of millions of dollars required to erect these modern coliseums. They talk about the boon it will bring to the surrounding area, the increase in tourism, and the creation of jobs, while in the same breath, threatening to leave for another city if they don’t oblige. …

Hamilton County, which took on stadiums for both the Cincinnati Bengals and Cincinnati Reds in the mid-1990s, has been crippled with debt ever since. In 2013 alone, annual stadium expenses totaled $43 million. Since these two stadiums were built, a public hospital was sold, mass transit investments were put off, and the tiny amount of private development along the Ohio River, which was a big selling point to get an increase in sales tax approved, has still required additional public subsidies. …
To afford the $720 million required to build Indianapolis’ Lucas Oil Stadium, the city raised hotel, restaurant and rental car tax rates. Five months after it opened in 2008, a first-year deficit of $25 million was projected to jump to $45 million a year later. In June 2013, the city of Detroit, amid a financial crisis and filing for bankruptcy, stayed the course with its $444 million hockey arena for the Red Wings. A $450 million bond with a 30-year term fit the average arrangement mentioned in Long’s book, leaving taxpayers responsible for $283 million of it. …

John Oliver: How Sports Teams Are Ripping Us Off
Source: Marlow Stern, Daily Beast, July 12, 2015

After a week off, John Oliver and his award-worthy HBO program Last Week Tonight are back, and this time, they’re targeting one of America’s favorite pastimes: pro sports….. “The vast majority of stadiums are made using public money,” said Oliver, citing a report from 2012 stating there’s been “$12 billion spent on the 51 new facilities opened between 2000 and 2010.” “Which begs the question: Why?” he asked…… But the theory that building a new stadium boosts a city’s economy is, according to an economic study cited by Oliver, a total myth. “A major review of almost 20 years of studies shows economists could find no substantial evidence that stadiums had increased jobs, incomes, or tax revenues,” he said….Recently, Hamilton County, Ohio, spent more than $50 million on stadium debt service and other costs in 2014 for the Cincinnati Bengals and Reds, even though the county has had to sell a public hospital, cut 1,700 jobs, and delay payments for schools because of budget gaps.

Stadiums
Source: Last Week Tonight with John Oliver, July 12, 2015

Cities spend massive amounts of public money on privately-owned stadiums. Cities issue tax-exempt municipal bonds that — wait, don’t fall asleep!

Public-Private Partnerships for Major League Sports Facilities
Source: Judith Grant Long, Routledge, ISBN-13: 978-0415806930, 2012
(purchase required)

This volume takes readers inside the high-stakes game of public-private partnerships for major league sports facilities, explaining why some cities made better deals than others, assessing the best practices and common pitfalls in deal structuring and facility leases, as well as highlighting important differences across markets, leagues, facility types, public actors, subsidy delivery mechanisms, and urban development aspirations. It concludes with speculations about the next round of facility replacement amidst rapid changes in broadcast technology, shrinking domestic audiences, and the globalization of sport.

Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?
Source: Dennis Coates and Brad R. Humphreys, Econ Journal Watch, Vol 5 no. 3, September 2008

From the abstract:
This paper reviews the empirical literature assessing the effects of subsidies for professional sports franchises and facilities. The evidence reveals a great deal of consistency among economists doing research in this area. That evidence is that sports subsidies cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates. The paper also relates survey evidence showing that economists in general oppose sports subsidies. In addition to reviewing the empirical literature, we describe the economic intuition that probably underlies the strong consensus among economists against sports subsidies.