Should cash-strapped states and cities, facing billions in unfunded obligations and deteriorating government services, fund lavish sports arenas? Advocates – mostly billionaires who want taxpayers to pay for these stadiums – have long touted the economic benefits of having city hall or state legislatures fund all or most of these buildings housing baseball, basketball, football, or hockey events. Critics have repeatedly rejected these pleas from affluent owners, arguing that politicians should fund essential services instead, not sports. Who’s right? It appears that the public is siding with the naysayers – and with just cause.
No Tax Dollars for Sports Arenas
Will the Kansas City Royals and the Kansas City Chiefs skip town? After more than half (58%) of voters rejected a sales tax measure this past spring that would have supported funding a new downtown ballpark and substantial renovations for the football stadium, their future is ostensibly in doubt. The Royals, which just lost its National League Division Series to the New York Yankees, want to use a portion of the tax revenue to construct a $2 billion ballpark. In comparison, the Chiefs sought a share of the receipts to pay for an $800 million overhaul of Arrowhead Stadium.
“We’re deeply disappointed as we are steadfast in our belief that Jackson County is better with the Chiefs and the Royals,” said Royals owner John Sherman in a statement. “As someone whose roots run deep in this town, who has been a dedicated fan and season-ticket holder for both of these teams, and now leading a remarkable ownership group.”
Last month, hundreds of individuals rallied in opposition to a proposed sports arena for the Philadelphia 76ers. Supporters say the $1.5 billion project would create many jobs and stimulate the local economy. Opponents are worried about destroying Chinatown, pricing out residents, and affecting schools. “Our schools don’t have air conditioning, libraries or playgrounds. Why should the city let a billionaires’ playground destroy Chinatown?” a teenage girl asked at a town hall meeting.
Philadelphia could be in a pickle because New Jersey has tried to lure the Sixers with $400 million in tax credits. At the same time, Philadelphia and Pennsylvania could lose more than $1 billion in tax revenue, offsetting revenues a downtown arena would generate, according to a study released in February.
“It’s possible that there might actually be no impact or a positive impact. But under a relatively conservative scenario, there will be some negative impact on existing businesses due to increased congestion, traffic during the construction period, people avoiding the area as some of the streets will be closed and all the traffic patterns will be disrupted,” said Dr. Arthur Acolin, the Bob Filley Endowed Chair in the Department of Real Estate at the University of Washington.
The sentiment is vastly different from what has transpired elsewhere. Las Vegas recently spent more than $1.1 billion in public funds to establish a new ballpark and football field. Buffalo approved $850 million in funding for the Bills’ new stadium. Nashville granted a $1.26 billion subsidy for the Tennessee Titans. It is only a matter of time before the owners of the Chicago White Sox and Chicago Bears garner public investments in their respective sports arenas.
But is opposing using taxpayer resources to construct lavish sports arenas justified? The economic literature suggests so.
Economics: No Fan of Sports
Over the past three decades, taxpayers have doled out approximately $30 billion on stadiums, excluding various tax breaks, exemptions, and lost federal revenues (sorry, tax-exempt municipal bonds). A Citizens Against Government Waste report from 2023 estimated that state and local taxpayers have spent more than $43 billion on professional sports stadiums since 2000.
Despite promises that these costly sports arenas would generate significant economic activity and create thousands of jobs, taxpayers never receive a return on their investment. A plethora of studies have reached the same conclusion: Taxpayer subsidies to build or renovate football fields, hockey rinks, or baseball diamonds never pay off as intended.
A recent Tax Foundation report determined that “stadium subsidies fail to generate new tax revenue and new jobs or attract new businesses.” Adam Hoffer, Director of Excise Tax Policy at the Tax Foundation, stated: “While attending a sporting event or a concert in a new, publicly subsidized venue might benefit fans of the team or those who attend the event, those subsidies shift spending that would have occurred in other parts of the city or state in the absence of a new sports stadium or arena.”
In 2022, it was reported that taxpayers were still responsible for $640 million ($383 million in principal and $256 million in interest) from 2002 renovations to the Chicago Bears’ Soldier Field. This is $63 million more than what was initially borrowed.
Michael Leeds, a sports economist with Temple University, told Investigative Post that a professional baseball team contributes as much to the economy as a “mid-sized department store.” This makes sense when examining the situation from the perspective of the “substitution effect,” an economic concept that suggests a sporting event attendee will shift his or her spending from one area to another. The Brookings Institute endorsed this idea in a September 2016 study, writing that “any economic activity generated while attending a game, will largely if not entirely be offset by reduced spending on other local leisure activities.”
Another argument favoring subsidies is that sports arenas can be used even during the off-season. The research indicates this is also wrong. Sports economist Victor Matheson found that NFL stadiums hosted 4.9 non-league events per year between 2000 and 2019. Put simply, these buildings sit empty for most of the year.
A New Consensus
Economists say that the one universal economic idea agreed upon by most is that price controls are dangerous. These days, it could be safe are say that one uniform opinion is that subsidizing billion-dollar sports arenas is a terrible use of public funds that abandons public needs. Billionaires possess plenty of capital to construct these modern-day colosseums. Why financially abuse taxpayers who are already forced to send their children to deteriorating schools and take dilapidated public transit?
If teams can spend hundreds of millions of dollars on a single player, they can fund their own headquarters.
