Stadiums, Mega Events, and Public Finance Follies

Victor Matheson, College of the Holy Cross

Minnesota Economic Association

Hamline University, October 2013

Is commercial sport a wise use of taxpayer money?

Commercial sport is heavily subsidized in the US and MN“Without professional sports the Twin Cities are just a cold Omaha” – H.H. Humphrey, 1976

“Stadiums should be like libraries. If the taxpayers build it, they should be able to use it for free.” – Jesse Ventura, 1999

“This should be the ‘people’s stadium’.” – Mark Dayton, 2013

Stadium construction since 1990

LeagueStadium Projects

Cost (Nominal) Public Cost

Public Percent

NFL 28 (out of 31) $ 10,537 $ 6,380 61%

MLB 26 (out of 30) $ 9,393 $ 5,511 59%

MLS 17 (out of 18) $ 2,340 $ 1,249 53%

NBA 26 (out of 30) $ 6,115 $ 3,126 51%

NHL 26 (out of 30) $ 5,451 $ 1,974 36%

Total 111 out of 127 $ 31,201 $ 17,612 56%

Stadiums Opened

0

5

10

15

20

25

30

35

Number of Stadiums

Cost of Stadiums

* 2007 dollars.

Percentage Financed by Public

A closer look at the NFLTeam Stadium Built Cost (Nominal) Public Cost Public PercentNew Orleans Superdome (repair and rehab) 2011 $ 505 $ 490 97%Giants/Jets New Meadowlands Stadium 2010 $ 1,600 $ - 0%Kansas City Arrowhead Stadium (rehab) 2010 $ 375 $ 250 67%Dallas Cowboys Stadium 2009 $ 1,150 $ 325 28%Indianapolis Lukas Oil Stadium 2008 $ 720 $ 720 100%Arizona University of Phoenix Stadium 2006 $ 371 $ 267 72%Philadelphia Lincoln Financial Field 2003 $ 285 $ 228 80%Green Bay Lambeau Field 2003 $ 295 $ 251 85%Chicago Soldier Field 2003 $ 600 $ 450 75%New England Gillette Stadium 2002 $ 325 $ 33 10%Houston Reliant Stadium 2002 $ 300 $ 225 75%Detroit Ford Field 2002 $ 300 $ 219 73%Seattle Qwest Field 2002 $ 300 $ 201 67%Pittsburgh Heinz Field 2001 $ 230 $ 150 65%Denver Invesco Field 2001 $ 365 $ 274 75%Cincinnati Paul Brown Stadium 2000 $ 400 $ 400 100%Cleveland Browns Stadium 1999 $ 283 $ 255 90%Tennessee LP Field 1999 $ 290 $ 220 76%Buffalo Ralph Wilson Stadium (rehab) 1999 $ 63 $ 63 100%Baltimore M&T Bank Stadium 1998 $ 220 $ 176 80%Tampa Bay Raymond James Stadium 1998 $ 169 $ 169 100%San Diego Qualcomm Stadium 1997 $ 78 $ 78 100%

Washington FedEx Field 1997 $ 250 $ 70 28%Oakland Oakland Coliseum (rehab) 1996 $ 200 $ 200 100%Carolina Bank of America Stadium 1996 $ 248 $ 52 21%Jacksonville Everbank Field 1995 $ 121 $ 121 100%

St. Louis Edward Jones Dome 1995 $ 280 $ 280 100%

Atlanta Georgia Dome 1992 $ 214 $ 214 100%

Total $ 10,537 $ 6,380 61%

MN Vikings - Bucking the TrendTotal stadium cost: $975 millionPublic cost: $498 million State contribution (gambling) $348 million City contribution (downtown)$150 millionPrivate cost: $477 million NFL subsidy $200 million Naming rights ($6-8/year) $125 million Personal seat licenses $ 80 million Vikings/Zygi Wilf $ 72 million

Who benefits from stadium subsidies?

Owners?

Players?

Fans?

Cities?

“Economic Impact” StudiesOften commissioned by groups with a vested

interest in the outcome of the study. Used to justify public subsidies.

Typically measure gross economic impact not net economic impact.

Generally ignore substitution effects, crowding out, and large leakages from sports.

Exaggerate opportunities for outside events.

Independent Economists Look back after new stadiums, new/relocated

franchises, work stoppages, or mega-events.Measure income, GDP, employment/unemployment,

taxable sales, tourist arrivals, or hotel occupancy.Remarkable agreement among economists, finding

that spectator sports result in little or no measurable economic benefits on host cities.

Expensive methods to promote local development.As a rule of thumb, take whatever the boosters say

and move the decimal point one place to the left.

The sales job – Wrigley Field

The reality – U.S. Cellular Park

The reality – HHH Metrodome

Policy implications

The sum total of the independent evidence does not suggest that sport subsidies standing alone produce social value in excess of their social costs. As part of a larger redevelopment plan, expenditures on teams, facilities, and sports mega-events may induce an increase in economic activity in the urban core, but that may come at the expense of other parts of the metropolitan or regional economies.

Why do teams get subsidies?Classic special interest problem in political

economy. A small number of people stand to make huge

profits – owners, players, construction firms, media, etc. A large number of people stand to lose a small amount over a long period of time. Jerry Jones – spent over $1 million lobbying for new stadium in Arlington. Opponents spent $20,000.

Conclusions and policy implications

Professional leagues are extremely effective at exerting their monopoly power to pit city against city and neighborhood against neighborhood.Cities can and should take steps to prevent sports from “playing” cities rather than the other way around.

A final comparisonMarathons vs. professional

sports

Boston Marathon is worlds oldest, most prestigious (and fastest) marathon in the world.

Attracts roughly as many live spectators each year as the Patriots, the Bruins, or the Celtics.

Among the most “non-local” races in the world.

The Boston MarathonThe Boston Marathon receives no public

subsidy.

Honolulu Marathon, which generates as many new net arrivals as the Pro-Bowl, receives no subsidy while the Pro-Bowl receives a direct payment in excess of $5 million from the HTA.

Why?

No one has a monopoly on the distance 26.2 miles.

Substitution EffectsMost fans at sporting events are local

residents. Their spending at sporting events displaces spending elsewhere in the economy.

Evidence? During 2002 Winter Olympics, retail sales at hotels and restaurants rose by $80 million, but… sales and general merchandise stores fell by $152 million.

More evidence? Attendance at cultural institutions and theaters during sporting events.

Crowding outCrowds and congestion associated with

sporting events deter other visitors.“Nobody goes there anymore. It’s too

crowded.” – Yogi BerraEvidence? NFL Pro-Bowl in Honolulu.

Attracts 28,000 out of state attendees. Visitor arrivals in Hawaii are only 6,000 above normal during Pro-Bowl week.

More evidence? Ski resorts in Utah 2002. More evidence? Broadway and London

shows.More evidence? Great America vs. SF 49ers.

LeakagesNationwide, roughly 95% of the labor force

lives full-time in the metropolitan area in which they work. Most workers are also local hires.

In the NBA, 20% of players live during the offseason in the city for which they play. Almost none live locally prior to hiring.

Mega-events have additional issues. Prices increase but wages don’t. Also, specialized labor may be imported for the event. (Back)

What does $660 million buy these days?