Arnold Kling  

Sports Stadiums

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The Atlantic Monthly points to this survey of the economic impact of pro sports stadiums. The verdict from many economic studies is that the marginal contribution of a sports team to a local economy is small, and perhaps negative. When a stadium is financed with public money, the benefits do not accrue to the public.


Most revenues from sports facilities, even those built with public funding, tend to flow to the sports teams and not into the coffers of the public sector. While the previous era of sports facilities were unable to cover their debt payments (Baim, 1994), many modern sports facilities generate revenues sufficient to cover their construction and operating costs. Luxury suites, club seats, stadium naming rights, pouring rights, parking revenues, and ticket revenues are just some of the revenue streams that flow from these facilities, streams that generate in excess of the $400 million in funds required for modern sports facilities. However, in almost all cases, these revenues flow to the teams and not to serve the debt from these projects.

For Discussion. I have argued that cities should own sports franchises, so that both the benefits and the costs of sports teams would be socialized. Would this be better than the current arrangement?


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CATEGORIES: Cost-benefit Analysis



COMMENTS (6 to date)
Bernard Yomtov writes:

Arnold,

Could you elaborate a bit on your position on sports franchises?

It has always seemed to me that they should be treated no differently than other private businesses. I find the huge subsidies outrageous, and am not at all surprised that the claimed public benefits are small or non-existent.

Why not just let them operate on the same basis as any other private concern?

Arnold Kling writes:

Some reasons why I do not believe that baseball should not be treated like other businesses (I don't know or care as much about football, basketball, or other sports):

1. Innovation in most businesses is a good thing. I am not convinced that innovation is good in baseball.

2. A more socialist system in baseball might reduce the disparities between teams, which I think would make games and races more interesting.

3. Since the cities end up subsidizing the teams anyway, they might as well own them.

Chris Rasch writes:

1. Aren't ticket sales the best judge of whether an innovation is good or not? If it isn't, as judged by baseball's fans, sales will drop; if it is; sales will increase.

2. Why do you think that cities owning the teams would result in reduced disparities? Will changing the formal ownership change the fact that a city like New York will be able to afford to pay much more than a city like Minneapolis?

3. Why not transfer ownership of the steel industry to the feds? After all, they're effectively subsidized by the steel tariffs. Or all the farmlands? I fail to see why even greater state control of sports teams would be better for me than the existing situation, and it seems even farther from my desired outcome ( no subsidies at all) than the status quo.

This would not be so upsetting were it not for the fact that sports stadiums have been accepted as a "public use" for eminent domain purposes, so that government can take people's homes from them in order to build these stadiums--hardly the sort of thing the authors of the Fifth Amendment considered a public use.

It would be helpful to expand this research to include Olympic villages. I believe it was Virginia Postrel who pointed out recently that whole neighborhoods are torn down to create these villages--and then when the games are over and folks go home, you're left with a vast, empty ghost town. Is that really good for the economy?

Eric writes:

The issue has been framed as owners vs. fans or owners vs. taxpayers. But isn't the real issue PLAYERS vs. fans?

What portion of revenue goes to the players? In MLB and the NFL, it is like 95% or more.

And you can argue that the money actually goes to a very few players, as A-Rod makes more money than the entire D-Rays roster.

Hawy writes:

I would just like to comment on Eric's response to the question. If I'm not mistaken in the NFL half of the revenues go to players and the other half to owners. Especially with the salary cap in football this causes teams stay under a certain amount, while in baseball there is no limit to how much a player may get and A-Rod is a prime example of that.

Secondly, I agree with Arnold Klling that the people or taxpayers should get a good percentage of the benefit from sports teams. I picture the taxpayers and fans as being the investors and the revenues that do not go back into the city as a loss to them.

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