The longer you spend in local government, the more likely it becomes that you’ll have to deal with one of the more distinctly American interactions between government and business: Public subsidies for professional sports stadiums.
More than anything else, it’s important for local leaders to understand one simple fact: Sports stadiums are provably ineffective economic development tools.
Once you look past rosy economic impact predictions and the glittering stadium renderings, the evidence of decades’ worth of real-world results from across the country is crystal clear: Stadiums strike out when it comes to economic development.
Economists: Game Over
It’s hard to find anything that economists agree about more than the economic futility of municipal governments subsidizing sports stadiums. In 2017, the University of Chicago’s Booth School asked some of the world’s most eminent economists whether subsidized sports stadiums are likely to cost taxpayers more than they return in benefits. The panel – which included an incredible seven Nobel Prize winners in economics – was virtually unanimous in its skepticism with 83% agreeing that stadium subsidies aren’t worth the cost, 11% not sure and just 4% in favor of them.
The evidence is so clear that economists have largely stopped studying the issue as there’s really nothing left for them to learn. Earlier this year, a comprehensive survey of the available research to date by three respected sports economists from Kennesaw State University, the University of Maryland, Baltimore County and West Virginia University noted that there’s really no need for any more studies dunking on teams’ economic impact claims: “The scale is tipped so heavily against the desirability of stadium projects in improving resident welfare that additional studies are unlikely to have further influence beyond confirming what is already known to researchers in the field.”
Economic “Anchors” or Just Economic Dead Weight?
You don’t have to be an economist to understand why stadiums are terrible at delivering a meaningful economic impact to a city. Instead, all you have to be able to do is simply count the number of customers coming through the gates, and the number of days in the year that those gates are actually open.
Annual sports league attendance (2019 pre-COVID league-wide averages) and annualized daily (365-day) averages:
MLB: 2,282,622[1] – 6,254/day
NBA: 731,114[2] – 2,003/day
NHL: 606,625[3] – 1,662/day
NFL: 527,964[4] – 1,446/day
Minor-League Baseball (AAA): 449,998[5] -1,233/day
MLS: 362,274[6] – 993/day
Minor-League Soccer (USL Championship): 75,961[7] – 208/day
Three million fans in a season is the traditional “great attendance” mark for a Major League Baseball (MLB) team, with usually just four or five teams hitting that mark in any given year. However, while three million customers is a big number in the sports business world, it’s relative peanuts for other kinds of businesses that are open year-round. For instance, it’s roughly equivalent to the annual customer count of a single downtown department store, or a successful big-box retailer such as a Walmart Supercenter.
Or, consider a professional football stadium. The average National Football League (NFL) team drew roughly 530,000 fans to home games in 2019, before COVID upended sports. That’s a lot of economic activity in the surrounding area on gamedays, but it starts looking a lot less impressive when you spread that out over the other 357 days of the year. In that light, the average daily impact of an NFL team spread out over the course of the entire year is between the annual customer count of an average gas station convenience store (400,000 per year) and an average supermarket (725,000 per year).
Additionally, the jobs created by stadiums also tend to be dominated by part-time, seasonal jobs in concessions and other roles that deliver a few hours of gameday employment. This makes them largely second jobs rather than roles that meaningfully boost employment in a community.
For smaller cities considering minor-league stadiums, the math gets even worse. For instance, a minor-league soccer stadium’s predicted annual attendance in Pawtucket, RI would have resulted in an annualized 350 people a day. That’s equivalent to the customer traffic of just one of New England’s beloved Dunkin’ Donuts stores.
Critically, these aren’t new customers magically summoned from thin air. Sports teams compete with other local businesses for residents’ entertainment budgets. In cities without sports teams, people don’t sit home doing nothing. Rather, they go out and spend their entertainment dollars on other things that create jobs and economic activity such as bowling alleys, movie theaters, concert venues, restaurants, bars and other local entertainment options.
Thanks in part to the Internet and social media, it’s gotten easier for stadium subsidy opponents to get their arguments out into the public. As a result, more Americans are skeptical than ever before about the idea that a stadium will make a huge difference in their community’s fortunes.
To combat this, teams have started pitching stadiums as the “anchors” of larger districts that promise to broaden and deepen the economic impact of a stadium. However, the limited impact of the stadium in terms of creating foot traffic means that those sorts of “stadium districts” succeed or fail on their own merits and broader economic factors, not on the presence of the stadium in the middle of them.
In Atlanta, local sports economist J.C. Bradbury of Kennesaw State University performed a comprehensive economic impact review of the first three full years of the Atlanta Braves’ Truist Park and surrounding “The Battery Atlanta” development, which had cost Cobb County $300 million in subsidies. The results:
- Sales tax revenues did increase. However, much of the spending at the ballpark and new businesses came at the expense of existing businesses in the community.
- Local property values did not increase more than other Atlanta-area communities
- Increased revenues from the stadium did not cover the county’s costs. Debt payments and other expenses were almost $15 million per year more than the growth in revenues.
Punt it to the Voters
The challenge for local officials – especially elected officials who are dependent on voters for their continued position – is that the emotional investment most Americans have in sports is deeply out of balance with the economic importance of sports to our communities. While professional sports may be ubiquitous in our communities and our media, in reality they’re almost irrelevant from an economic perspective. In fact, Temple University sports economist Michael Leeds once showed that the combined economic impact of all five major Chicago professional sports teams was less than 1% of the city’s entire economy.
The Bulls, Blackhawks, Bears, Cubs and White Sox could all go away tomorrow, and Chicago’s economy would hardly notice. The people of Chicago, however, would likely consider it the greatest tragedy since Mrs. O’Leary’s cow kicked over the lantern. That’s what local elected officials have to deal with when trying to make fiscally responsible decisions about stadium subsidies – and that’s why they’re increasingly turning the decision over to the voters themselves.
As Victor Matheson recently noted for BCP, the Buffalo Bills’ stadium deal stands out for the burden it places on state and municipal budgets. But polling from Siena College found 63% of voters in New York State opposed to the Bills’ stadium deal, with just 24% approving. Even voters in western New York were opposed to the deal, 65-31%. Had the Bills’ stadium deal been put in front of New York’s voters, it’s likely it would have failed decisively.
This points to a practical way forward for local leaders: Put stadium deals on the ballot. In recent years, Americans across the country have become far more skeptical about the claims of stadium subsidy supporters:
- An Albuquerque, a $50 million soccer stadium bond vote was rejected by a nearly 2-1 margin despite the support of the mayor and the team spending almost $900,000 on a pre-election advertising campaign.
- In 2006, Seattle voters passed Initiative 91 requiring the city prove that the financial return of any sports subsidy be equal or better to the return on investing the same amount of money in 30-year T-bills. (The pro-initiative group had the wonderful name “Citizens For More Important Things.”)
- In 2002 and 2004, voters in St. Louis passed referenda requiring that any future stadium subsidies be approved by the electorate. (A judge later found that requirement to be unenforceable.)
- Louis voters also rejected subsidies for a new MLS stadium in 2017 – that the city’s Board of Aldermen later subsidized regardless through property tax abatements and sales tax exemptions for construction materials.
- In 2011, voters in Nassau County, NY defeated a proposed $400 million fund to support an NHL arena and minor-league ballpark.
- In San Diego, voters decisively turned down proposals in 2016 to raise hotel taxes to pay for a new stadium for the Chargers.
Not every stadium vote goes down to defeat. But enough do – especially when local leaders communicate clearly about the actual financial issues and tradeoffs involved – that it is a viable option for elected officials who want to make the right fiscal decision but are concerned about political implications.
Finance Concerns
Those financial concerns are very real, and they have serious implications for the long term.
Stadium subsidies usually require bonding by local governments, and the money to pay off both the principal and interest on that debt has to come from somewhere. According to a 2016 report from the Brookings Institution, 33% of MLB stadium bonds’ revenue streams rely on taxes on tourism-related sources such as hotels and rental cars, 40% rely on a sales tax and 13% are budgeted out of governments’ general revenues.
As stadiums (and related projects such as team practice facilities) have gotten more expensive, they have begun to reach the limits of municipalities’ borrowing power. One $340 million subsidy project moving the NFL’s Carolina Panthers’ team headquarters and practice facility a grand total of 22 miles from Charlotte, North Carolina to Rock Hill, South Carolina was justified with a multiplier of 39.1,. effectively promising that each job moved some 20 miles south from Charlotte would create 39.1 new jobs in the destination community. The project later fell apart when Rock Hill’s leaders discovered that bond underwriters were unconvinced by that magic multiplier and would not issue bonds to cover the city’s $225 million share at anything other than “junk” ratings.
Conclusion
Municipalities looking to pro sports for economic growth have the relationship exactly backward. Places turn themselves into “big-league” cities first, then pro sports show up to profit from the local economy. Fast-growing metro areas like Phoenix (1988), San Jose (1991), Jacksonville (1993), Charlotte (1995), Nashville (1998), Columbus (2000), Oklahoma City (2008), Las Vegas (2017) and Austin (2018) didn’t get major pro sports teams until their growth was well underway.
Meanwhile, Green Bay, Wisc. has had a professional football team for as long as such a thing has existed, and its population and economy have been stagnant – at best – for decades.
Stadiums don’t create economic growth, they follow it. For fiscally responsible local leaders who still have to keep an eye on the next election, that’s an argument that local voters can understand.
[1] https://www.espn.com/mlb/attendance/_/year/2019/sort/allAvg
[2] http://www.espn.com/nba/attendance/_/year/2019
[3] https://www.espn.com/nhl/attendance/_/year/2020
[4] http://www.espn.com/nfl/attendance/_/year/2019
[5] https://ballparkdigest.com/2019/09/09/2019-affiliated-attendance-by-classification/
[6] https://soccerstadiumdigest.com/2019-mls-attendance/
[7] https://soccerstadiumdigest.com/2019-usl-championship-attendance/