Future historians will look back on the 1980s and 1990s with amazement. Communities hard-pressed to keep their schools open or police on the beat nevertheless spent billions of dollars on stadiums and arenas for use by professional sports teams. Mediocre athletes were paid more in a single season than the average taxpayer earned in a lifetime. Tickets were priced so high that the average taxpayer, whose earnings were taxed to build these facilities, could not afford to walk through the turnstile.
Nationally, subsidies to professional sports facilities cost taxpayers some $500 million a year. Taxes account for some 75 percent of the expected $7 billion that will be spent on stadiums and arenas by the year 2006.
All available data suggest this is madness. Sports subsidies don’t produce economic benefits, and they unfairly burden those who don’t follow pro sports or who can’t afford to watch live games. There is some good news, however. The powerful alliances of elected officials and special interest groups that have pushed through subsidies in the past can be beaten by a series of policy changes, the most promising of which is community ownership of franchises.
Why Are Sports Subsidized?
Professional sports are subsidized, we are often told, because they produce economic benefits that more than offset their cost to taxpayers. Those benefits allegedly include construction jobs, spending in the community (creating more jobs), businesses and tourists attracted by national television coverage, and the “multiplier effect” of all of this.
Repeated examinations by independent scholars have found that those benefits are a mirage conjured up by accounting firms and consultants, paid by team owners and politicians, to help make the case for a tax hike or subsidy package. The latest addition to the research–a 17-author collaboration published by The Brookings Institution–concludes that “the economic benefits of sports facilities are de minimus.”
Why No Benefits?
To calculate the net benefit of a new stadium, the apparent or visible economic benefits must be reduced by the benefits that would have been produced had the capital and land been used some other way. Often, those alternatives would have produced a higher rate of return, meaning the net public benefit of the stadium is negative.
Most people who go to games are not from out of town, and few businesses want to locate near a sports facility. As a result, most spending is simply shifted from other local recreational opportunities, such as movies and restaurants. The jobs created by stadium development tend to be seasonal, low-paying, and part-time, such as parking cars and selling refreshments during games.
Are There Indirect Benefits?
Professional sports provide entertainment and civic pride. Robert Milbourne, executive director of the Greater Milwaukee Committee, was quoted a few years ago saying, “without major league sports, Milwaukee would be like Des Moines.” No one, apparently, wants to be like Des Moines.
It is probably impossible to measure or weigh the impact of professional sports on a community’s self-image. However, whatever the impact may be, it must reduced once again by the value that would have been generated if the money were spent on something else. This is simply the opportunity cost issue in a different guise.
If spent by the public sector, the same investment might have meant new schools, better police protection, roads, parks, or other public facilities. Surely these things would have a positive effect on the community’s self-esteem–and on the residents’ quality of life.
If the money were left instead in the hands of taxpayers, it might have meant better restaurants, a rejuvenated downtown business district, a new theme park, more amateur sports, and other kinds of public entertainment produced by for-profit and non-profit businesses. Those investments , too, would have a positive impact on a community’s self-image.
Why Shouldn’t We Subsidize Sports?
Subsidies to professional sports should be discouraged for at least five reasons. First, they divert funding from more important public services. The cost of a proposed stadium/convention facility for the Bears, for example, is nearly half the annual budget of the Chicago Public Schools. A fraction of that amount would be enough to build a dozen new schools from the ground up.
Subsidies are unfair to taxpayers. As former Houston Mayor Bob Lanier put it, “the average working person is asked to put a tax on their home, or pay sales or some other consumer tax, to build luxury boxes in which they cannot afford to sit.”
Subsidies are also unfair to businesses. No other business is given access to public funds as readily as professional sports teams. Yet other businesses must compete with professional sports for labor, capital, and customers.
Subsidies exacerbate income inequality by fueling a bidding war among team owners for elite athletes. The extraordinarily high salaries going to professional athletes lead young people to devalue education and hard work, and can fuel envy and despair among many adults.
Finally, there is a deadweight loss to society when facilities that are still functional are torn down on the grounds that they are economically obsolete. Stadiums as little as 15 years old are being demolished to make way for elaborate and expensive new structures. This is not “economic development.” It is make-work, no different than digging ditches and filling them in again.
What Can Be Done?
The dynamics of the professional sports marketplace leave taxpayers at a serious disadvantage. Across the country, taxpayer groups are outspent 10- and even 100-to-1 in public referenda on whether or not to subsidize a stadium. Even when they lose, pro-subsidy forces continue to work in city halls and in state capitals for a “deal.”
Public policy can, however, address the bidding war among communities and protect the legitimate interests of taxpayers. The use of tax-exempt bonds for stadium construction could be prohibited, for example. According to a 1996 study for the Congressional Research Service, this move alone would dry up about $100 million a year in subsidies.
Stephen Ross, an economics professor at the University of Illinois-Chicago, has suggested that Congress prohibit the use of tax subsidies to lure or retain franchises. Heartland policy advisor Robert Baade, an economics professor at Lake Forest College in Illinois, suggests requiring the leagues to give a free expansion franchise to any city that loses a franchise to another city.
A fourth possibility is community ownership of sports franchises. Consider the case of the Green Bay Packers. In 1951, stock was sold at $25 per share, raising $118,000 and putting the Packers on firm financial footing. Those stockholders now own the team. They elect a 45-person board, which in turn elects a 7-person executive committee to oversee operations. No dividends are paid on the stock, which cannot be sold or traded. In the unlikely event that the team is sold, the vast majority of the proceeds are assigned by the corporation’s bylaws to a local Veterans of Foreign Wars post.
The result of this unusual arrangement is a well-publicized love affair between the Packers and the entire state of Wisconsin. One cannot walk down a street in many of the state’s smaller towns without seeing the distinctive green and gold Packer logo on flags, bumper stickers, window decals, jerseys, banners, painted on the faces of children or carved into their hair.
The Packers, perhaps not coincidentally, are the least-subsidized professional sports team in the country and the reigning Super Bowl champs. Community ownership is a bona fide recipe for success in the NFL, fair to all taxpayers, and a way to avoid wasting hundreds of millions of dollars.
At about $250 million each, NFL franchises and new stadiums now cost about the same. Rather than build a stadium, the fans in some city, someday, may decide to just buy their team. The result would be good for taxpayers and professional sports.
