Source Newsroom: Florida State University
Many cities consider publicly financed, new sports arenas to be the ticket to prestige and revitalization, but those who argue that they are sound financial investments had better come up with a new argument.
Tim Chapin, a Florida State University professor of urban and regional planning, analyzed all of the major studies and found that economists agree that the economic impact of new sports facilities does not justify public subsidies for them. "Every reputable, empirical study has concluded that these are not good financial investments," said Chapin, who prepared his analysis for the Lincoln Institute of Land Policy. But that does not mean that sports facilities don't have a place in a community or that the public sector should not play any role in financing them.
"I'm a firm believer that the public should be involved to some degree, but the local governments should be able to get some of the money back to at least help them pay off the debt," Chapin said. "With most of these public-private partnerships, the public sector creates the opportunities and the private sector reaps all the rewards."
Publicly financed stadiums are a growing trend. In the 1990s alone, more than 40 major league facilities were constructed, costing more than $9 billion. About 55 percent of those funds came from public coffers.
Consultants hired by sports teams or local governments often say the economic rewards are in the hundreds of millions, Chapin said, and, at first glance, professional sports appear to be a substantial industry for a metropolitan economy.
In reality, though, sports teams have too few employees and involve too few direct dollars to be a driving force in any city or county's economy, Chapin found.
The jobs that are created are often low paying seasonal service sector jobs that cannot serve as the basis for a quality economy.
Some economists have said that sports facilities don't spur additional spending in the region either. They argue that those who buy tickets to the games or events are simply redirecting the money they would have spent elsewhere, such as concerts or movies, if the stadium didn't exist. Also, revenues that flow to professional sports teams are less likely to remain in the local economy because owners and players do not spend a large percentage of their money locally.
One reason that the economic impact of sports facilities falls short of expectations is that city officials fail to consider, and paid consultants often don't mention, all of the costs involved. Besides costs of land acquisition, construction, debt service and operation and maintenance, there are the costs of relocating businesses, police and ambulance services for public events, infrastructure improvements, such as highway interchanges, new roads and water and sewer lines, and tax losses that result from property tax abatements on the land used for the new facilities.
Proponents of using tax money to fund sports arenas often cite civic pride and community identity and visibility as benefits that can't be quantified in dollars, a notion with which Chapin agrees.
"The public sector routinely invests in things that do not have economic benefits, such as parks or museums," he said. "Sports are a real communal experience and can be a positive thing for a community."
But there can be a flip side to the image issue, Chapin cautioned. Take, for example, the image problems created by the publicly funded Seattle Kingdome, an ugly, concrete domed stadium. After suffering maintenance problems that required even more public money, it became something of a public embarrassment for the city and was torn down in the late 1990s despite tens of millions of dollars debt still owed on the building. The city built two new stadiums to replace it, with a bill approaching
$1 billion - most of it coming from the public coffers.