Public Money for Private Stadiums?

By | March 28, 2015

On Wednesday, Minnesota United was officially announced as an expansion side into Major League Soccer. The franchise looks to build a 20,000 seat stadium from scratch; however, the Minnesota Governor stated that Minnesota United and Major League Soccer will not be receiving public money for their private stadium [1]. Minnesota Democrats and Republicans came out in support of the governor’s decision. Ironically, a stadium under construction for the Minnesota Vikings of the NFL is receiving $498 million dollars of taxpayer money [2]. This seems to be the norm in the current sports atmosphere in the United States, as the St. Louis proposed a new stadium that would be financed by $400 million of public money and Wisconsin is planning to give $220 million of public bonds to the Milwaukee Bucks [3]. Why does this happen? The simple justification would be that stadiums provide an economic boom to a region by hosting events throughout the year. Proponents state that stadiums  provide some construction jobs, some permeant jobs, and give local businesses a boost in visibility. However, this does not seem to frequently be the case. Robert Baade performed a statistical test to see if a new stadium or sports team was a boon to the local economy, and in many cases, there was no statistical economic difference before and after the stadium was built or the team was formed [4]. It turns out that many fans spend money at or around the stadium that would elsewhere be spent in or around the city.

If that is the case, then why do we still subsidize these stadiums? Perhaps one reason is that the taxpayers value their sports teams. Americans spend a considerable amount of time on Sundays watching the NFL and rooting on their team, and the last thing many of them would want is for their team to be gone. However, this is exactly the case in Saint Louis, where the Rams are threatening to move to Los Angeles unless the city increases public funding to a new stadium. Many other underserved markets, such as Buffalo, Jacksonville, and Oakland, have threatened to move to other cities, placing the ball in the taxpayer’s court. The last thing many Saint Louis Rams fans want is to lose their team, so if that means increased public funding for a new stadium, that is one unfortunate sacrifice that one would make.

 

The franchise system is a major player for the usage of public funding in the US. Instead of clubs with local roots and history, franchises move around to more desirable locations relatively consistantly. Some examples include the Seattle Supersonics (NBA) moving to Oklahoma City, the original MLS San Jose Earthquakes moving to Houston, the Atlanta Thrashers moving to Winnipeg, and the old LA Rams of the NFL moving to Saint Louis. As seen, this is frequently the case in the North American sports landscape; however, it is not so much the case in Europe. One notable example is when Wimbledon FC moved roughly sixty miles to Milton Keynes in 2003. However, that was a lengthy process and it is believed that the FA would not allow another team to move a significant distance from its current home. For example, when Arsenal left Highbury, their new stadium, Ashburton Grove, was adjacent to its old. Similarly, Tottenham are currently constructing a larger stadium to replace White Hart Lane, and again, it is on an adjacent land parcel. Another similarity that both of these stadiums have is that no public money was used in building them, and that these stadiums were valued at 400 million pounds. Why is public financing so common in the US for stadiums, but not in England? There are no doubt different political climates; however, another reason also rises especially after the MK Dons fiasco. It does not seem feasible that teams will be able to significantly relocate, which means that they cannot credibly threaten to relocate, meaning that the cities do not have any real incentive to fund a new stadium. In the US, a franchise can move after a certain number of league owners approve it, however, the FA does not appear as if they will let any clubs relocate, which ends up saving the tax payers a significant amount of money.

 

[1]http://minnesota.cbslocal.com/2015/03/26/dayton-lawmakers-say-no-public-money-should-go-toward-soccer-stadium/

[2]http://www.startribune.com/local/minneapolis/297724801.html

[3]http://reason.com/reasontv/2015/03/17/sports-stadiums-are-bad-public-investmen

[4]http://news.heartland.org/sites/all/modules/custom/heartland_migration/files/pdfs/3075.pdf

 

Cover image from sodahead.com

Category: economics England Major League Soccer MLS

About Dylan Newman

I am a junior at Duke studying history and economics. This past summer I worked in Brussels, Belgium and got to experience the World Cup with many Belgian fans in Grand Place, Place Lux, and King Baudoin Stadium. Their passion for the game was unlike anything I’ve seen before.

4 thoughts on “Public Money for Private Stadiums?

  1. Dea

    It is, indeed, an interesting topic and no matter we says here, the truth will be always out there! If government wants to build stadiums with public money then it is rightly to give equal access to all people. The reality is, in my opinion, that a lot of people are involved in this chain of interests and that an ordinary man just can’t “qualify for a game” there! The backstage game is not for the masses but for the chosen ones.

    Reply
  2. Deemer Class IV

    This topic is certainly interesting. I believe it is important however to look into the time frame of the data that Baade was examining. Published in 1994, he likely examined only stadiums built before 1990. This is interesting to note because many of the new stadiums that we are accustomed to today were built past 1990 and are more geared towards tourism. I am from Baltimore and the Ravens stadium, built in 1998 is a great example of being a boon to the economy. In research published in 2005 by Charles Santo titled “The Economic Impact of Sports Stadiums: Recasting the Analysis in Context”, Santo examines Baade’s work as well as other economists’ and concludes that more examination needs to be done in context when it comes to the stadiums. He examines many of the more recent stadiums built in the 1990s and notes that outside factors such as recessions can make the data appear skewed towards the generalist argument that there is no indicator of an economic boon.

    I truly do believe that especially in areas, like my hometown Baltimore, that well designed stadiums in a strong market are economic boons to cities and should continue to receive public funding.

    Reply
  3. Connie Cai

    Thanks for making this post, Dylan. I had no idea that public money was being used in this way, and after researching more about this issue, there are some other notable things to mention. Firstly, President Obama’s 2016 budget plan actually includes a proposal to prevent exactly this type of public funding (but only federal funding, not city-level funding). His proposal is going to end tax-free government bonds for professional sports facilities, which in the last 30 years, has resulted in $17 billion of public money being used for NFL, MLB, NBA, and NHL franchises. Many economists argue that with this new proposal from Obama, the cost of stadiums will be evaluated more closely and the ultra-luxurious and fancy stadiums of the future won’t be as common (e.g. the AT&T stadium in Arlington, TX).

    Secondly, like you mentioned, public funding of a stadium is always a horrible idea. And the actual methods used to obtain public funding (whether from the government, state, or city) are numerous and complicated. Some economists have calculated the actual cost of new stadium and have found that it’s about $20 per year per taxpayer. When you look at it this way, it doesn’t seem so bad… and the non-economic value that a sports team brings to a city sometimes can’t be measured by a monetary value. But then you think about all the other ways that the $20 can be spent, and to me, I’d rather have that money be spent on education or perhaps re-invested into the economy (e.g. just read about stadium financing for the Atlanta Braves’ new field, SunTrust Park, while teachers in Atlanta are being laid off).

    Reply
  4. Alexis

    For me, sport should be accessible to as much people as possible… and not just as a spectator, but as a sports participant! If the private sector wants to invest in sport, that’s their choice and we all know that their goal will be to make profit. Period.

    On the other side, I think that if the government invest in sport, it should be to make the sport more accessible to young people and disadvantaged classes. And it is certainly not by co-investing with the private sector to build a stadium that we will promote sport activities! The state should finance the purchase of sports equipment or membership for sports clubs … That’s my opinion.

    Reply

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