Should Cities Pay For Sports Facilities
8/26/2014
Should Cities Pay for Sports Facilities?
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T HE REGIONAL ECONOM IST | APRIL 2001
Should Cities Pay for Sports Facilities?
By Adam M. Zaretsky
"We play the Star-Spangled Banner before every game—you want us to pay taxes, too?
—Bill Veeck
Americans love sports. Watching the home team in any of the four major sports—baseball, football, basketball and hockey—march to victory in the World Series, Super
Bowl, NBA Finals or Stanley Cup Finals arguably generates more excitement and local pride in a town than any other event. Fans love when the hometown boys win. But even when they don 't, fans stick by their teams. By and large, so do the cities these teams play in. In fact, cities with home teams are often willing …show more content…
Even if economic impact studies are taken at face value, however, the cost of creating these jobs is usually out of the ballpark. In Cincinnati, for example, when two new stadiums were proposed to keep the NFL Bengals and the MLB Reds in town, the economic impact study claimed that 7,645 jobs would be created or saved because of the stadium investment. Since the project was estimated at $520 million, each new or saved job was reported to cost about $68,000.
When economists John Blair and David Swindell examined the $68,000 figure a bit closer, though, they discovered it was too low because the study 's estimate of 7,645 new or saved jobs was too high. Blair and Swindell then re-evaluated the report, corrected for double-counting and other problems, and concluded that only 3,530 jobs would be created or saved if the stadium proposal passed. Thus, the cost per job was actually going to run more than $147,000. In contrast, state economic development programs spend about $6,250 per job to create new jobs.9
Those Old Economic Saws
Another glaring omission from these economic impact studies is the value of the next-best investment alternative—what economists call the opportunity cost. "There 's …show more content…
No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus.10
In fact, research has shown that subsidizing sports facilities usually does not affect a city 's growth and, in some cases, may even hurt growth since funds are being diverted from alternatives with higher returns. In a 1994 study that examined economic growth over a 30-year period in 48 metropolitan areas, Robert Baade found that of the 32 metro areas that had a change in the number of sports teams, only two showed a significant relationship between the presence of a sports team and real per-capita personal income growth. These cities were Indianapolis, which saw a positive relationship, and Baltimore, which had a negative relationship.
Moreover, Baade found that of the 30 metro areas where the stadium or arena was built or refurbished in the previous 10 years, only three areas showed a significant relationship between the presence of a stadium and real per-capita personal income growth. And in all three cases—St. Louis, San Francisco/Oakland and Washington,
D.C.—the relationship was
Should Cities Pay for Sports Facilities?
Share on:
T HE REGIONAL ECONOM IST | APRIL 2001
Should Cities Pay for Sports Facilities?
By Adam M. Zaretsky
"We play the Star-Spangled Banner before every game—you want us to pay taxes, too?
—Bill Veeck
Americans love sports. Watching the home team in any of the four major sports—baseball, football, basketball and hockey—march to victory in the World Series, Super
Bowl, NBA Finals or Stanley Cup Finals arguably generates more excitement and local pride in a town than any other event. Fans love when the hometown boys win. But even when they don 't, fans stick by their teams. By and large, so do the cities these teams play in. In fact, cities with home teams are often willing …show more content…
Even if economic impact studies are taken at face value, however, the cost of creating these jobs is usually out of the ballpark. In Cincinnati, for example, when two new stadiums were proposed to keep the NFL Bengals and the MLB Reds in town, the economic impact study claimed that 7,645 jobs would be created or saved because of the stadium investment. Since the project was estimated at $520 million, each new or saved job was reported to cost about $68,000.
When economists John Blair and David Swindell examined the $68,000 figure a bit closer, though, they discovered it was too low because the study 's estimate of 7,645 new or saved jobs was too high. Blair and Swindell then re-evaluated the report, corrected for double-counting and other problems, and concluded that only 3,530 jobs would be created or saved if the stadium proposal passed. Thus, the cost per job was actually going to run more than $147,000. In contrast, state economic development programs spend about $6,250 per job to create new jobs.9
Those Old Economic Saws
Another glaring omission from these economic impact studies is the value of the next-best investment alternative—what economists call the opportunity cost. "There 's …show more content…
No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus.10
In fact, research has shown that subsidizing sports facilities usually does not affect a city 's growth and, in some cases, may even hurt growth since funds are being diverted from alternatives with higher returns. In a 1994 study that examined economic growth over a 30-year period in 48 metropolitan areas, Robert Baade found that of the 32 metro areas that had a change in the number of sports teams, only two showed a significant relationship between the presence of a sports team and real per-capita personal income growth. These cities were Indianapolis, which saw a positive relationship, and Baltimore, which had a negative relationship.
Moreover, Baade found that of the 30 metro areas where the stadium or arena was built or refurbished in the previous 10 years, only three areas showed a significant relationship between the presence of a stadium and real per-capita personal income growth. And in all three cases—St. Louis, San Francisco/Oakland and Washington,
D.C.—the relationship was