Tag: stadiums

Public Financing of Vikings Stadium a Bad Deal for Fans, Taxpayers

The collusion between big business and big government that fleeces the rest of us has struck again – Tim Carney, iMessage your office – this time in the sports world. 

Minnesota governor Mark Dayton recently signed the midnight deal that state lawmakers struck with the owners of the state’s football team, the Minnesota Vikings, to build the team a new stadium.  This caused plenty of celebration in Minneapolis and elsewhere across the Gopher State.  Alas, the hangover is about to come for taxpayers regardless of their gridiron allegiance or level of fandom.

As former Cato legal associate (and Minnesotan) Nick Mosvick and I write in the Huffington Post, these stadium deals hurt most fans:

That’s because they lead to increased taxes and higher prices, squeezing the average fan for the benefit of owners and sponsors.  And that’s not even counting the overwhelming majority of taxpayers, regardless of fandom, who never set foot in these gladiatorial arenas.

Let’s look at this particular deal.  The stadium costs $975 million on paper, with over half coming from public funds, $348 million from the state and $150 million from Minneapolis—not through parking taxes or other stadium-related user fees, but with a new city sales tax.  In return, the public gets an annual $13 million fee and the right to rent out the stadium on non-game-days.

Vikings ownership, NFL commissioner Roger Goodell, and local politicians make a typical pitch for the deal: the stadium will attract investment to the area; local establishments will see a rise in game-day sales of $145 million; jobs will be created, including 1,600 in construction worth $300 million ($187,500 per job?!); tax revenues will increase $26 million; property values will rise; and, of course, the perennially underachieving team’s fortunes will improve.

Such arguments are always trotted out for these sweetheart deals, but the evidence regarding the economic effects of publicly financed stadiums consistently tells a different story.  For example, Dennis Coates and Brad Humphreys performed an exhaustive study of sports franchises in 37 cities between 1969 and 1996 and found no measurable impact on per-capita income.  The only statistically significant effects were negative ones because revenue gains were overshadowed by opportunity costs that politicians inevitably ignore.

An older study looked at 12 stadium areas between 1958 and 1987 and found that professional sports don’t drive economic growth.  A shorter-term study looked at job growth in 46 cities from 1990 to 1994 and found that cities with major league teams grew more slowly.  Even worse, taxpayers still service debt on now-demolished stadiums, including the $110 million that New Jersey still owes on the old Meadowlands and the $80 million that Seattle’s King County owes on the Kingdome.  And we shouldn’t forget that local governments often employ property-rights-trampling eminent domain to facilitate these money-squandering projects.

Read the whole thing.  It’s not a matter of ideology; we even quote Keith Olbermann approvingly!

The point is that these deals benefit team owners and the politicians who get to wrap themselves in team colors to the exclusion of taxpayers or fans (who are priced out of the games their increased taxes support).  If luxury stadiums were hugely profitable, why would the savvy businessmen who own the teams let the politicians in on the windfall?

The Mudville Revolt

The Wall Street Journal reports, “From New York to Florida to Arizona, some taxpayers are opposing agreements to fund baseball projects after a decadeslong boom in publicly financed ballparks. The fights are complicating plans for stadiums, pitting residents against one another and driving some local governments to turn to U.S. stimulus programs.”

Well, it’s good to know that if local taxpayers don’t want to line the pockets of millionaire players and billionaire owners, the U.S. government’s stimulus program stands ready to oblige.

Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:

The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect.

In Regulation magazine, (.pdf) Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:

The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.

And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.