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Sports Stadiums Do Not Generate Revenue For Cities

December 20, 2012

How is it possible for a metropolitan area to experience a reduction in per capita income as a result of having a professional sports team or a stadium? The answer lies in the jobs that stadium activity generates. They are generally low-paying and seasonal positions–ticket takers, ushers, parking lot attendants, and the like. When a city devotes its economic development subsidies to creating this sort of employment, it develops a comparative advantage in unskilled, seasonal labor. As a result, long-run future growth becomes concentrated in low-paid jobs.

Defenders of public sports subsidies counter that the local population’s income must rise as a result of the money spent at stadiums and surrounding restaurants. The flaw in that argument is that expenditures on tickets on sporting events might simply represent money not spent on other leisure or entertainment activities within the same metropolitan areas. I can tell you that I have literally seen stadium events in place in the city of Camden, New Jersey where Mickle Boulevard is blocked off almost as if protecting the suburbanites from the evil creatures that live in the city of Camden in order to get them to their entertainment event at the Sony Blockbuster Theater and then doing the same to ferret the surburbanites out of there unharmed and I always thought that was so odd. Here is an opportunity for the city of Camden to generate income by getting these surburbanites who would never otherwise go to Camden to spend money there on their way to the stadium. In the case of Camden and in the case of all cities, building  a stadium and bringing in a professional sports franchise does not produce new income for the locals. Dont take my word for it, go to the city of Camden if you dare and look around and tell me if you see any prosperity since the bringing in from the Sony Blockbuster Theater or even the New Jersey State Aquarium for that matter. What is has done is reduce the revenue of restaurants in Collingswood and for other cities it reduces the revenue of the metro area’s movie theaters and nightclubs. Overwhelmingly, the verdict of hard-core research is that having a sports team or a new stadium doesnt help the local economy.

If anything, the chances of a citywide economic benefit from a sports stadium have declined over time. The newer stadiums are expressly designed to let its owners capture as much of the revenue generated by the games as possible. Modern sports facilities provide restaurants, museums and nightclubs. That makes it tough for other businesses to set up shop nearby in hopes of profiting from the fans’ pregame or postgame spending.

According to an analysis by Edward Coulson of Pennsylvania State University and Gerald A. Carlino of the Federal Reserve Bank of Philadelphia, people are willing to pay for the lifestyle advantage of living in a city where they can attend NFL games. As a result, apartment rents in central-city areas are 8 percent higher in the NFL cities than those in the non-NFL cities. That makes residential property more valuable, resulting in higher property tax receipts. Carlino and Coulson conclude that in most cases, the resulting revenue gain more than offsets the annual cost to the city of subsidizing the stadium.

Carlino and Coulson’s research represents a useful contribution, but not everyone would view high rents as evidence that a sports team is providing an economic benefit. A general rent increase doesnt boost income within the city. It just transfers income from renters to landlords, with some of the transferred funds getting siphoned off by the tax collector.

If the local economy doesnt benefit in the conventional sense of generating jobs or income, who does profit when a city shells out tax dollars to build a stadium and lure a sports franchise to the city? The clear winners are the team owners.

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From → Economics

3 Comments
  1. Tim permalink

    I could write opinionated garbage like this. Where are your sources? I think you should at least cite your ass for a majority of the article.

    • My citations I guess could be the hostages in communities like Glendale in Phoenix where taxpayer money to the tune of $180 million was spent on an arena for the National Hockey League’s Coyotes. The team moved into its new taxpayer funded facility and despite having hockey legend Wayne Gretzky as head coach, the Coyotes declared bankruptcy. This spelled trouble for Glendale, which was dependent on the team as a tenant to pay its arena debts.

      Things went from bad to worse for Glendale, which then guaranteed the team’s future on the backs of taxpayers again to the tune of $25 million for the fiscal year of 2010-2011. This was followed by another $25 million for FY 2011-2012 season. Digging itself in deeper, it offered to borrow $100 million in the bond market to give to a potential buyer for the team, as well as offering to pay the team another $97 million to operate the arena. The city, with a 2010 population of 227,000, was willing to put its taxpayers on the hook for $362 million or more for a team that Forbes.com rates as only worth $134 million. Where was the gain on the investment made by the Glendale taxpayer? An investment they didn’t have a choice in. Were thousands of jobs that were able to pay mortgages and raise families created for Glendale residents, millionaire team owners not included?

      How about the $1.8 billion tax burden shouldered by Arizona taxpayers around the construction of the new stadium for the NFL Arizona Cardinals? Team owners fought a protracted battle to have a new stadium constructed in the flight path of Phoenix Sky Harbor airport, despite the prospect that flights involving 200,000 air passengers a day might have to be diverted to make room for the stately football dome. The plan was only abandoned when air traffic controllers and pilots objected. What was the attraction of the site near the airport? More jobs for airline workers or for other residents? A local paper reported that development rights adjacent to the location were controlled by the team owners and that there was a quiet plan to favor them with additional millions of dollars of property tax abatement leading to their own net growth of $300 million thanks to the construction of another taxpayer-funded arena.

    • And if you keep it respectful Tim, you can feel free to visit my new home at http://www.dancortes.com where I do cite sources, thanks for the feedback.

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