 Issues and Impact of New Sport Stadiums on Cities
By William A. Malfese
NOVEMBER
10, 2007
In recent years, professional sports teams have tended to seek stadiums and arenas built with the latest technology and innovation leading the costs to nearly $1 billion. The older, multi-use stadiums built in the 1960’s and 1970’s have been replaced by single-sport facilities, where only baseball or football is played for example. So the question becomes, who pays for these hundred-million dollar new stadiums and do they really benefit the city and economy as promised?
Many scholarly studies have investigated the reasons why cities choose to finance new sports stadiums. First, fiscal pressures due to declining federal aid and a loss of economic activity to the area have required cities to search for ways to revitalize themselves. Public officials often believe that revenues generated from a new stadium will spill outside the stadium, and increase economic activities in other parts of the city which makes the idea worthwhile.
It is believed that sports strengthen the national and regional image of a city and benefit both the economy and those who attend sporting events in person. A better image attracts more tourists, businesses, and residents, and expands the tax base. People also believe sports facilities lead to community pride and solidarity along with a sense of being a “major league” city in America.
Thirteen of the current thirty Major League Baseball teams have received new ballparks in the past ten years. The New York Yankees, New York Mets, Minnesota Twins and Boston Red Sox are also set to unveil new stadiums in the next two to three years, which will be the most expensive and extravagant ones built to date.
Partly in response to rising player salaries, the facilities are designed to maximize revenues through amenities like luxury sky boxes which can cost up to $200,000 per year, club seats, concessions and themed activities. This has led to higher revenues for teams, thus making more cities capable of supporting franchises. With more cities entering the bidding wars for franchises, cities are forced to offer ever higher bids, sometimes including public financing, to win those franchises.
The positive impacts alleged by proponents to come from sports franchises include the
generation of tax revenue, direct spending by teams and owners in an area, new jobs and
community development, improved city infrastructure, and that the stadium is more attractive to tourists and shoppers. In addition to economic benefits, there are other arguments that proponents of public financing of sports stadiums use.
Matthew Peters, a research associate at Middle Tennessee State University, discounts the focus on immediate economic benefits of proposed sports stadiums, and instead argues the view that, "The greatest benefits may not derive from measurable economic activities attributed directly to the financial success of the team, but rather from the improved infrastructure, urban renewal, and construction of a venue to accommodate the diverse needs of the area.”
The issue of opportunity cost is another which many critics raise. Critics of sports-based development policies ask whether it would not be better to spend the money on schools, roads or attracting other businesses to the area. Other options could be selling the land to an organization that would pay property taxes, reducing tax rates, or investing the money elsewhere.
Critics of public financing of sports facilities have been conducting their studies for the last thirty years, about as long as arguments that sports can be an economic development tool have been made. As the costs of stadiums rise ever higher, the private sector should play an increasingly larger role in financing projects to reduce the strain on public budgets.
There have been many cities that built new stadiums, using taxpayers' dollars, with the promise that revenue from the facilities would go to improving not only the surrounding area and economy but the team. That list includes Baltimore, Pittsburgh, Seattle, Cincinnati, Philadelphia, Atlanta, Cleveland and Colorado which have all not lived up to expectations thus far.
Sports owners like new stadiums because they can reap the benefits of raising prices on parking, concession, and both regular and luxury box tickets. While the teams can then produce more money for an owner, it's not necessarily the stadium that makes a team better.
In recent decades, to help take the burden of the massive expense of building and maintaining a stadium, many teams have sold the rights to the name of the facility. This trend, which grew rapidly in the 1990’s, has led to sponsors' names being used to both established stadiums and new ones. In some cases, the corporate name replaces the name by which the venue has been known for many years. But many of the more recently-built ballparks, such as Milwaukee's Miller Park, have never been known by a non-corporate name. The sponsorship phenomenon has since spread worldwide. There remain a few municipally-owned stadiums, which are often known by a name that is significant to their area for example, Minneapolis' Hubert H. Humphrey Metrodome.
If the stadium is not entirely privately financed, the federal government subsidizes state and local governments' sports ventures by allowing them to issue tax-exempt bonds to finance sports stadiums. This loss in tax revenue amounts to approximately $70 million for a typical $225 million stadium, or more than $2 million a year. State and local governments pay even larger subsidies than the federal government, often more than $10 million per year.
Most of the newer stadiums built are funded by private investors or corporations that use naming rights to benefit their business and the sport organization. There are many positive factors that come from building a new stadium, such as more potential economic activity including new jobs, better areas and neighborhoods surrounding the stadium and even the civic pride and unity that comes with having a local professional team. Despite the possible benefits, there are issues that arise when talks of a new stadium begin. Major implications include who pays for the construction, will the new stadium really benefit the city and are there better options or priorities where this money could be used towards?
One thing for certain is that with more and more teams wanting to have top of the line facilities, the price to build will continue to increase and all parties involved and affected must thoroughly research and analyze whether a new stadium will be advantageous.
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