Should Municipal Bonds Fund Stadiums?

The train heads south, underground through downtown Oakland, does a U-turn around Lake Merritt, and emerges in Fruitvale. It comes to a halt outside the OaklandAlameda County Coliseum, which houses the Athletics and, for the time being, the Raiders. The Oracle Arena, which houses the Golden State Warriors basketball team for the time being, is just behind it. Both stadiums debuted in 1966 and cost a total of $25.5 million to build, plus $1 million for the land they sit on, all of which was paid for using municipal bonds, or taxpayer money.

We mix with other fans as we go over the sloping concrete bridge, where sellers sell tickets, T-shirts, and beers amid the noise of train whistles and street drummers. They’ve arrived in cars and buses, perhaps on bicycles or Bird e-scooters, clogging up Oakland’s public roads, which will cost at least $66 million to repair and maintain in 2019. We all go inside after handing over our cash to John J. Fisher, the A’s billionaire majority owner, in exchange for the opportunity to watch his team play.

In some ways, that’s just business. Money has to be exchanged. Cities contribute to this by funding public infrastructure that facilitates business. Cities frequently provide money to private pro-sports franchises to lure them to come, and then give them more to stay, whereas practically every other business funds the building of its facilities and pays taxes as well.

The Raiders were enticed back to Oakland in 1994 in part by the promise of renovations at the Coliseum. The bill will have cost Alameda County and Oakland $350 million when it is fully paid off in 2025. It’s worth noting that the Raiders’ market value has risen from $351 million in 2001 to $2.38 billion in 2017a nearly fivefold increase after inflation. The A’s valuation increased fourfold to $1.05 billion during the same time period, while the Golden State Warriors’ value increased by a factor of 12 to $3.1 billion. Meanwhile, Oakland’s roads are among the worst in the country, the Oakland Unified School District is laying off up to 340 teachers for the 201920 school year, and the city relies on outside funding to cover the generally inadequate shelter it offers its homeless population.

Cities continue to fall for pro sports franchises despite the fact that they are lousy financial transactions. Municipalities, on the other hand, can fund local sports without betraying their constituents.

Why should municipalities utilise municipal bonds to fund stadiums?

The case for using public funds to finance stadiums and arenas is compelling. Professional sports teams instill pride in their communities. Consumer spending increases as a result of video games. First-class venues can raise a city’s prestige and encourage more development in the surrounding area.

Should stadiums be built using public funds?

Economic impact studies frequently concentrate on the higher tax revenues that communities anticipate as a result of their investments. The studies, on the other hand, sometimes gloss over or disregard the fact that these facilities rarely generate new money for a city or metropolitan area. Instead, the funds raised are frequently only stand-ins for funds that would have been gathered through other means. Any economics student understands that households are bound by budget limitations, which implies that families have a limited amount of money to spend, particularly on amusement. If the family decides to spend the money on a trip to the ballpark, for example, the money cannot be used for other purposes. As a result, no additional revenue is generated.

Only if one of the following scenarios occurs can public funds used for a stadium or arena create additional revenue for a city: 1) the funds cause area citizens to spend money locally that would not have been spent there otherwise; 2) the funds keep turning over locally, so “generating” new spending; or 3) the funds keep turning over locally, thereby “creating” new spending.

There is little evidence that sporting events are more effective than other activities in drawing tourists to a place. Tourists who watch a baseball or hockey game, for example, are usually in town on business or visiting family and would have spent the money on something else if the sports outlet had not been available. 5

Roger Noll and Andrew Zimbalist, economists, investigated the matter in depth and concluded that, on general, sporting facilities do not attract tourists or new industries. Oriole Park at Camden Yards is another good example. Because it is only 40 miles from the nation’s capital, where there is no major league baseball team, this ballpark is arguably the most successful at luring visitors. Every game draws around a third of the crowd from outside the Baltimore area. “Even so, the net gain to Baltimore’s economy in terms of new jobs and increased tax revenues is just around $3 million a yearnot much of a return on a $200 million investment,” Noll and Zimbalist point out. 6

It’s more difficult to prove that sporting facilities induce residents to spend more money in town than they would otherwise. To make such a claim, the analyzing agency would need both precise information on household spending patterns and the ability to ferret out information about their spending in other regions for its report, which is at best difficult and at worst impossible. The report’s writers could only back up this claim with some fancy footwork and dubious assumptions without this information. That is, they would have to argue that locals are spending more money in town as a result of better salaries, which allow families to spend more of their entertainment expenditures on local athletic events. The writers would then have to show that incomes had increased as a result of the stadium spending. If they can’t, the argument collapses since the only conclusion is that incomes increased for reasons unrelated to the stadium; investing tax dollars on the stadium had no effect on household spending habits.

How do most stadiums get their funding?

Stadium subsidies were unheard of eighty years ago, when professional sports stadiums were financed entirely through private means. MLB commissioner Ford Frick ruled in 1951 that league clubs were bringing enormous sums of money to their host cities that the owners couldn’t profit from. He stated that communities would be required to begin supporting their teams by providing public funding for the construction and maintenance of venues. Most new or rebuilt professional sports stadiums now rely on stadium subsidies to fund at least part of their construction. While Frick may have been a spark, the development in negotiating power of professional sports teams at the expense of their host communities has been the primary driver of this change.

Many recent studies have concluded that hosting a professional sports team has a number of direct and indirect economic benefits, however each community enjoys these benefits to varying degrees. Even still, according to a 2017 poll, “83 percent of economists polled agreed that the cost of a subsidy to the public outweighed the economic advantages.” The economics of handing out billions of dollars to professional sports teams are still a mystery, but cities have shown that they are ready to take chances by increasing the number of subsidies awarded and the amount of money given out per subsidy in recent years.

Twenty-seven of the thirty stadiums constructed between 1953 and 1970 got more than $450 million in public investment.

During this time, publically supporting a stadium became increasingly popular as a means of luring professional sports teams to up-and-coming communities.

Famous instances include the Brooklyn Dodgers departing New York in exchange for 300 acres in Chavez Ravine and the New York Giants relocating to Candlestick Park in San Francisco. In 2018, the Los Angeles Coliseum became the first stadium to be wholly funded by the government.

Subsidies have developed their own market throughout time. Sports teams have recognized that they can relocate their private contributors at ever-lower expenses. Local governments acquiesce and offer teams subsidies because they believe that maintaining their sports teams around is vital to the success of their cities. This establishes a subsidy market in which professional athletic organizations can compare towns to see which one will supply them with the most resources. The NFL permits teams to bid to host the Super Bowl and takes recent and planned improvements into account, so teams have a strong motivation to maintain their stadium up to date. Many NFL teams have requested subsidies for the construction of fully new stadiums in recent years, including the Atlanta Falcons, who were eventually given the Super Bowl LIII contract.

Are stadiums an excellent investment?

Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums, edited by Roger Noll and Andrew Zimbalist, contains more information.

The United States is experiencing a surge in sports building. Baltimore, Charlotte, Chicago, Cincinnati, Cleveland, Milwaukee, Nashville, San Francisco, St. Louis, Seattle, Tampa, and Washington, D.C. have completed or are in the process of completing new sports facilities worth at least $200 million each, and Boston, Dallas, Minneapolis, New York, and Pittsburgh are in the planning stages. Jacksonville and Oakland have both undergone major stadium improvements. Industry experts estimate that new facilities for major sports teams will cost more than $7 billion by 2006.

The majority of the $7 billion will come from government funds. The federal government provides the subsidy by allowing state and local governments to issue tax-exempt bonds to help fund sporting facilities. Tax exemption lessens the amount that communities and clubs must pay for a stadium by lowering interest on loans. Since 1975, interest rates have been reduced by 2.4 to 4.5 percentage points. The discounted present value loss in federal taxes for a $225 million stadium, assuming a 3-percentage-point advantage, is nearly $70 million, or more than $2 million each year during a 30-year useful life. The Superdome in New Orleans, the Silverdome in Pontiac, the now-defunct Kingdome in Seattle, and Giants Stadium in the New Jersey Meadowlands are among ten stadiums erected in the 1970s and 1980s that each produce an annual federal tax loss of more than $1 million.

State and municipal governments receive much more subsidies than the federal government. The average cost of a sports facility to the host community is currently more than $10 million per year. Oriole Park at Camden Yards, perhaps the most successful new baseball stadium, costs Maryland citizens $14 million a year. Renovations aren’t cheap either: the Oakland Coliseum was renovated for the Raiders at a net cost to the city of around $70 million.

Most major towns are ready to invest a significant amount of money to attract or retain a major league team. However, as the NBA’s Utah Jazz’s Delta Center in Salt Lake City and the NFL’s Houston Oilers’ new football stadium in Nashville demonstrate, a city does not have to be among the country’s largest to win a national competition for a team.

The campaign slogan for a new stadium for the San Francisco 49ers reveals the economic rationale for cities’ willingness to finance sports facilities: “Build the stadium, but don’t forget to create jobs!” Sports facilities, according to proponents, benefit the local economy in four ways. For starters, constructing the facility generates construction jobs. Second, fans who attend games or work for the club generate additional spending in the community, resulting in more jobs being created locally. Third, a team brings tourists and businesses to the host city, boosting local spending and employment. Finally, all of this additional spending has a purpose “Increased local income leads to further new expenditure and job development, creating a “multiplier impact.” New stadiums, according to supporters, generate so much economic growth that they are self-financing: subsidies are compensated by income from ticket prices, sales taxes on concessions and other non-stadium spending, and property tax increases resulting from the stadium’s economic impact.

Unfortunately, these arguments are based on flawed economic logic, which leads to an exaggeration of stadium advantages. When a community’s resourcespeople, capital investments, and natural resources like landbecome more productive, economic growth occurs. Increased productivity can come from two sources: economically beneficial community specialization for the purpose of trading with other regions, or higher local value added than other uses of local employees, land, and investments. Building a stadium is beneficial to the local economy only if it is the most efficient method to deploy capital and employ workers.

Who footed the bill for SoFi Stadium?

The cost of SoFi Stadium reflects the expectations that were placed on it when it was created. According to the Los Angeles Times, the construction of SoFi Stadium cost more than $5 billion. All of it was paid for out of pocket by Rams owner Stan Kroenke.

According to the Designbuild Network, the price tag makes it the most costly stadium ever built, by a significant margin. Allegiant Stadium, the Raiders’ new stadium in Las Vegas, is listed as the second-most expensive at $1.9 billion.

Who covered the cost of the new Yankee Stadium?

The New Yankee Stadium, located in the Bronx borough of New York City, is not only home to one of the most famous and successful major league sports clubs in history, but it is also one of the most technologically advanced sports venues in the world… more

The New Yankee Stadium, located in the Bronx borough of New York City, is not only home to one of the most famous and successful franchises in major league sports history, but it is also one of the world’s most technologically advanced sports facilities, providing fans with the most technologically advanced game-day experience in baseball while maximizing the Yankees organization’s great historical tradition.

The train is the most convenient mode of transportation. At the corner of 161st St. and River Ave., the Yankee Stadium Subway stop is right next to the stadium. Several subway lines connect to the stadium, and a trip from midtown Manhattan takes less than 25 minutes. At 161st St./Yankee Stadium, the #4 line, as well as the B (weekdays only) and D trains, make stops. The 125th Street subway stop offers Metro-North train service to and from Connecticut and Westchester County.

The stadium was designed by HOK Sport of Kansas City and has a perimeter that resembles the pre-renovation façade of the original Yankee stadium, but the inside ballpark has some noteworthy variances. Compared to the 57,000+ in the old stadium, the new stadium seats 51,000 supporters with a standing room only capacity of 53,000. The new stadium is also structured in the shape of a bowl, rather than the stacked layer construction of old Yankee Stadium, allowing people to sit further back while still being closer to the field. Along with the transition from a tiered to a bowl construction, another significant distinction between the two stadiums is the huge increase in retail space in the new stadium, which is housed in a 1,000,000 square foot “Great Hall” between the stadium perimeter and the stadium itself.

The number of bleacher seats has been reduced by half, but there are now 2,000 standing room positions available. Between the second level and the upper deck of the new stadium, there are 60 luxury boxes, roughly a fourfold increase over the previous 16 boxes available at the old stadium. In addition, each level of seating in the new stadium has a portion designated as “luxury seating.” Cushioned seats, cup holders, and access to private bars/clubs and restrooms are all available in these areas. As a result, the new design provides significantly more options to stand and watch a game (probably at the cheapest ticket prices), while also quadrupling the luxury seating capacity for the stadium’s most costly seats.

The New York Yankees teamed with Cisco Systems to integrate video, phone, data, and wireless services into one seamless next-generation network that links fans to the team in whole new ways, continuing the franchise’s tradition of innovation. Fans can stay up to date on sports news and scores, weather, and traffic while never missing a beat on the field. The game is aired live on HD video monitors around the stadium, including concession areas, the Great Hall, the Yankees Museum, and various in-stadium restaurant and bar spots, ensuring that spectators can watch the game no matter where they are.

The $1.3 billion cost of the New Yankee Stadium was covered by $450 million paid evenly by the Yankees organization and New York City taxpayers, with the rest coming from money diverted from revenue sharing payments that would have gone to other MLB teams. The New Yankee Stadium is the world’s second most costly stadium, with a price tag of $1.3 billion.

Johnny Rockets, Hard Rock Café, Lobel’s, Moe’s Southwest Grill, Asian Noodle Bowl, a sushi station run by Soy Kitchen, Brother Jimmy’s BBQ, Boar’s Head Deli, and the NYY restaurant are among the hundreds of concessionaires at the new stadium. Not to add a plethora of Nathan’s and Hebrew National hot dog stands!

What should be done about stadium funding?

Teams engage with states and municipalities to determine how they will be supported when a new stadium or arena is wanted. This is usually funded by an increase in sales and tourism taxes, as well as the issuance of long-term bonds. Surcharges on parking and ticket costs are two more sources of financing.

Which stadiums are self-funded?

CHICAGO (CBS) Last week, the Bears shocked everyone by announcing that they had placed a bid for the 326-acre Arlington International Racecourse site.

It provoked heated debate among football fans in the Chicagoland area about the advantages and disadvantages of the team’s relocation to Arlington Heights. That debate isn’t likely to go away anytime soon. If the Bears are serious about relocating, it will be a lengthy process.

Almost definitely, it would include debates regarding government funding. NFL stadiums are rarely constructed without the assistance of taxpayer funds. 28 of the NFL’s 32 teams play in stadiums that have received some type of government assistance. SoFi Stadium and MetLife Stadium are the only stadiums that are entirely funded by private investors.

The McCaskey family is worth an estimated $1.3 billion, according to Forbes, which is less than the market fee for a modern NFL mega-complex. The team is estimated to be valued $3.5 billion. If the Bears are going to build a stadium in Arlington Heights, it seems certain that they will seek public assistance.

Regardless of whether the Bears relocate to Arlington Heights, Illinois taxpayers will be responsible for paying off the Soldier Field reconstruction and construction until 2032. In the months and years ahead, extra money for a stadium in Arlington Heights will become a contentious issue.

Are stadiums subsidised by the government?

On Tuesday, Carolina Panthers owner David Tepper reaffirmed his position that the team will not build a new stadium without government help. It’s the latest example of a multibillion-dollar NFL owner demanding fans to foot the tab for pet projects.

Tepper’s proposal isn’t original. Rather, it’s become part of the NFL’s new normal, in which cities are seen as disposable unless they’re ready to pay. Even if no one says it, the underlying message in these debates is that if local government won’t foot the price, a team will locate a city that will.

“I’m not going to build a stadium by myself,” Tepper said to reporters on Tuesday. “It will have to be desired by the community.” The Panthers owner also stated that he would not impose a new stadium on anyone, but the devil, as always, is in the details. Tepper’s statement that he won’t participate is strange “After years of publicly stating that he wants a new stadium with a retractable roof to house the Panthers, his recently-purchased MLS team, and host larger events, including possibly a Super Bowl, he has decided to “force” a stadium on the people.

There’s no need for the Panthers to need a new stadium other than to provide a millionaire a shiny new plaything. While Bank of America Stadium is one of the NFL’s oldest, having been erected in 1994, the difference between a stadium built in the mid-90s and one built in the early 2000s is significantly less evident. In addition, from 2014 to 2017, Bank of America Stadium underwent a series of taxpayer-funded upgrades that cost the city of Charlotte $87.5 million.

One of Tepper’s arguments for constructing a new stadium is based on the fictitious threat of the structure collapsing. “That building will fall down at some point,” Tepper asserted, without explaining why a 27-year-old concrete structure would do so. The proprietor stated that he desires a “Partnership,” but it’s unclear what that means in practice. Historically, owners have talked about working with communities to build new stadiums, but it’s unclear what the city gets in return. Numbers such as “Economic impact” is tossed around a lot, but profit-sharing agreements that pay money back into the city after large-scale stadium investments are rare, if ever.

Tepper’s remarks have been widely mocked, both by locals who see no problem with the current stadium and by those who point out that the Panthers’ owner is the richest in the NFL, with a net worth of $14.5 billion, according to Forbes. It just adds to the absurdity of Tepper’s three-way agreement, which asked for his own money, taxpayer money, and a personal seat license (PSL) holder investment to construct a new stadium on Tuesday.

Simply said, money would have to be diverted from other sections of the budget, and season ticket prices would have to rise. Historically, municipal governments have shown little interest in funding such pet enterprises. The team requested a total of $250 million when the city of Charlotte last authorized the $83.5 million improvements to Bank of America Stadium, which was ultimately denied.

It’s unclear whether Charlotte will cover a third of Tepper’s project costs, but this is clearly the latest evidence of a larger problem in professional sports.

Locally-funded stadiums are a scam

Tepper isn’t the first, and he won’t be the last, property owner to seek government assistance for private projects. The Panthers’ owner is only following in the footsteps of other billionaires, but it does not make it right.

Outside of being a pissing competition between cities, there’s absolutely no justification for larger, more ornate, and costlier new stadiums. Economic analyses on publicly sponsored stadiums have been conducted since the 1990s, and the results have consistently come up short.

Sports, Jobs, and Taxes: Are New Stadiums Worth the Money? was published in 1997. The Baltimore Orioles were offered as an example at the time. A team that received $200 million in taxpayer money is predicted to cost citizens $14 million per year. The stadium’s actual economic impact was evaluated at $3 million per year during its first five years of operation, resulting in a net loss for the city.

According to an IGM study of economists conducted in 2017, an overwhelming majority (83%) stated that funding stadiums with tax money would cost taxpayers more than the building would produce.

While teams produce rosy economic impact statements claiming that new building will create hundreds of millions of dollars in revenue, they always present their case in isolation. It assumes that if a city does not spend hundreds of millions of dollars on a stadium, those funds will remain idle. Most economists believe, however, that putting the same money intended for stadium building into other areas of growth will provide similar, if not larger, results.

Michael Leeds, a Temple University sports economist, presented Chicago as an example of how little sports teams truly contribute to the local economy. In 2017, his calculations found that if the Bears, Bulls, Blackhawks, White Sox, and Cubs all went out of business overnight, the city would lose 1% of its revenue. In addition, his research revealed that a full MLB season has the equivalent economic impact on the local Chicago economy as a mid-size department store.

Despite abundant proof that new stadiums have little influence on the community and that teams donate considerably less to the community than they claim in economic impact statements, elected officials continue to dupe taxpayers into handing over their money to billionaires to support pet projects. And it’s because owners understand that fear is the most effective bargaining chip they have, far more powerful than any balance sheet.

This fear acts on two levels: first, a citizen’s worry that their favorite team will leave; and second, a citizen’s fear that their favorite team will depart. The second comes from political officials who are under pressure to support stadium developments because if a team leaves while they are in office, it will be a major campaign issue for their opponents.

Owners have tapped into the zeitgeist of knowing how much pain a team’s departure causes a city, and how deep those wounds cut, and have used this to their advantage when discussing their “needs.” If you ask someone in Seattle how they feel about losing the Sonics, they’ll tell you about the heartbreak they felt when their team was forced to relocate to Oklahoma City due to a budget dispute.

Unfortunately, relocation threats will continue to be used as a bargaining chip as long as there are other communities prepared to foot the bill. This new normal isn’t new, and it shouldn’t be, and the outcome is the same every time: billionaires get richer at the expense of taxpayers. It needs to come to an end.