Who Benefits from the Presence of Professional Sports Teams? The Implications for Public Funding of Stadiums and Arenas

Abstract

State and local governments have become increasingly responsible for financing many of the new arenas and stadiums demanded by professional sports teams (Olbermann, 1997). While local officials have a long history of efforts to attract team to their communities, the task of securing the funds needed to build the required playing facilities is relatively new. During the early years of professional sports through the 1950s, most teams played their home games in a privately owned stadium or arena. Team owners wanted little involvement from the public sector in their business affairs. Later, when publicly funded facilities became more common, the teams and other users paid rental fees that helped offset the public sector's capital and operating costs for the facilities (Swindell, 1996). It has now become commonplace for cities, counties, and states to use a combination of broad-based taxes (e.g., sales and property taxes) or special taxes (e.g., taxes on alcohol and tobacco consumption, hotel rooms, and car rentals) to help bad or operate these facilities. In most cases, team owners receive the vast majority, if not all, of the revenues produced by each facility. There are some privately built arenas and stadiums, but these are the exception. Arenas and stadiums have become large capital responsibilities for most of the governments that host one of North Americas major sports franchises; several local governments now have invested more than $500 million in these facilities. With more than 50 of North America's metropolitan regions hosting at least one of the 134 big league franchises, few urban residents are unfamiliar with the arguments that advocates use to attract electoral support to raise taxes to build a facility. Mayors and governors argue that teams and the facilities they use (1) generate economic growth through high levels of new spending in a region, (2) create a large numbers of jobs, (3) revitalize declining central business districts, and (4) change land-use patterns. Proponents also focus attention on intangible benefits, including civic pride, a high-profile image and identity and national and even international publicity. Advocates for the building of facilities frequently note that the image of many cities is frequently defined by high-profile teams and sporting events. The celebratory atmosphere created in a city when a team wins is another Intangible benefit even for people who do not attend games. In a society where sports are a dominant cultural icon, teams do create a level of recognition that generates pride for residents of a community (Kotler, Haider, and Rein, 1993; Baade, 1996a, 1996b; Rosentraub, 1996; Danielson, 1997). As both the number of publicly subsidized facilities and the scale of public-sector expenditures have increased, policy analysts have evaluated the expected economic benefits. Such analysis has shown projected economic returns to be greatly exaggerated, overly optimistic, or simply incorrect. For example, many economists note that most of the expenditures by fans are merely a transfer of their discretionary recreational dollars from other activities (Baade and Dye, 1988; Baade, 1994; Rosentraub, 1997a; Noll and Zimbalist, 1997). Baade's work suggests that expenditures for sports facilities are not associated with regional growth, and Rosentraub's studies illustrate the small scale of the returns to cities and downtown areas from investments in sports facilities. Although the building of many new facilities in downtown areas has attracted millions of visitors to areas previously avoided by most residents, there is no evidence that these facilities have significantly changed employment or residential location patterns. Employers still seek more suburban locations for their businesses, and their employees still prefer outlying areas to inner-city locations for their residences (Rosentraub, 1997b). This is not to suggest that growth and development do not occur in downtown areas. …