Sports Franchises And Quality Of Life
June 15, 2001
Proponents of using public funds to build sports facilities argue the benefits from increased economic activity and increased tax revenue collection exceed the public outlays. But independent economic studies universally find such benefits to be smaller than claimed.
- The studies suggest that the net number of jobs created from hosting a professional sports team is quite low, at between zero and 1,000.
- At a typical local sales tax rate of 2 percent, imported sales tax revenues range from just $278,400 per year for a National Hockey League team to $614,800 per year for a Major League Baseball team.
- Other studies found the estimated benefits from a franchise range from $26.7 million for an NHL team to $40.3 million for an NFL team, compared with an average public outlay of $188 million on new stadiums completed between 1994 and 2000.
However, economists Jordan Rappaport and Chad Wilkerson suggest that the impact on quality of life, while difficult to measure, may exceed more traditional job creation and tax revenue benefits. For example:
- In a survey, Pittsburgh metro area residents implicitly valued the quality-of-life benefits from hosting the NHL Penguins at $26.9 million to $74.7 million over 30 years.
- The quality-of-life benefits from hosting a team may be similar in magnitude to that of one extra sunny day per year, valued at between $14 million and $24 million per year for a city of two million people.
- Of the 12 metro areas that lost NFL teams since 1980, all but one subsequently allocated considerably more public financing to attract a new team than it would have cost to keep their old one.
Together, these factors suggest that hosting a major league franchise contributes substantially to quality of life and that public outlays on sports stadiums and arenas may not be such a bad investment for some metro areas.
Source: Jordan Rappaport and Chad Wilkerson, "What are the Benefits of Hosting a Major League Sports Franchise?" Economic Review, First Quarter 2001, Federal Reserve Bank of Kansas City, 925 Grand Boulevard, Kansas City, Mo. 64198.
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