Publicly Financed Stadiums Actually Drag Down Local Economies

November 16, 2000

Proponents of taxpayer-funded sports stadiums promise they will rejuvenate or boost local economies. All taxpayers have to do is hand over the money and watch as prosperity envelops the community.

But new research by Dennis C. Coates and Brad R. Humphreys of the University of Maryland demonstrates that sports stadiums may actually be an economic drag.

  • Nearly 50 stadiums and arenas were built for major professional sports teams in the 1990s -- with about 70 percent of the cost borne by the public.
  • Looking at 37 cities between 1969 and 1996, the Coates-Humphreys study found that in cities with baseball franchises new ballparks reduced income by $10 per person per year -- and building a basketball arena cut income by $73 per person.
  • While bringing a new team to town to play in an existing facility does have some economic benefits, the net value is usually negative if a new stadium must be built with public money.
  • That's because subsidies for sports facilities mean that taxes must rise or that local governments must reduce other spending -- taking funds that might otherwise go to making business more productive or producing more local spending than a stadium would.

The study concluded that subsidized stadiums use taxpayers' money to generate more wealth for owners and players, who typically don't spend a large portion of their income in the local area.

Moreover, when people fill the seats in an expanded stadium, they siphon money away from other local establishments -- such as theaters, bowling alleys and other entertainments.

Analysts argue that when team owners demand public funds for sports constructions, taxpayers must learn to tell them: "Build it yourself!"

Source: Charles J. Whalen, "Time for the Stadium Boom to Go Bust?" Business Week, November 20, 2000.

 

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