Professional sports stadiums attract new business, create construction jobs, and increase local economic growth—or at least, that’s what we’re told. The truth is that the vast majority of peer-reviewed academic research finds that stadiums actually don’t contribute to economic growth, nor do they create measurable benefits in the local community.
This probably sounds odd, given that there’s a multitude of studies that purport to predict incredible benefits from stadium construction or renovation. The difference is that these studies, conducted by consultants and funded by the sports teams or overly-enthusiastic policymakers, don’t incorporate the costs of the subsidy. And, unsurprisingly, it’s pretty easy to make any idea look great if you only look at the benefits!
These non-academic economic impact studies represent a “benefits-only” approach to decision making, as opposed to a more rigorous cost-benefit analysis. For example, no consultant study has ever accounted for the basic fact that funds must be taxed out of the local economy to pay for the stadium, which reduces local economic development.
Furthermore, a proper cost-benefit analysis not only counts the cost as well as the benefit, it also compares different alternatives that could be pursued. That is, the full economic cost of a proposed project includes what else could be done with those resources—the tradeoffs that need to be made to select one option over another.
Money spent subsidizing a stadium could have been spent on alternative public investments in infrastructure and pure public goods, or expanded funding for services like public safety or education. Subsidizing a stadium means that local businesses, workers, and families foot the bill for its construction. This consumes funds that would be more likely to spur economic growth or improve the local quality of life.
A common argument is that stadium subsidies pay for themselves through the taxes collected on businesses that locate around the stadium. But most money spent in and around the stadium is simply redirected away from other entertainment options around the city—harming those businesses in the process. This is another example of focusing on the benefits and ignoring the costs.
Meanwhile, the value of the subsidy is generally capitalized into the net worth of the sports franchise. Since 1991, the value of professional sports teams has risen faster than any of the broad-based measures of the US stock market. It’s clear that the big winners of stadium subsidies are the billionaire team owners who benefit both from the public status of owning a sports team as well as from the ability to cash in on the soaring asset value in the future.
Stadium subsidies don’t boost economic growth and don’t help local residents or businesses. Policymakers are beginning to see through the fog of civic pride to glimpse facts that economists have been pointing out for decades. We’ve collected a variety of quotes from economists, economic development officials, and politicians that reflect just how bad of an investment a stadium subsidy is for taxpayers.
Roger Noll, “Sports stadiums do not generate significant local economic growth,” Stanford News, July 30, 2015:
“NFL stadiums do not generate significant local economic growth, and the incremental tax revenue is not sufficient to cover any significant financial contribution by the city.”
Michael Leeds, “Are pro sports teams economic winners for cities?,” Marketplace, Mar 19, 2015:
“If every sports team in Chicago were to suddenly disappear, the impact on the Chicago economy would be a fraction of 1 percent. A baseball team has about the same impact on a community as a midsize department store.”
Robert Baade, “The Economics of Subsidizing Sports Stadiums,” Economic Research Federal Reserve Bank of St. Louis, May 2017:
"The idea that sports is a catalyst for economic development just doesn't hold water."
Frank Rashid, “Stop The Subsidy-Sucking Sports Stadiums,” NPR, August 5, 2011:
"Public subsidies for stadiums are a great deal for team owners, league executives, developers, bond attorneys, construction firms, politicians and everyone in the stadium food chain, but a really terrible deal for everyone else."
Jeanette Mott Oxford, “Stop The Subsidy-Sucking Sports Stadiums,” NPR, August 5, 2011:
"Folks believe the threat that jobs will be lost, that somehow the team will move. Then there's the civic pride element around the status of having a team. I think that too often, those motivate people no matter what the evidence says."
Dennis Coates and Brad R. Humphreys, “Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?,” Econ Journal Watch, Volume 5, Number 3, pp 294-315, September 2008:
"We find near unanimity in the conclusion that stadiums, arenas and sports franchises have no consistent, positive impact on jobs, income, and tax revenues."
Victor Matheson, “Are pro sports teams economic winners for cities?” Marketplace, March 19, 2015:
“A good rule of thumb that economists use is to take what stadium boosters are telling you and move that one decimal place to the left, and that’s usually a good estimate of what you’re going to get.”
Allen Sanderson, “Why do mayors Love Sports Stadiums?” The Nation, July 27, 2011:
“If you want to inject money into the local economy, it would be better to drop it from a helicopter than invest it in a new ballpark.”
(This will be an ongoing project to collect such quotes. If you have suggestions we’d appreciate submissions to [email protected]).
Photo credit: CARL DE SOUZA/AFP/Getty Images