Why taxpayers keep footing much of the bill for new sports stadiums

We’ve been tracking how cities across the U.S. are recovering from the pandemic and changing to accommodate how we’ll live and work in the future. This includes a push for more affordable housing, support for job creation and investment in public transit and green space. Another thing we’re seeing: new sports stadiums. The state of Kansas, for instance, wants to lure the Kansas City Royals baseball team and the Kansas City Chiefs football team away from next-door Missouri.

The main idea is that building a sports venue stimulates the local economy. But, looking at the bottom line, is a stadium a good use of taxpayer dollars? A new article in The Economist takes a look at just that.

Simon Rabinovitch, U.S. economics editor at the magazine, discussed the question with “Marketplace Morning Report” host Nova Safo. The following is an edited transcript of their conversation.

Nova Safo: How many of these plans involve taxpayer dollars?

Simon Rabinovitch: They almost all involve taxpayer dollars. Academics who’ve looked at it have tracked the evolution of funding over the years. And public funding would often be to the tune of 100% of the project. Now, over the decades, I think the realization seeped in that that was a little bit obscene — that these are billionaire sports owners who could afford to do this, but local governments still felt obliged and compelled to come up with some funding. So the share of funding from governments has actually decreased to roughly 30% to 50% of the projects. But because the projects themselves have gotten a lot more lavish, a lot more bells and whistles, the level of public subsidy is about three times as big today as it was in the ’80s and ’90s. So we’ve gone from about $150 million to closer to $500 million.

Safo: And do these investments pay off?

Rabinovitch: You typically hear three different arguments about why it might be sensible to do this kind of spending. So, you know, No. 1 is the idea that they create lots of jobs. No. 2, that they unleash a lot of consumption, and No. 3, that they’re great for local economic development. But the economists who’ve looked at them over the years conclude that all three of these are a little bit wobbly.

There are a lot of jobs during the construction phase, but on a permanent basis, a stadium is kind of equivalent to a midsize department store — not something that you typically would want to give, you know, $500 million to. Consumption — yeah, people spend a lot of money when they go to sports games, but a lot of that spending is effectively displaced. [In other words, people would spend their money elsewhere if they weren’t spending it at the ballpark. Just having the stadium there doesn’t mean people are spending more than they would otherwise.] And then No. 3 — and I think this is the most damning one — is the idea that the stadium is an anchor for a thriving, lively neighborhood. The problem with that is that stadiums are only used some of the time. A football stadium maybe hosts 10 games a year — maybe, if you’re lucky, 10 concerts on top of that. So, you know, empty for more than 90% of the year.

Safo: And here’s the debate part, though. I was just in Detroit not too long ago talking to business owners who really did say the stadiums, the fact that people were coming downtown to go to a game, really helped when there was almost nothing else there [during the worst of the pandemic]. Is there some measurable public benefit that you can legitimately point to for these investments?

Rabinovitch: There is clearly a lot of civic pride that is associated with a sports team. People love their sports — people are crazy about their sports. And, in the same way that we will make an argument that there ought to be public funding for the arts, that you can’t just reduce it to dollars and cents — I think you can make a similar argument for sports that that, yeah, the dollars and the cents aren’t great, but there’s more to it than that.