Funding Pro Sports Teams Is Against the Public Will

Funding Pro Sports Teams Is Against the Public Will

The second type of externality allegedly generated by a sports team is civic pride— a nonuse benefit. Without ever paying the team, people can cheer for it, read about it in newspapers and magazines, and brag about it to out-of-town friends and relatives. To the extent that teams generate civic pride, subsidies to teams and arenas may be efficient. Using a CVM survey, however, Johnson, Groothuis, and Whitehead [2001] find that, while the Pittsburgh Penguins of the NHL generate substantial civic pride, the value of those public goods falls far short of the cost of a new arena. Johnson and Whitehead [2000] also used a CVM survey to determine that the public goods generated by a minor league baseball stadium in Lexington, Kentucky, and a new arena for University of Kentucky basketball fail to justify significant public subsidies.

The CVM results are consistent with the outcomes of many referendums on taxes to subsidize stadiums—they often lose. Yet, even in cities where stadium referendums fail, governments still often find ways to subsidize sports teams [Fort, 1997]. This suggests a public choice explanation that public stadium financing results from the influence of special interest groups.

Some studies have suggested a public choice motivation for subsidies. Swindell and Rosentraub [1998] say that fans, players, and owners benefit from a team’s presence, and that fans themselves value the intangible benefits the most. Kalich [1998] studied three stadium-funding initiatives and found that, when the benefits were concentrated among a small group and a much larger group shared the costs, the funding initiative succeeded.

Like previous CVM studies of sports teams, this study finds that aggregate willingness-to-pay values are not large enough to cover the costs of sports facilities. The range of values is large enough, however, that intangible benefits have to be considered an important factor in public support for stadium subsidies. A plausible argument could be made that the values are large enough to explain stadium subsidies depending how non-response and other factors are handled.

Teams use money to influence the democratic process, Fj

Attempts to curtail enormous subsidies have also included the ballot box (i.e. voter referenda and initiatives). However, these referenda might not accurately express the “will of the people” because like all democratic elections, a major determinant in deciding the vote is who shows up to vote and what type of information is available in order for them to make their decision. Economic scholars argue that those who are in favor of subsidizing new stadiums greatly outspend those who oppose it. In 1997, both San Francisco and the state of Washington held a referendum to determine whether to subsidize a new NFL stadium. Proponents in San Francisco outspent opponents by twenty-five to one and opponents in Washington were outspent eighty-to-one, with both referenda barely passing in favor of the subsidy.

The public has no say. ASF

City leaders have become very aggressive in the competition to acquire a professional sports team., Not only will a professional team put their city "on the map," but it will also bring in more revenue opportunities. Usually, city officials do not give residents an opportunity to participate in, or object to their plans, insisting instead that a new sports arena will improve the local economy. They argue that the building of a new stadium will create construction and stadium jobs, attract tourists and new industry to boost the local economy, and the overall increase in local income will have a "multiplier effect," which will cause still "more new spending and job creation." These are the same officials who attend games sitting next to wealthy developers and team owners in the "sparkling new luxury boxes," while the average fan faces steeply increased ticket prices. (pg. 108-109)

Teams are circumventing public displeasure and extracting more funds from governments DAT

As public resistance to cash payouts to franchise owners has increased, clubs and cities have cleverly devised alternative forms of financial subsidies. Tax abatement became a first alternative, but it was rarely enough to convince the owner either to stay or to relocate from another city. Using government bonds to raise construction funds cuts the cost of borrowing. Add to that a very low (if any) stadium lease fee, the franchise’s capture of revenue from concessions, parking and on-sports events at the facility, and a governmental guarantee of a full house of spectators, i.e., covering the cost of empty seats. More recently, contracts with cities have included a provision similar to a public sector union “me-too” clause. The city promises that the stadium it provides will meet the “state-of-the-art.” If other stadiums are “better,” the city promises it will update its facility for the franchise at the public’s expense.

Sports franchise owners have also devised new ways to secure public funding, for example, by making the new sports facility part of a comprehensive redevelopment package or, in the case of football, obtaining a promise from the NFL to hold the prestigious Super Bowl in the new stadium at some time in the future.

Stadiums are typically considered a massive investment with progressive financial benefits down the line. However, under modern financing schemes, the positive future impact of a stadium, which is heavily “sold” to local communities to secure funding, is wiped out by contractual obligations for cities to continue to provide funding for things like renovation. Con teams can dissolve the idea that stadiums are even an investment in the classical sense of getting any kind of return on investment.