Foundation Briefs Advanced Level September/October Brief Resolved

Pro Evidence

How Sports Subsidies Provide Economic Benefits

New sports stadiums usually create jobs. Though many stadiums simply replace older facilities in another part of town, employment is usually increased at new facilities since new elaborate stadiums tend to require more staff, and prove to be more successful at increasing net expenditures originating from outside the immediate geographic area. These new expenditures minimally increase direct employment, such as stadium and franchise staff, but can significantly boost indirect employment serving neighboring shops, hotels, restaurants, and transportation. The specific local and regional job multipliers related to new stadium are highly contested, though it is clear that new stadiums tend to successfully attract spending from those outside of the region and create some new local employment. Proponents argue that as long as no better job-creation strategy is in place, these new jobs are well worth subsidizing.

Spin-off Development + Expanding the Tax Base:

Subsidies are constructed in a variety of ways, though the taxes imposed on stadium activities such as ticket, concession, and merchandise sales don't tend to supersede the significant abatements offered directly to teams by host cities. Proponents argue that new stadiums stimulate spin-off development such as new retail establishments, restaurants, concession suppliers, and parking structures. These new developments, coupled with a boost for existing local economic players, and increased property values, generate enough of a tax base increase to pay off the initial stadium investments while laying the groundwork for a healthy and sustainable tax base.

Marketing the City:

It has been argued that through the regional and national television broadcasts of sporting events, cities are become marketed to potential tourists and investors. Supporters assert that stadiums built in the 1990s such as Oriole Park at Camden Yard (Baltimore) and Jacobs Field (Cleveland) have served as proven gateways of redevelopment for their respective cities and that the tourism produced by these new ballparks has transformed both their image and capability of attracting new investment.

This card provides an economic analysis of the ways that sports stadiums benefit their host cities.

Intangibles: Civic Pride AMS

Boosting civic pride has been a primary challenge for many city leaders throughout the country. It is believed that positive attitudes towards cities improve productivity, encourage local constituents to become further invested and engaged, and attract new talent and growth. Proponents argue that enticing sports teams to relocate into cities, or building sleek new facilities for existing franchises has been a successful tool in boosting this intangible asset. Though this effect is difficult to quantify, it provides utility far beyond the cost of the subsidies.

Cities charge more property tax on stadiums than they’re worth DAT

Van Dongen, Troy. “Don’t Confuse Cost With Value When Assessing the Worth of Professional Sports Facilities.” National Association of Property Tax Attorneys. 7 June 2010. Web.

Although the costs of major league sports facilities has increased significantly in recent years, the public’s share in these investments has not kept pace. As mentioned above, historically, the public’s share of the construction costs in Major League ballparks has averaged roughly 70 percent of the total costs. Yet, the public’s investment in the Mets’ new ballpark was just 27 percent, and the public’s investment in the new Yankee Stadium was only 17 percent. 

The public’s reluctance to maintain its historically high prorata investment in these projects may be from either a reduced perception of the value received by the community from such projects (or perhaps a perception that the value has remained static), or a recognition by the team owners that their investment is of a greater value. In either case, however, the market evidence still generally supports a decrease in overall value from year to year.

As explained above, professional sports facilities have a significant rate of depreciation. Although this may be offset somewhat by the honeymoon effect for the first few years, the depreciation is incurred almost entirely by the private entity, because the public entity retains the infrastructure, redevelopment, civic pride, and other intangibles associated with having a professional sports team located in the community, regardless of how well the team fills the seats at its stadium. On the other hand, the private possessory interest is disproportionately affected by the trailing-off of the honeymoon effect, as the team will eventually experience just average performance on the field, with a corresponding impact on the revenues attributed to the real property. Consequently, although the public investment in professional sports facilities has decreased while the construction costs have increased, the result of this phenomenon does not signal an increase in the property’s assessable value. Indeed, team owners that have not undertaken the work to assure that their facilities are being properly assessed are likely to be paying property taxes based on values that were erroneously set too high by the local assessor.

This card shows how investment in a stadium is actually safer for the city than for the team. Cities retain all the intangible benefits of the stadium while collecting property tax (in most cases) that’s in excess of the property’s value. Owners, meanwhile, are left with depreciated properties. Because this depreciation can go unrecognized, the local community is insulated from drops in property tax revenue.