(The post below is from 2012, for an updated picture of 2014 see this post)
Minnesota just built a new baseball stadium for the hometown Twins. Target Field is luxurious and spacious and the perfect confines for a competitive baseball team. The Minnesota Vikings, however do not play baseball and thus need a stadium of their own, or so they say. The Hubert H. Humphrey Metrodome housed both teams for upwards of 25 years, but the Twins moved and the Vikings lease on the stadium has run out. The team had lobbied the state legislature for public funding for the stadium, claiming that the Metrodome was no longer profitable enough for the team to compete. Thus, a $975 million stadium will be built in its place, with just over half the funds coming from tax payers. The passing of HF 2810, was done in the belief that “the expenditure of public money for this purpose is necessary and serves a public purpose.”
The situation in Minnesota is commonplace across the United States. The public clamoring for a sports team to support often forces politicians into difficult decisions balancing fiscal restraint and public outcry. Texas was recently faced with a similar situation in whether or not to allocate public funding for a race track designed specifically for a Formula 1 Race. The race, known as the “Circuit of the Americas”, will be the first F-1 race in the United States, after dwindling attendance forced its cancellation. The sum needed to build and sustain this track in the Austin area may cost as “as many as 100,000 teachers in Texas [their jobs] …. to cope with the state’s budget crisis, according to Moak Casey & Associates, an Austin-based education consultant. For $25 million a year, the state could pay more than 500 teachers an average salary of $48,000.” The circumstances differed drastically between the two plans, but ultimately it was a substantial chunk of money to be distributed toward a stadium whose primary purpose is to house one large event a year. The $25 million the race organizers asked for was doled out, but not without controversial methods of achieving it. The procurement of the investment from the state has caused delays for the development, but the November deadline is still on track.
The question of why states, or occasionally counties, allocate such large sums for sporting related events delves deeper into the collective psyche of modern society. The adoration of sporting teams is predicated on the idea that they accomplish a public service. Branching, its sphere of influence into reports on daily local newspapers, radio, and television stations, teams take on the identity of the region they represent. Richard Lipsky in “How We Play the Game” describes sport to be “classless” in its widespread interest. He said that knowledge of sport appears to bring people of all walks of life together and molds them into a “we.” Sport in each community has an emotional affect on its residents. In bonding themselves to a sports franchise, the team becomes “our” team and, in competition, a feeling of “us versus them” arises.
Sporting events offer spectators a unique experience, since each game is different. With the advent of luxury seating there is an opportunity for people to consume sports in an elite and rarified manner visible to other consumers. Mark Rosentraub explores the topic further in how sporting teams take up a rarified spot in public life. Not only can sports serve as an outlet for fans’ passions, they also serve as economic tools to renovate parts of downtown. Modern architecture used in the design of new stadiums not provides an arena for the event, but serves in and of itself as a tourist attraction. In addition, as cities strive to build affluent downtown areas with offices and services, stadiums can be used as a recreation area to complement the working population of the area.
The importance of a sports team to a city’s residents is difficult to overstate. Christopher Diedrich notes the study of Mark Rosentraub and David Swindell, who in 1996 surveyed Indianapolis residents, asking them to rank the importance of a range of cultural attractions to their city. The results are endemic of society’s value on professional sports. The researchers found that
“When asked about civic pride, respondents answered that the NBA’s Indiana Pacers were as important as museums. Right behind them were the NFL’s Indianapolis Colts, well ahead of the area’s music and shopping. When asked what defined the area’s reputation, respondents answered auto racing first, followed by the Pacers and Colts, with museums falling to fourth. Finally, when asked whether the loss of a particular community asset would hurt the reputation of the community, sports won again. Eighty-five percent of respondents believed that losing the Indianapolis 500 would hurt their reputation, followed by the Pacers at 81% and the Colts at 75%, with only 68% of respondents believing that the loss of their museums would harm the city’s reputation.”
Furthermore, proponents claim keeping teams within the city provide benefits outside the financial realm. Sarah Wilhelm analyzes each of these claims in her oft-cited study on the value of professional sports to cities. She notes that a local sports franchise may create benefits for fans who never attend a single game. Fans may follow the franchise in the media and discuss the franchise with friends, family and coworkers. It also gives off a feeling of civic pride. A local sports franchise will create civic pride, essentially putting the city “on the map.” It may help draw in a talented workforce that would be willing to settle for reduced benefits in order to be closer to a sports team. She writes that it can affect recent college graduates as they ponder their next location.
Critics of this are numerous, and though the overall effects of a team are difficult to quantify, the basic economic measurements of job creation and economic stimulus of building new stadiums do not justify public funding. Decision makers have not necessarily been listening. Since 2000, 28 new major league stadiums have been built costing over $9 billion dollars. More than half, over $5 billion, of the costs of the new stadiums were funded using public dollars. Even more, two thirds of teams in the five major sporting leagues are playing in stadiums built or significantly renovated since 1990—with 28% built or significantly renovated since 2000. So despite the precarious results, the success rate at which owners get subsidized for their requests is astounding.
Further examination of the financial data suggests that while the construction of a stadium provides an influx of jobs in the interim, its lasting effects are substantially overstated. For example, all the funding diverted to new stadium projects will not be doled out to other deserving causes. The investment in the stadium can be serving other public goods in the meantime. While the events at the stadium can be a driving source of business in terms of taxes paid and as a benefit for the surrounding businesses, it diverts the public from other forms of entertainment. Economists have called this the “substitution effect” in that while the stadium does generate substantial revenue, it detracts from the other options left for consumers on a budget.
The CATO institute debunks the myth of the value a stadium adds in terms of job creation. In evaluating the plan for the construction of a new baseball stadium for the then-new Washington D.C franchise, they deem the positive numbers to be severely inflated. For example, a report from the District’s Office of the Deputy Mayor for Planning and Economic Development claims that the team and ballpark will “create 360 jobs earning an annual total of $94 million.” That amounts to an astounding $261,111 per job. The wonder is that anyone finds such figures credible. Yet decade after decade, cities throughout the country have struggled to attract or keep professional sports teams, and the idea that a team brings with it large economic gains invariably arises.
Yet, in the current professional sports marketplace the conditions are stacked against cities in dealing with the issue. The barriers to entry for professional teams ensure that there will consistently be new suitors for a team’s service. In these scenarios, the team always has leverage over its host city since a move after the current agreements end loom heavily over the proceedings. The Wall Street Journal investigated the imbalance in negotiations in the case of Cincinnati and found alarming statistics.
Not only did the final cost of the football stadium for the Cincinnati Bengals exceed initial projections, it put an unduly burden on the lone county that put forth funds. While it may have been foolish for a lone county to fund a stadium, considering only one other example of this exists out of the most recent 23 stadiums built with public funding, this deal surpassed even the worst case scenarios for the county. The proposed budget for this project was $280 million, the team admits costs ran up to $350 million, the county claims it was $454 million, and when Harvard Professor Judith Grant Long dug further total costs ran to $555 million. The astounding costs involved have long term consequences on the tax-payers in the county. 11.4% of the general fund was dedicated to paying off the stadium in 2008, by 2010 that percentage swelled to 16.4%.
The circumstances in this case should serve as a cautionary tale for other cities, but as current legislation shows this is not the case. Consistent renovations are often asked for by owners instead of complete overhauls of the stadium. In Chicago, the infamous Wrigley Field is being haggled over in terms of how renovations will be financed. That is in addition to the recent renovations of the home of the Chicago Bears football team, where precautions were taken in order to ensure that costs were managed. California has several teams that have leveraged their circumstances into a beneficial compromise with the city. Santa Clara has promised the 49’ers football team a $878.6 million contract construction of a 68,500-seat stadium. The Sacramento Kings has threatened relocation in case a new arena is not built, and as it currently stands that may come to fruition. Likewise, the Golden State Warriors basketball team will move across the bay by 2017 into a brand new arena in San Francisco.
Without delving further into the sociological factors that dictate the place of professional sports in American society, current trends certainly dictate an imbalance in bargaining for private team owners and state legislatures. To change the course of events would require a fairly major overhaul of the current structure, a change that despite union lockouts in several major sports seems highly unlikely. Instead, it will require a delicate balancing act in determining the disbursement of funds from tightening state budgets versus the popular sentiment of supporting local professional teams.
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