Skepticism justified on government spending for arenas, stadiums and pro sports franchises
September 18, 2010 7 Comments
The proposal to spend $175 million or more of taxpayers’ money on a new arena in Quebec City has created a new controversy for a federal Conservative government that has had its fair share of troubles over the course of the past year.
It’s an emotional issue to be sure. Some Conservatives hope that it will help the party hold on to valuable Quebec seats in the next election. For Quebec City residents, the proposal reignites the dream of the NHL eventually returning to their hometown, while for western Canadians it conjures up more troubling memories of a time when Quebec was seen as the beneficiary of federal favouritism.
If Quebec City succeeds in winning federal backing for a new arena, it could increase pressure on Ottawa to spend more money to help draw the NHL back to Winnipeg and to build new arenas in Edmonton and Calgary. It could all get very expensive, very quickly.
Are public subsidies for professional sports facilities and teams money well spent, or a drain on the public treasury that helps governments win votes in a way that a similar commitment to education and research and development could never hope to do?
Let’s see what those who have done the research have to say:
- Charles Santo of Portland State University’s School of Urban Studies and Planning noted in a 2005 article for the Journal of Urban Affairs that “context matters” in determining whether or not public subsidies for sports facilities have had a positive effect on a community. He noted that “stadiums set in downtown locations are more likely to generate ancillary spending before and after games than their suburban counterparts” and that “a new team might also generate some economic benefit… if it causes local residents to spend money inside the local economy that they would have otherwise spent elsewhere.”
- Economists John Siegfried of Vanderbilt University and Andrew Zimbalist of Smith College noted in a 2002 article for the Journal of Sports Economics that “there are few empirical conclusions on which a broad array of economists agree so strongly as the absence of local economic development effects of sports facilities” and that when governments help finance new professional sports facilities, they “realize only a small, if any, direct financial return—which in any case is dwarfed by the debt service, maintenance, sanitation, security, and opportunity costs incurred.”
- Siegfried and Zimbalist also noted that the professional sports teams that reside in these new stadiums, arenas and ballparks can drain revenue away from other parts of the local economy:
“Most consumers have a relatively inflexible leisure budget. The more time and money that is spent on a sports team, the less is available for golf, bowling, amusement parks, restaurants, theater, or concert halls. And although some expenditures on local sports teams substitute for imports (e.g., replace out-of-town travel), a lot also replace alternative leisure expenditures in the community where the team is located. The net effect of a new team or stadium on consumption in the team’s local community is likely to be close to zero, although sports teams cause a substantial rearrangement of leisure spending within the local area (Coates & Humphreys, 2000).”
- Economists Dennis Coates of the University of Maryland and Brad Humphreys of the University of Alberta, in a 2008 working paper, strongly criticized the assumption that public financing of professional sports facilities leads to economic development. While leaving the door open for the possibility of intangible benefits, they wrote that economists are nearly unanimous that “stadiums, arenas and sports franchises have no consistent, positive impact on jobs, income, and tax revenues” and that subsidies to build and operate professional sports facilities are “difficult to justify”.
- Peter Asselin, in another review of the evidence for a 2006 Rutgers Journal of Law and Urban Policy article on the effects of public financing of pro sports facilities in Philadelphia, found that the politicians are among the biggest beneficiaries of new sports facilities:
“Local politicians who either seek accolades for enticing new teams to their cities or seek to avoid the stigma of losing a team on their watch argue that new stadia result in local economic growth. The citizens are serenaded with claims that building a stadium will create jobs, increase tax revenue, attract business, and improve tourism. The public subsidy, they are told, will pay for itself.”
“However, the majority of research indicates that the presence of new stadia and teams have no significant economic impact. Most independent economists agree that the number of jobs created after the construction phase has ended is minimal, and these jobs are seasonal, unskilled, and low paying. Publicly funded stadia also come at a great cost to both local and federal taxpayers. Moreover, spending at the stadium and in the area is likely shifted from other forms of local entertainment and therefore does not create a net benefit. Lastly, using public funds to subsidize stadium construction limits the availability of funds for essentials such as education, police, streets and water.”
Remember those points the next time the issue of public funding for arenas, stadiums and sports teams comes up in the news.