stadiums

Sports Stadiums Throw Taxpayers for a Loss

It's a play fake that never fails.

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Since 1995, Los Angeles has been an anomaly: a huge city with lots of sports fans that has exactly as much professional football as Billings, Montana. This week, Angelenos got a bit of good news: They still aren't getting an NFL franchise.

A corporation called AEG announced Monday that it was giving up on its effort, endorsed by Mayor Eric Garcetti, to build a new football stadium as part of a renovated downtown convention center. So one of the groups vying to induce a team to move from some other city—St. Louis, Oakland, San Diego—is out.

This is good news because attracting a team would probably mean piling a burden on local taxpayers to enrich owners who are already wealthy. Local taxpayers would have been on the hook for $350 million in debt to finance the new arena, on top of the $322 million left to be paid on the current convention center. And taxpayers elsewhere would have been effectively sharing the load, because the bonds used to get the money would have been exempt from federal taxes.

But Southern Californians are not free of the threat of having to pay for a professional football team that most of them will never go to see. (When the Rams were still in Los Angeles, before decamping for Missouri, they had the worst attendance in the league.) Inglewood is planning a facility that would house an NFL franchise, and Carson is hoping to build an arena to be shared by two of them, the Chargers and the Raiders.

St. Louis and Missouri have countered by proposing to build the Rams a new stadium, which could involve $350 million in state bonds. You could almost forget that the Edward Jones Dome is just 20 years old and was built, with public help, to lure the team.

University of Chicago economist Allen Sanderson has a better idea: Pay the Rams to keep playing there. "It would be far preferable for the mayor of St. Louis to write a check to the Rams' owner for, say, $100 million and let it go at that, essentially a bribe to stay put and shut up," he told me.

This is a second-best option, he admits. He has a sensible preference that local governments and the feds provide no money at all. NFL teams are rich entities, and there is no reason their owners shouldn't pay for their own playgrounds.

No reason, that is, except that they can usually get cities to offer them money to come or stay. The Miami Marlins got public assistance in building a gaudy retractable-roof ballpark, most of whose costs were paid by local governments.

While the public was spending more, the Marlins' owners were spending less, slashing their team payroll by more than half. This year, it's the second-lowest in baseball.

The only justice is that the mayor responsible for the funding was removed from office in a recall election. His successor, who opposed the deal, has refused to attend a Marlins game.

But none of that makes taxpayers whole. So it's better if the federal government discourages such extravagance by not furnishing tax breaks. How many Americans would volunteer to help Dallas Cowboys owner Jerry Jones build a $1.2 billion stadium for the NFL team that ranks as most disliked by fans? Even most Texans probably wouldn't go for that.

But all of us are getting to do it whether we want to or not. Bloomberg Business reported in 2012, "Over the life of the $17 billion of exempt debt issued to build stadiums since 1986, the last of which matures in 2047, taxpayer subsidies to bondholders will total $4 billion."

State and city bonds were originally intended to finance projects like roads, bridges, schools and other projects that serve the public. But they have been expanded to borrow money for all sorts of projects that serve to enrich private corporations.

The expense is always justified as an ingenious way to create jobs and prosperity. But economists Dennis Coates and Brad Humphreys surveyed the research on the impact of teams and stadiums on local economies and found "no substantial evidence of increased jobs, income or tax revenues."

Team owners, however, can always find some city or state willing to fleece taxpayers in the fallacious hope that prosperity will follow. It's a play fake that never fails.

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  1. panem et circenses

  2. The two largest cities, New York and Los Angeles, have managed to survive without professional football teams, so maybe the rest of the country should pay attention.

    1. Now that’s just silly, New York has a professional football team and the Jets.

      1. I guess you mean the New Jersey Giants and New Jersey Jets?

        1. Beat me to it while I was reading. Well played.

        2. In the same sense that we refer to the Landover Redskins, the Santa Clara 49ers, the Arlington Cowboys and the Berea Browns, sure.

          1. The point being that the people of New York City and New York state are not paying for the sports stadium, and not receiving whatever financial benefits the stadium might bring.

          2. Cleveland trains in Berea but plays in downtown Cleveland.

      2. You mean the New Jersey Giants?

  3. Considering that I’ve just had yet another argument with an economic illiterate over the effects of jacking up the minimum wage, I don’t think most people would be able to grasp the hit from subsidizing sports teams.

  4. There s, so far as I know, only one professional sports franchise with a reasonable relationship with its town; the Green Bay Packers. And it is instructive that the NFL is on record that they will never allow another non-profit corporation become a team owner.

    Were I the mayor of a town that a team owner was pressuring to build him a free stadium, I would tell the sonofabitch that we were going to see if the courts would allow eminent domain to be used on sports teams.

    1. Asset Forfeiture, seize the team and the stadium on the basis that the NFL (Or other organization) is an illegal cartel.

      1. They’ve already lost the anti-trust suit to the USFL. Fat lot of good it did the USFL.

      2. Actually just like people can have their cars taken if cops think it was from drug money before a conviction there is no reason why the National Felon Legion couldn’t have stadiums taken for actual crimes.

    2. That’s why Irsay moved the Colts out of Baltimore in the middle of the night. Maryland tried eminent domain on the team, and the next morning, there was nothing there to take.

      1. The Baltimore Colts were right in leaving but wrong for the public money being used to finance a stadium.

  5. Nice to see that Ann Coulter has put on some weight and started modeling.

    The metaphor of so many empty blue seats is just icing on the cake.

  6. When the Vikes got their new stadium, I proposed that they state should just levy a new tax on tickets to pay for the next one. Sort of like payroll withholding.

    Figure 65K seats, 20 year lifespan and 10 games a year and a $75/ticket tax would be added. Then the next time they need a new stadium, you just give them the $1B from the ticket tax.

    At least that way the fucking idiots who go to the game would pay for their own fun.

    1. I can’t remember the specifics, but when the Vikings stadium was approved I remember seeing the revenue projections the Vikings were anticipating and thinking they were quite small in comparison to the cost of the stadium. From a financial perspective it would have made more sense just to write the team a check ever year for thirty years and have them continue playing in the Metrodome.

      1. Part of that was because they waited until after they broke ground to spring personal seat licenses and shit on the fans who want to go to the “People’s Stadium” (yes that is what our governor is calling it).

        http://www.twincities.com/ci_2…..cense-fees

        I’m sure there are more goodies like that that will come to light. I think there was already some shady development deal on a parcel of land nearby. I can’t remember the specifics, but there was some minor kerfuffle about who would win the rights to it.

    2. The Vikings’ stadium is self-financing thanks to the revenue from electronic pull-tabs!

      (Sorry, but as a Packer fan, I can’t help but marvel at the stupidity of the Minnesohhhhhta politicians who thought there would be more than triple-digit revenue from electronic pull-tabs going to fund a stadium. That’s stupid even by politician standards.)

      1. Ted, they knew that those pull tabs wouldn’t work. However it gave them the political cover to push that bill through.

        If they had tried to push a bill that just sucked that money from the general fund, it wouldn’t have flown. The way they did it allowed them to commit to funding the stadium without facing the blowback that they should have gotten.

        The pols weren’t stupid, it was the voters.

        You probably thought Scott Walker signing a roof beam was funny. Didn’t you? (Actually I thought it was pretty funny, and was also dismayed by the fact that Vikes fans got so freaked out about it).

        http://www.twincities.com/loca…..om-vikings

    3. Yes, the people who attend those games make up a small percentage, compared to people who live too far away to attend! I have been to one game in my life, that I did not live in, or near to, the cities that had the sports teams. I guess that just means most of us are “back woods” people. And, we get to contribute to these sports teams who are exempt from income taxes?!

  7. Since 1995, Los Angeles has been an anomaly: a huge city with lots of sports fans that has exactly as much professional football as Billings, Montana.

    They’ve got as much professional football as Columbus OH or Tuscaloosa AL.

  8. NFL games are already ridiculously expensive, with many teams averaging over $100 per seat. At those rates, it is completely unaffordable for the average family to go to more than one game a year (if that). I can’t imagine what it’ll be like in a few years’ time when the new crop of stadiums (stadia?) start being paid for.

    How long can this (as well as the insane amounts networks are throwing at the NFL) go one for? This feels like a bubble waiting to pop.

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  13. The SF Giants and Arsenal FC both privately financed their new stadiums, and paid off the related debts in less than 20 years. Why? Because they had FUCKING POWERFUL INCENTIVE TO DO SO!

    I don’t mean to yell, but this point is so obvious, yet it never seems to get made when some ‘representative’ dipshit wants to hand out other people’s to massive corporations.

  14. It’s worth noting that Scott Walker has also supported a new stadium in Milwaukee:
    http://www.huffingtonpost.com/2015/02/0Walker plans to have the state issue $220 mi3/scott-walker-stadium_n_6595492.html

    Note the following contradictions in the article:

    “Walker plans to have the state issue $220 million in bonds for the new facility. These bonds would be paid back by projected growth in income taxes from Bucks players and from visiting teams. …

    Increases in salaries and more lucrative NBA television contracts are expected to raise the amount of income tax collected from players each year. …

    Walker’s proposal, … emphasizes that no new taxes will be enacted. It also states that no revenue currently coming into the state would be used to pay for the bonds.”

    Basically, while he’s not enacting new taxes, tax revenues that would otherwise occur, will be used to pay back the bonds, diverting them from other uses (such as letting the taxpayers keep their own money).

    Walker is a crony crapitalist.

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