Virginia Should Refuse to Subsidize the Construction of a New Stadium for the Capitals and Wizards

The proposed deal could be the largest-ever government subsidy for a sports stadium. Studies consistently show such handouts don't benefit communities.

(Washington Wizards.)

The Washington Post reports that Virginia state and local governments may be about to give Washington Capitals (NHL) and Washington Wizards (NBA) owner Ted Leonsis a giant $1.35 billion subsidy to build a new stadium complex in Alexandria - the largest-ever government stadium subsidy:

A Northern Virginia sports arena that would move the Washington Capitals and Wizards out of downtown D.C. would receive the largest-ever public subsidy for a project of its kind, an estimated $1.35 billion in state and local funds, if it goes forward….

The net cost to taxpayers would ultimately reach an estimated $1.35 billion, according to the study. That includes $1.15 billion directly for the project — more than any comparable facility on record, according to J.C. Bradbury, a Kennesaw State economics professor who studies sports facilities and reviewed the study for The Post.

Virginia Gov. Glenn Youngkin claims the money will mostly come from revenue that wouldn't be available in the absence of the project. I'll believe that when I see it! Among other things, that claim doesn't take account of the loss of revenue from alternative uses of the same land. The Post reports that experts who have examined the plan are skeptical of that claim as well.

There is broad cross-ideological consensus among economists and other experts that sports stadium subsidies create net losses for communities, not gains. The billionaire owners and millionaire players make out like bandits. The general public, not so much. A recent survey of 130 studies on the impact of sports stadiums, written by economists J.C. Bradbury, Dennis Coates, and Brad Humphrey, concludes that "[e]ven with added nonpecuniary social benefits from quality-of-life externalities and civic pride, welfare improvements from hosting teams tend to fall well short of covering public outlays." Bradbury is one of America's leading sports economists.

Sports stadium subsidies may be an even worse deal in northern Virginia than in most other areas. The region suffers from a serious housing shortage, and needs to build more. Arlington County (where I live), and Alexandria, where the new stadium complex would be built, recently liberalized zoning restrictions that previously severely restricted construction. But more needs to be done along these lines. If state and local authorities want to repurpose a large chunk of real estate, they should let developers build new housing there. That would simultaneously bolster our economy and enable more people - especially the lower middle class and working class - to "move to opportunity."

As a libertarian, I am skeptical of the case for providing welfare for the poor. But I can at least understand and respect the logic behind them. By contrast, there is no plausible justification for giving corporate welfare to billionaire sports team owners. If Mr. Leonsis wants to move his teams to Virginia, he should be welcome to do so. But he should pay for the stadium himself, not ask the state for handout.

I have nothing against NBA and NHL teams. Indeed, I am a big fan of both leagues. But the state shouldn't subsidize my entertainment. Team owners are more than capable of building stadiums themselves, paying for them from their profits. That is in fact how stadiums were built during the early to mid-twentieth century, until public subsidies became common, starting in the 1950s. If unsubsidized private enterprise could build Fenway Park and the original Yankee Stadium a century ago, it can surely accomplish similar feats in today's much wealthier and more technologically advanced society.

Longtime readers may recall that, though I live in Virginia, I grew up in the Boston area and am a Celtics and Bruins fan. Cynics may suspect I would be more supportive of subsidizing the Caps and Wizards if I were a fan of those franchises.

But my opposition to stadium subsidies is not dependent on any such considerations. For example, I also think the city of Worcester, Massachusetts was wrong to subsidize the construction of a Red Sox minor league stadium, even though I am a big Red Sox fan. But this Massachusetts boondoggle (which cost Worcester some $160 million) is no justification for Virginia doing a much larger one. Our region should learn from the mistakes of others, not imitate them.

Fortunately, the stadium subsidy isn't yet a done deal. Among other things, it will have to be approved by the Virginia state legislature and the Alexandria City Council. They should just say no.