Posts Tagged ‘EcomicBenefits’

You get a stadium and you get stadium! Oh wait…

Wednesday, November 20th, 2013

Public funding for stadiums and arenas has seemed like a grand idea for cities for a long time, but is that really the case?

Since 2000, 28 new major league1 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,0,w

I believe that publically funding stadiums is a good idea, it brings people of the city into the events and festivities. With this, finance generation is possible through more than one avenue, creating a multitude of ways for residents to get involved.

If a decision has been made to use tax payers money for a stadium, finance generation is possible through: (a) Government backed bonds (b) Excise duties (c) Personal seat licenses (d) State lotteries (e) Tourism taxes (f) Sales taxes (g) Ticket surcharges (h) General fund revenues, and, (i) Lodging taxes

Bringing a sports team to a city and building the venues for those sport teams has been said to bring many benefits such as: increasing revenue, creating jobs, and benefiting the overall economy. When asking any residence of a city if they would like to have a major sports team reside in their city, few would say no, because of the “known” benefits and possibly personal satisfaction. What some people don’t realize it that the actual economic gain seen from publically funded stadiums is a shocking number, zero.

Milwaukee County did a report to determine the actual impact the city would see as a return on its significant investment of funding a new arena. A sports economist cited in the report stated that..

One should not anticipate that a team or a facility by itself will either  increase employment or raise per capita income in a metropolitan area

Again, the proponents for a new arena often say construction of a new facility will create jobs;  that those who attend sports events generate new spending; that a sports  franchise attracts tourists and companies; and that the new spending produces a  so-called multiplier effect in terms of additional spending. What is actually happening is an economic term called the “substitution effect”.

The substitution effect basically explains that instead of residents spending their money on local restaurants or movie theatres, they are spending it at the sporting arena or sporting events. So in fact, there is no gain of revenue but rather putting that revenue in a different spot. This keeps the overall entertainment spending constant, with the overall effect being that a city might actually lose money.

There are many studies that contradict the typical thoughts of a sports stadium benefiting the local city. With the evidence that I’ve seen, I no longer believe that a new stadium would be best for most cities. The construction and possible final cost of the project could prove detrimental if the team or funding doesn’t work out. Of course there is always the argument of personal satisfaction though. Does building a new stadium or getting a major sports team benefit society in a way that isn’t measureable?

The quality of life argument is brought to light because people of a city might be uplifted or benefited in intangible ways that make the building of a new stadium worth it. This of course would be hard to measure academically because of its qualitative values, but I believe it’s worth a shot.

Overall, building a new stadium and getting a town involved in a new project would seem like a good idea, but unfortunately is not. The fiscal benefits aren’t there and the value of the city could quite possibly go down. I do believe the quality of life measurement is the next step to go before people completely rule out the idea of a new sporting venture.