Tags: The | Stadium | Financing | Ripoff

The Stadium Financing Ripoff

Thursday, 10 May 2001 12:00 AM

In the latest edition of "The Regional Economist," economist Adam Zaretsky analyzed the payoff for cities that have invested billions of taxpayer dollars in stadiums for professional, for-profit teams. He found that the economic impact studies often used to justify the spending rely on spurious assumptions.

"When a city chooses to use taxpayer dollars to finance sports stadiums, the city's leaders must consider not only what the alternative uses of those funds could be - schools, police, roads and so on - but they must also figure what return the city would receive from those other ventures," Zaretsky said.

"Then, the return from the city's next-best alternative must be subtracted from the total return of the 'winning' choice to arrive at the 'actual' return of the investment in a stadium. This calculation is almost always missing from these studies because the next-best alternative is often the better choice."

Zaretsky said for cities to benefit from public investment in stadiums, the facilities must bring in people from outside the area who otherwise would not have come to town, because such visitors would spend money that would not otherwise have been spent in town.

He rejected arguments that stadiums generate jobs, saying those who work at the facilities come from nearby jobs so there's no net change in the number of jobs available. Additionally, many of the jobs are part-time, low-paying and needed only on game days.

Since World War II, only 14 of the 140 sports facilities refurbished or built did so without taxpayer dollars. From 1987 to 1999, taxpayers spent about $5 billion to build or upgrade facilities, and since 1999 from $9 billion to $11 billion has been ponied up from public coffers.

Zaretsky cited an independent economic study that found that of the 30 metro areas where a stadium or arena was built or remodeled in the previous decade, only three - St. Louis, San Francisco/Oakland and Washington, D.C. - showed a significant relationship between the facility and per-capita personal income growth, and that was negative.

In Chicago, Illinois taxpayers were forced to put up $150 million for a new stadium for the White Sox. New Comiskey Park opened in 1991. The Illinois Sports Facilities Authority said since that opening only $54 million has been paid back, and the bonding authority runs out in 2010.

The Sox are required to pay rent based on ticket sales. In 1997, when ticket sales reached only $1.4 million, the team paid just $400,000 in rent.

The next taxpayer-financed sports project in Chicago involves Soldier Field, home of the Chicago Bears. The authority is authorized to issue $399 million in bonds for that project, but the bonds have not yet been issued. The deal was reached after more than a decade of wrangling.

Among the teams pushing for taxpayer support are the St. Louis Cardinals and Minnesota Twins. State officials in Missouri are holding out for a downtown revitalization plan to complement plans for a $370 million, old-fashioned ballpark for the Cardinals.

Milwaukee's Miller Park, which opened in April, was financed through a complicated sales-tax scheme involving Milwaukee County and several other southeast Wisconsin counties. The deal was contested bitterly by outside Milwaukee interests, and the construction was delayed by overruns as well as a deadly accident involving the roof that delayed the opening by a year.

Zaretsky said what keeps cities putting up the money for facilities is not expectations of economic benefits - rather, it's civic pride.

"Home teams strike an emotional chord with most communities," he said.

In the book "Sports, Jobs and Taxes," economic professors Roger Noll of Stanford University and Andrew Zimbalist of Smith College take on the myth that new stadiums trigger so much economic growth that subsidies are offset and revenues resulting from sales taxes and spending outside the stadium, as well as property tax increases, making them virtually self-financing.

Noll and Zimbalist said that was just not true.

"A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment," they said in a Brookings Review article. "No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on the net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city or an entire metropolitan area, the economic benefits of sports facilities are de minimus."

They added: "Sports facilities attract neither tourists nor new industry. Probably the most successful export facility is Oriole Park, where about a third of the crowd at every game comes from outside the Baltimore area. ... Even so, the net gain to Baltimore's economy in terms of new jobs and incremental tax revenues is only about $3 million a year - not much of a return on a $200 million investment."

Copyright 2001 by United Press International.

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In the latest edition of The Regional Economist, economist Adam Zaretsky analyzed the payoff for cities that have invested billions of taxpayer dollars in stadiums for professional, for-profit teams. He found that the economic impact studies often used to justify the...
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Thursday, 10 May 2001 12:00 AM
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