Public Financing of Professional Sports Stadiums

Megan McArdle argues, not unreasonably, that “if the Yankees want a $1.3 billion stadium, they should pay for it themselves.”

Instinctively, I agree. Practically, however, it’s not that simple. Big league sports franchises are an incredibly scarce resource and municipalities are willing to bid for the advantages, psychic and real, that attach to having one. I examined the issue some years back for Tech Central Station in a piece called, “Applying Free Market Logic to an Unfree Market.” Looking at the recent history of bidding wars for NFL teams, I noted that,

The mere threat of relocation has secured several teams better stadium deals. Several cities — Oakland, Baltimore, St. Louis, Cleveland, and Houston — that declined to pay up to keep their current teams wound up paying even more a few years later to lure other teams or secure an expansion team. Charlotte and Jacksonville competed with former NFL cities and others who hoped to be elevated to “big league” status to obtain their franchises, and had to provide substantial funding for a state-of-the-art facility to win their bids.

[…]

While libertarians rightly bemoan the notion of forcing taxpayers to subsidize wealthy team owners, they should understand that the market works both ways. If sports leagues have the leverage to demand public financing of stadia as a precondition for moving a franchise to a city, they would be foolish not to use it.

Luring a professional sports team is difficult and generally not economically smart. It is rather galling that the vast majority of a town’s residents who will never attend a game are forced to pay for the privilege of added traffic congestion. Nonetheless, there are plenty of cities out there begging for a team. Public subsidies for arenas are the cost of playing.

In the specific case of the Yankees, who derive phenomenal benefit from the local media market, the city is presumably in a better bargaining position. The Steinbrenners would be foolish to move the team to, say, Charlotte. Then again, New York City has “lost” both of its NFL franchises, the Jets and the Giants, to neighboring New Jersey, which has kicked in the money to build two consecutive stadiums.

FILED UNDER: Economics and Business, Sports, ,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Bithead says:

    In the specific case of the Yankees, who derive phenomenal benefit from the local media market, the city is presumably in a better bargaining position. The Steinbrenners would be foolish to move the team to, say, Charlotte. Then again, New York City has “lost” both of its NFL franchises, the Jets and the Giants, to neighboring New Jersey, which has kicked in the money to build two consecutive stadiums.

    Of course the issue here, is the tourism dollars brought on by the Yankees being there, which I expect far outstrips the 1.3 billion they’re asking for.

    Then again, given the ardor of some yankees fans, one wonders if this doesnt sross the line into government support of Religion…

    (smirk)

  2. Patrick T. McGuire says:

    Is there any flip-side to this? That is, do the teams have to pay any usage fees to play in the stadium in the form of a lease or something similar to offset the cost of building it? Is there any revenue sharing or taxes applicable to sales of team branded merchadise? What about the ad revenues from the stadium banners, who gets it?

    In short, is there any direct monetary gains to be realized by the stadium owners or do the teams get to own the stadium too?

  3. Jeffrey W. Baker says:

    There are obvious issues of urban design that this post doesn’t even approach. The new stadium for the Yankees is built upon a park in the Bronx. The stadium includes 9,000 subsidized parking spaces, paid for with the $225m tax-free public bond. The only jobs added to the neighborhood are an (estimated) 12 full time garage attendants at a whopping $11/hour. So the neighborhood loses several hundred acres of prime parkland, gains a few thousand bucks in annual wages, and also gains 9,000 cars worth of pollution and asthma per home game. Meanwhile, the Metro-North rail station that was supposed to serve the stadium will not be built.

    These public priorities seriously need to be rethought. The city is bankrolling free parking for thousands of Yankees fans from New Jersey while ignoring their own public transportation needs, which would be a much more appropriate application of public money.

  4. James Joyner says:

    In short, is there any direct monetary gains to be realized by the stadium owners or do the teams get to own the stadium too?

    The deals vary but usually the city gets some cut from concessions and whatnot. In all cases, though, the city counts on the ancillary benefits in tax revenues offsetting the costs.

  5. I do believe that most major league sports teams in the USA have plenty of money and if they want a stadium they should pay for it. They would have money, if they didn’t pay ridiculous salaries to ballplayers. Plus the supposed benefits they bring local communities are not all that great.