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.