Why Publicly funded stadiums are a bad idea

I’ve been to many sporting events, but I can’t recall any specific play or remember who won or even who played. However, I vividly recall each stadium, where I sat, who I sat with, and what I ate. Many fans like me go to games for the experience, and stadiums are a big part of that experience.

My visit to SoFi Stadium in 2021. I had a hot dog, a beer, and caught Covid from the person sitting next to me.

As much as I love stadiums, I don’t think taxpayers should pay for them. And we pay a lot. According to my research, governments spent $10.6 billion to build or refurbish the current crop of NFL stadiums, almost $8 billion on MLB ballparks, and another $6.3 billion on NBA arenas. The Daily Kos reports that money could have hired 50,000 teachers for ten years, repaired 50,000 miles of road, or fed 3.4 million people for a year.

This article explores the political economy of publicly funded stadiums—i.e., those paid in part by tax dollars. We begin by considering the concept of public goods before discussing whether stadiums belong in that category. We then survey the social science research that has debunked most, but not all, of the arguments favoring publicly funded stadiums. Next, we explore the political processes that finance stadiums and learn why sticking tourists with the bill is always a good idea. Finally, we’ll conclude with a brief case study on the Buffalo Bills.

Public Goods

Public goods are non-divisible and non-excludable. If you can’t divide something up or prevent someone from using it, then there is no profit to be made. And if there is no profit to be made, no market actor will provide that good. Therefore, it is up to governments to provide things like roads, bridges, clean air, schools, police, courts, fire departments, and the military. Indeed, providing public goods is why we have governments in the first place and is why anarchy doesn’t work.

Not everyone agrees on what is or is not a public good. Take roads. As long as you follow the rules, no one can stop you or charge you for driving on 92 percent of the highways and roads in America. But what if you could charge people for driving on your road and exclude those who didn’t pay? How much would you pay to bypass gridlocked traffic that takes an hour to drive 10 miles? Customers’ willingness to pay and companies’ ability to exclude suggests roads may not entirely be a public good.

At times, the U.S. government treats private companies as public goods. In 2008, U.S. financial institutions teetered on the verge of collapse, which would have pushed the country into a full-blown depression. To avoid that fate, Congress passed the Troubled Asset Relief Program (TARP), using over $700 billion in tax dollars to prop up failing banks. The rationale for bailing out private financial institutions is that their collapse and the resulting depression would have been bad for everyone. However, critics argue that programs like TARP amount to corporate welfare and that it is not the government’s responsibility to bail out mismanaged companies.

So, are stadiums public goods?

The Case For Publicly Funded Stadiums

Economic Development. The notion that stadiums are public goods goes back to the Great Depression when the Works Progress Administration (WPA) built 2,302 stadiums.

Both then and now, proponents argue that stadiums are public goods because they stimulate economic development, which benefits everyone. Building stadiums requires infrastructure and loads and loads of construction. That means jobs for workers and profit for local companies. Once built, stadiums require a lot of people to work them, which again means more jobs and higher wages. Tourists flock to the city, and hotels and restaurants are filled with fans, especially if the stadium hosts a mega-sporting event like the Super Bowl. Everyone benefits from the economic engine that is stadiums, sports fans or not.

Rockies fans during the 2007 season. Source: https://www.denverpost.com/2007/10/31/curtain-call-for-rockies/

Civic Pride. People love seeing their home team win. I lived in Denver in 2007 when the Colorado Rockies won 21 of their last 22 games to make their first and only World Series. The mood was electric. Strangers would stop to talk about the Rockies. Everyone was wearing Matt Holiday, Todd Helton, and Yorvit Torrealba jerseys. Despite sold-out games, tens of thousands of people still flocked to LoDo just to be close to the action at Coors Field. My nerdy colleagues at the University of Denver even canceled their classes to watch the games. The Rockies managed to unify a city divided along racial, political, and class lines in a way I haven’t seen except for the aftermath of 9/11.

But as joyous as it is to see the home team win, watching them leave town is even worse. In 1988, the Los Angeles Times ran a piece on the Brooklyn Dodgers leaving for LA. Thirty years later, ‘Da Bums fans were still heartbroken.

Vinnie Faretra, a 57-year-old truck driver from Brooklyn, said, “I mean, these guys [the Dodgers], they broke my heart. They tore the guts out of this town when they left.”

Hall of Fame Dodger announcer Red Barber put it like this:

“If the words on the Statue of Liberty meant anything at all, they applied to Brooklyn in the old days. You had Blacks, Jews, Italians, Irish, Polish and others working hard to make a living, and they all cared passionately about their ball club. I’ve never seen a community that was so attached to a team, or grieved so much when it left. And the grieving goes on today.”

For a great video on the Brooklyn Dodgers, see The Ghosts of Flatbush.

Moreover, some argue that landing a professional team will turn their “sleepy little town” into a “big-time city.” That is the sentiment expressed by State Senator David Holt to The Oklahoman when reflecting upon the Seattle Supersonics becoming the Oklahoma City Thunder in 2008,

“Having local ownership of our NBA team provides long-term security. It has meant that our city has that blue ribbon that sports bestows upon America’s great cities, and there really is no other process to obtain that blue ribbon. Without it, we were always going to be no different than Omaha or Wichita or Amarillo to Americans outside our state. With it, at least superficially, we’re competing with the great American cities. Back then … we were ignored. We just didn’t exist to Americans outside of Oklahoma, other than the occasional event like the bombing [the domestic terrorist bombing of the Alfred P. Murrah Federal Building in 1995].”

A Better Team. Proponents of publicly-funded stadiums like to paraphrase Field of Dreams: “If you build it, they will win.” The argument goes like this: new stadium —> more fans to pay for more expensive food, drink, and parking —> more revenue —> more money to buy better players and coaches —> more wins.

The Case Against Publicly Funded Stadiums.

Stadiums Bring Limited Economic Benefits, So They Are Not Public Goods. On their face, stadiums are not public goods because they are both divisible (there are only so many seats) and excludable (you don’t get in without a ticket). But what about the argument that stadiums provide a collective benefit through economic growth?

Critics of publicly funded stadiums say they rarely, if ever, bring in the promised economic benefits. They don’t create that many jobs, they don’t raise wages, and they don’t stimulate the local economy. Stadiums are not public goods if they don’t benefit the local economy. And if they are not public goods, the government has no business providing them.

Stadiums are Corporate Welfare. While publicly funded stadiums may not benefit a city, they certainly benefit owners. Billionaire owners are amazingly adept at convincing the average American to share in the stadium’s cost. But when We, the People, want to visit that stadium we built, we must pay that owner $200 per ticket, $50 for parking, $13.75 for a beer, and $6.25 for a hot dog. To add insult to injury, most owners get additional tax breaks from the city and state. So, tax dollars flow into owners’ pockets but don’t flow out. The result is an enormous wealth transfer from the median American earning $37,000 annually to the wealthiest 1%, whose net worth tops several billion.

Opportunity Costs. The simple but often forgotten concept of opportunity costs means a dollar spent on one thing is a dollar not spent on another. So, every tax dollar spent on building a stadium means one less spent on things like education, police, roads, or public health.

Marginal Utility. Anyone who has ever purchased a pack of Red Vines at the movie theater understands the concept of marginal utility, i.e., the benefit of consuming an additional unit of a good. As I eat my first Red Vine, I invariably think, “I forgot how good these are! I’m going to eat Red Vines every day!” The fifth vine is okay. By the end of the pack, I hate Red Vines. That is declining marginal utility.

Let’s think of marginal utility in terms of the value of an additional dollar spent on either building a new stadium or refurbishing an old one. In their book Field of Schemes, Joanna Cagan and Neil deMause argue there is much greater marginal utility in renovating old stadiums than building new ones. While some stadiums may have had to go (e.g., Veterans, Riverfront, and Three Rivers Stadiums), others might have been just fine with a little love and care (e.g., Tiger Stadium, Old Yankee Stadium, and Ebbets Field). Without public funding, owners would usually receive a much better bang for their buck by sprucing up the old stadium than building a new one. Renovation is especially appealing because of…

Nostalgia. There is something different about attending a game at Wrigley Field, Fenway Park, Dodger Stadium, the LA Coliseum, the Rose Bowl, or Lambeau Field. These venerable old stadiums are bucket-list destinations precisely because they are old and contain so much history. Just imagine how cool it would be if Ebbets Field were still around.

Gentrification. New stadiums are often built in neighborhoods where land is cheap. These stadiums then force out poor residents who can no longer afford to live there. They also drive out mom-and-pop businesses to make room for big brand chains like Buffalo Wild Wings.

The Evidence

We’ve seen some solid arguments for and against publicly funded stadiums. Who’s right?

Before we get to the evidence, let’s consider how social scientists view the world. Those of us in political science, economics, sociology, or psychology usually divide things into three categories.

The Empirical. Here, we ask: “What is?” The empirical is the realm of raw facts. For example, there is good evidence that political polarization has reached an all-time high in the U.S. Congress.

The Causal. “Why is it so?” Causal theories try to explain empirical realities. So, political polarization may result from…

a long-term partisan realignment that began in the 1960s,
changes in the media,
an increased willingness of ambitious politicians to “primary” a fellow partisan who they think has gone soft,
an increased propensity of Americans to move to places where people look and think like them, which increases the number of “safe seats,”
and so on.

The Normative. “What ought to be?” The normative is the realm of values and preferences; it concerns what we think is right, good, or just. No objective scientific test can show whether one normative position is any better than another. Social scientists don’t like things we can’t test, so we generally leave the normative to the philosophers and political theorists.

Consider hamburgers. I love In-N-Out’s Double-Double, but my son prefers Quarter Pounders with Cheese. We can test many things about hamburgers: how many calories they have, their cost, sales, and even which burger people prefer in a blind taste test. But there is no accounting for taste. My son prefers McD’s, and even though I think he is crazy, there is nothing I can do to convince him otherwise.

Now, consider political polarization. Political scientists can tell you that polarization is at an all-time high (empirical) and why that might be the case (causal), but we can’t tell you how to feel about it (normative). Some people think polarization is killing America because it turns the other side into the enemy. Others like polarization because it provides a meaningful choice between two alternatives. Like hamburgers, what we think about political polarization is fundamentally a matter of taste.

Why should we care what social scientists think? One reason is that social science research has established solid evidence that, at one level, publicly funded stadiums are not worth the cost. Nevertheless, your view of stadiums likely depends upon something social scientists can’t address.

With that, let’s take a look at the evidence. [For an excellent summary of this literature, see Clark Merrefield’s “Public Funding for Sports Stadiums: A Primer and Research Roundup”]

Do the benefits of publicly funded stadiums outweigh the costs? The answer is most likely “no.” Economists John Siegfried and Andrew Zimbalist put it like this,

“Few fields of empirical economic research offer virtual unanimity of findings. Yet, independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development” (“The Economics of Sports Facilities and Their Communities” 2000: 98).

Most of the research shows that publicly-funded stadiums…

Almost always underestimate costs and overestimate benefits. In Field of Schemes, Cagan and deMause show that stadium proponents reliably underestimate construction costs and overestimate benefits. These “shadow statistics” are so optimistic as to be delusional. Yet, the press, public, and politicians often accept the figures without question.

Don’t automatically result in a net increase in tourism or business. Zimbalist and Noll show that tourism is often a wash. Some fans might travel to your city to watch a game in your shiny new stadium, but many of your fellow citizens will also leave town to visit a shiny new stadium elsewhere. Ironically, sporting events can even decrease business and tourism. Locals tend to avoid stadium areas during games, and the fans that do show up tend to eat and drink at the stadium instead of at local businesses. In his book Circus Maximus, Zimbalist also shows that tourism often decreases when a country hosts the Olympic Games or World Cup precisely because prospective tourists want to avoid crowds.

Don’t increase employment or wages. Coates and Humprhies (2003) show new stadiums usually lead to decreased employment and wages, especially for those in the food and beverage industry.

Do little to stimulate an economy. Building a new stadium benefits some companies and workers, especially in the construction industry. However, that effect is temporary, and the money fails to trickle down to the average citizen. University of Chicago economist Allen Sanderson argues that cities would get a better stimulative effect by dropping a billion dollars out of a helicopter than building a new stadium.

Not every economist agrees with this assessment. Timur Abbiasov and Dmitry Sedov (2023) found that football and baseball stadiums create a median of $11.3 million in extra spending for local restaurants, shops, and hotels (basketball and hockey arenas don’t bring in extra money). However, they also say the increase in consumer spending usually does not cover the initial outlay of public funds to build the stadium. Charles Santo (2005) argues that older studies don’t account for the tourist appeal of new stadiums, like Baltimore’s Camden Yards, and how they are built into the urban fabric.

Stadiums might transfer wealth, but they don’t create it. President of the North American Association of Sports Economists, John Charles Bradbury, said, “You might see a little bit of a [economic] resurgence in the area right around the stadium, but it comes at a cost to less commerce in the outlying area, which is exactly what we’d expect. This is just a transfer of wealth within the community.”

Stadiums deplete government coffers. The most apparent way that stadiums negatively affect governments’ bottom line is that they are expensive to build. Then come the ancillary tax-exempt bonds, property tax breaks, infrastructure projects, and other giveaways that cost governments billions more.

Stadiums are not as important to civic pride as one might think. Even if stadiums don’t bring tangible economic benefits, they might be worth it if they increase civic pride or keep the team in a city. However, Bradbury, Coates, and Humphreys (2023) find that most citizens prefer spending their tax dollars elsewhere. Grooothuis, Johnson, and Whitehead (2004) also found that even in sports-crazed Pittsburgh, citizens take more pride in the museum, zoo, or science center than in the Steelers, Pirates, or Penguins.

New publicly-funded stadiums don’t increase wins. Economists Duane Rockerbie and Stephen Easton show that new publicly-funded MLB stadiums bring in fewer fans than expected and do little to improve the teams’ performance. And the MLB is the best-case scenario for the new-stadiums-buys-win argument. Other leagues have salary caps, so you can’t just buy wins with a bigger salary.

In sum, a mountain of social science research has debunked most of the arguments favoring publicly funded stadiums. However, there is one argument that social scientists cannot refute.

I love my team. At the end of the day, I expect views on publicly-funded stadiums will hinge on how much someone loves their team. As we will see, owners hold fans hostage by threatening to leave town if the public doesn’t pony up for their new stadium. Using tax dollars to build a stadium and keep a team is well worth the cost for many fans—after all, you can’t put a price tag on love. For others, the price is way too steep. No objective social science test can say who is right since fandom is a normative value. Social scientists can show that more money for stadiums means less for things like roads and education, but we can’t tell someone whether they should value roads and education more than the home team.

How do Owners Get the Public to Pay for their Stadium

How can billionaire owners convince working-class Americans to pay for their new stadium? In Field of Schemes, Cagen and deMause identify the owners’ seven-step process to the “art of the steal.”

1. Claim your stadium is obsolete and on the verge of collapse, even when it isn’t.

2. Threaten to move the team if you don’t get a new stadium. [This is the big one!]

3. Argue the team won’t be competitive without a new stadium.

4. Use highly dubious statistics and some outright lies to show that the benefits of the new stadium will far outweigh the costs.

5. Take a used-car salesperson approach and tell the public that they should act now because the window of opportunity for building the new stadium is only open for a limited time.

6. Move the goalpost by having the government pick up the tab for all cost overruns (and there will always be cost overruns) or some cool stadium features that weren’t part of the initial agreement.

7. Review steps 1-6.

John Oliver covers much of the same ground as Cagen and deMause in his take on stadiums.

How Governments Come to Pay for Stadiums

There are two main political routes to get a publicly funded stadium. Which route the pro-stadium side chooses depends on many factors, the most important being whether the public is on their side.

Route 1. The Legislative Route. We might consider this the “normal political process,” where elected officials vote on whether to commit public money to help build a stadium. The legislative body might be a state government, county, city council, or municipal government.

There are three reasons why owners might go the legislative route.

There is no other choice. The alternative political route is to have the public vote directly on the matter, but not all state or local governments have direct democracy.
The pro-stadium side would lose a public vote. There is some evidence that Americans are increasingly hostile to the idea of publicly funded stadiums. If owners can’t win with the public, they try their hand with politicians.
Convincing politicians to build a stadium can be easier and cheaper than convincing the public. Perhaps the pro-stadium side only needs six city council members to vote in their favor. Convincing six politicians can be much easier than convincing thousands of voters, especially if ownership has generously donated to their reelection campaigns. As economist John Charles Bradbury said, “I like to say that you can fit a majority of the city council in the owner’s box but you can’t fit a majority of the electorate.”

Route 2. Direct Democracy. The other route is to have voters decide whether to build a new stadium through a measure, initiative, or referendum. Pro-stadium forces usually conduct an initial survey to gauge what the public thinks. If a substantial majority want a stadium, putting it to a public vote is a no-brainer.

Even if voters are initially hostile to a publicly funded stadium, the pro-stadium forces have ample opportunities and resources to change hearts and minds. Voters in local elections tend to be of the “low-information rational” type, trying to make the best decision possible with limited information. Since most voters aren’t doing a deep dive into the issues, much of what they know comes from political advertisements. Since the pro-stadium forces have a lot of money, they can run a lot of ads. And since they can run a lot of ads, they can often control the narrative, change public opinion, and win the referendum.

In Field of Schemes, Cagen and deMause offer numerous examples of how pro-stadium forces can change public opinion through a concerted advertising campaign. In 1997, the Miami Heat wanted Dade County to pay 75 percent of the $162.5 million price tag for their new waterfront arena. Initially, 60 percent of residents opposed the measure. But after an eight-week ad blitz that cost $3.7 million, the measure passed 59-41 percent. You can see one of the ads featuring Pat Reilly at the 2:07 mark of the video below.

https://www.youtube.com/watch?v=6J3BP6jLXzE

Another example of an effective stadium ad is Cleveland’s Gateway project in 1990. The Cleveland Guardians and Cavaliers wanted the public to pick up two-thirds of the $343 million cost to build a new ballpark and arena (Field of Schemes pp. 15-17). Again, the pro-stadium side went on an PR-blitz days before the election. Here is an example of a newspaper ad run right before the election:

“Gateway will create a development that will generate $33.7 million in public revenues every year and provide:
* 28,000 good-paying jobs for the jobless;
* neighborhood housing development for the homeless;
* $15 million a year for schools for our children;
* revenues for City and County clinics and hospitals for the sick;
* energy assistance programs for the elderly.
No property tax; no sales tax; no income tax; no tax abatement… Gateway: the next chapter in our future.”

From the ad, there certainly doesn’t seem to be any downside to the Gateway project. Not surprisingly, the measure passed with 51.7 percent of the vote. Of course, there is far more to this story.

Cleveland’s Gateway District. By Paul M. Walsh - Own work by Paul M. Walsh, the image also appears here, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=4934778

[I’m currently working on a dataset on publicly funded stadiums. Please check back to see the results.]

Who to Tax?

Part of getting a publicly funded stadium is knowing the right people to tax. In the old days, a county sales tax was the most common way to finance a stadium. The problem was that pro-stadium people asked citizens to raise taxes on themselves, which is never an easy ask.

It is far better to get tourists to pay through hotel and car rental taxes. Out-of-towners can’t vote, so they don’t get a say in how much they’re taxed. And I don’t know anyone who researches local tax codes before booking a trip; most of us find out that we’re paying an exorbitant amount of taxes when we check out of our hotel or pick up our rental car. The best part about taxing tourists is that the locals get a stadium but don’t have to pay for it (setting aside the notion of opportunity costs).

The Buffalo Bills

Since 1973, the NFL’s Buffalo Bills have played in the same stadium under a bewildering number of names: Rich Stadium, Ralph Wilson Stadium, New Era Field, Bills Stadium, and currently, Highmark Stadium. Whatever the name, the stadium was never much good—typically ranking toward the bottom of NFL stadiums. In 2015, New York State paid $53.9 million and Erie County $40.7 million to renovate the stadium.

Renovations weren’t enough for new Bills owners Terry and Kim Pegula, who took over the team in 2014 after former owner Ralph Wilson’s death. The Pegulas initially said they had no interest in a new stadium but soon changed their tune, threatening to leave for Austin, Texas, if they didn’t get one. The spokesperson for Pegula Sports, Jim Wilkinson, put it like this:

“Extending the lease at the current stadium was simply not an option. Spending upwards of $1 billion to renovate an obsolete stadium also wasn’t an option. But relocation could have been a very real option.”

The threat scared die-hard Bills fans and New York politicians alike.

New York Governor, Democrat Kathy Hochul, emerged as one of the greatest champions of a new publicly funded Bills stadium. Hochul argued that the new stadium would create 10,000 new construction jobs and that its economic impact would cover 100 percent of taxpayer investment.

Hochul’s argument resonated in Albany, as lawmakers voted to include funding for a new Bills stadium in a state record $220 billion omnibus spending bill.

Rendering of the new Highmark Stadium. Source: https://en.wikipedia.org/wiki/New_Highmark_Stadium

Construction of the new $1.4 billion Highmark Stadium is underway across the street from the old stadium. Of the total cost, $850 million will come from the State of New York and Erie County, the highest public expenditure ever for an NFL stadium. The State and County are also on the hook for an additional $280 million for ongoing maintenance and improvements.

The Bills have one of the most committed fanbases in the NFL, and it would have been a shame to have the team move. However, the deal is bizarre on so many levels. Economist Victor Matheson calls it “one of the worst stadium deals in recent memory,” and I agree.

Consider that…

The new Highmark stadium will have 12,000 fewer seats than the old one, making it the smallest stadium in the NFL. Moreover, the old Highmark has been sold out or close to it for most of the past decade. So, it isn’t like the new stadium will bring in more fans.
The new Highmark stadium will not have a domed roof, so it can’t host a Super Bowl; hosting a Super Bowl is usually one of the major arguments for building a new stadium.
The stadium is rarely in use. The Bills will play eight home games there. While the stadium might host some concerts or monster truck rallies in the summer, it is not like an open-air, outdoor stadium in Buffalo is in high demand for most of the year.
We shouldn’t expect the new stadium to create a bonanza of new businesses since it is built right where the old one was. As economist Victor Matheson writes, “Rather than creating a dense area of housing, retail establishments and restaurants, Highmark Stadium instead sits alone as an island of concrete in a sea of parking lots.”
New Yorkers don’t want it. A Siena College poll found that 63 percent of New Yorkers opposed using public money to build the stadium. Siena pollster Steve Greenberg said, “It’s opposed by at least 55% of every demographic group. Interestingly, Upstaters are even less approving than Downstaters of the stadium deal.”
Bills owners Terry and Kim Pegula are worth $5.8 billion! They’ve earned an estimated $900 million above their 2014 purchase price of the Bills. Here’s a visual of their net worth compared with the median net worth of Americans:

Elsewhere on this blog, I provide data on publicly funded NFL stadiums that shows a decline in public financing of stadiums. However, Highmark Stadium may represent a reversal of that trend and a new era. The Tennessee Titans are also asking the public to contribute $500 million to their new $2 billion stadium. The Maryland legislature committed $1.2 billion for renovations to Camden Yards and M&T Bank Stadium. And until Dan Snyder finally wore out his welcome, it looked like Virginia would foot a lion’s share of the $3 billion stadium for the Commanders.

I guess this all makes some perverse sense. After all, why should billionaires have to pay for their own stadium when they can get us to buy it for them?