Economics

URBAN NATION: Money-Wise, Stadiums and Super Bowls Don’t Benefit Cities

The Superdome in New Orleans. Credit: VisionaryAgency

Professional sports teams, and the big events associated with them, are near and dear to many an urban-dweller’s heart. New York City is already salivating over next year’s Super Bowl before this year’s has even happened. The city will rename part of Broadway “Super Bowl Boulevard” in honor of a game that is not taking place in New York State. And for many, this year’s Super Bowl is still more proof of New Orleans’ recovery.

To some extent, the excitement is understandable. Sport is part of a city’s lifeblood. Without the Chicago Cubs and the Chicago White Sox to define them, Northsiders and Southsiders would have little except a few city blocks to divide them. Hosting a premier sporting event can instill a strange civic pride in having your city “on showcase.”

These feelings of identity and civic pride would all be well and good if they didn’t come at such a high price, one extracted not by these civic-minded fans, mind you, but by a uniquely undemocratic cabal of mayors and monopolists.

The public foots a large portion of the bill for new stadiums — more than 60 percent for new NFL stadiums since 1990 and 59 percent for new professional baseball stadiums. The rehabbed Superdome, host of this year’s Super Bowl, has cost taxpayers $471 million. Even FEMA provided more than $40 million for the renovation, with an additional million given just last summer. The tax exemption for municipal bonds has provided a subsidy of $4 billion from federal taxpayers to the owners of teams that have built new stadiums since 1986.

And yet, the lack of economic benefits to professional sports stadiums, and to hosting large sporting events, is very, very well-established. Every sport and sporting event imaginable has been studied. The results are generally in line with this one, looking at the economic impact of the Super Bowl:

Ex post analyses of the Super Bowl, as well as the NFL’s other premier event, the Pro Bowl, suggest that the true economic impact of these games is a fraction of what is claimed…Ex ante dreams often lead to a disappointing ex post reality.

The primary objection to these economic impact analyses is that they do not account for the identity associated with, say, Wrigley Field, or the civic pride associated with hosting the Super Bowl. Boosters of these events anchor big-number economic impact analyses produced by paid consultants — which I think (or hope) most people view with skepticism — with appeals to hometown sentiment. An article about the Baltimore Grand Prix captures this:

The prestige and excitement of staging an honest-to-Andretti 180 mph, open-wheel street race downtown will vault Baltimore into the big leagues of cities around the world, alongside Monaco and, well, Long Beach, Calif.

Because of course shutting down your city’s streets to normal traffic so that a bunch of tricked-out cars can hurtle around Baltimore makes obvious sense as an economic development strategy.

Recent research has attempted to capture and quantify this notion of civic identity and pride using an approach called “contingent valuation,” essentially a survey that asks people about their willingness to pay to keep a team in a city or to build a stadium. The method has shown subsidies to be unwarranted in the case of a new basketball arena for the University of Kentucky and a minor league baseball stadium. It has found the cost of a new stadium to exceed the value placed by Pittsburghers’ on the Penguins. And it has found the public cost of stadium renovation to exceed the value placed by Jacksonvilleites on the Jaguars.

With all this evidence that public subsidies for sports teams and their stadiums are not justified on the basis of economics or civic pride, why are they still doled out? With a limited supply and a more or less credible threat of leaving a city, sports teams are able to appeal to the risk-averse part of city leaders’ brains: People forget about $100 million lost here or there, but the departure of a sports team will be written in a mayor’s obituary.

Efforts to end the subsidization of stadiums via the federal tax code — by limiting the exemption for municipal bonds used for stadiums — are promising in an era when these exemptions are under close scrutiny. But a previous effort to do just that backfired and, in fact, helped create the situation we are in today.

The real solution would be weakening the bargaining power of the teams or strengthening that of mayors. With the breakup of professional sports monopolies unlikely and a non-compete agreement among mayors unenforceable, the future will likely hold more stadiums built with public money.

Tags: new yorkeconomic developmentnew orleansurban nationstadiumssuper bowl