Last Friday, the San Diego Chargers and Oakland Raiders made an interesting proposal: They’re willing to go Dutch on a new stadium in Carson, California, a Los Angeles suburb.
This is an unusual situation for a few reasons. One, L.A., a city that’s gone without an NFL franchise for two decades, can now count three teams who’ve expressed interest in moving there. St. Louis Rams owner Stan Kroenke unveiled a Southern California stadium proposal of his own earlier this month. (Last night, Inglewood City Council approved those plans.) Two, it’s unclear how divisional rivals like the Raiders and Chargers shacking up would even work yet. And three, both proposed stadiums, the teams say, would be entirely financed with private money.
In the last 20 years, just one NFL stadium has been built solely through private funding. Deadspin analysis of stadium construction costs from 1909 to 2012 (based heavily on research from sports economist Judith Grant Long) revealed that public dollars accounted for 61 percent of the financing for 186 facilities. (Find Next City’s deep dive into the politics of stadium subsidies here.)
Still, when it comes to getting the best deal out of an arena, leaving taxpayer money off the tab is only a good start.
Studies have repeatedly shown that sports teams don’t have the far-reaching economic impacts that one might assume, and experts have noted that stadiums aren’t as catalytic as some franchise owners might tout. “[P]rofessional sports has a small positive effect on earnings per employee in the Amusements and Recreation sector, but … this positive effect is offset by a decrease in both earnings and employment in other sectors of the economy,” wrote Brad Humphreys and Dennis Coates in their 2002 study on the economic influence of the big leagues in American cities.
San Diego Mayor Kevin Faulconer met with Chargers owner Dean Spanos over the weekend to talk fast-tracking a new stadium in that city. “I explained to Mr. Spanos that we are going to work to keep the team here but I will never support a deal that San Diego can’t afford,” Faulconer said in a statement Sunday. “We will continue to work to produce a viable stadium plan that is fair for San Diegans, protects taxpayers and can be approved by the voters.”
So how should cities like Carson and San Diego approach their proposed stadiums? I talked to three sports economists about what cities vying for sports teams can do.
1. Don’t Get Carried Away. Be a Smart Shopper.
“If you’re viewing this as a way to drive economic growth, don’t do it,” says Michael Leeds, co-author of the textbook The Economics of Sports. “If you want to have a football team, to say ‘We have our very own NFL team in our backyard,’ that’s fine. It’s like a Christmas present for yourself, for your spouse, your loved one or your children. Say, ‘I got this … because it makes me feel good.’ Don’t say, ‘I got this for you because it’s going to make you rich.’”
Leeds, who points out that art museums don’t need to be engines for job growth to be cherished assets, thinks cities shouldn’t rush into things. (Kroenke’s Inglewood stadium plans are moving at a rapid pace. The Los Angeles Times noted that last night’s council vote “capped six frenzied weeks, from the project’s public unveiling to the approval without a public vote.”)
“It’s like going to the store and saying, ‘I cannot go home unless I have this item.’ Even if you don’t see what you want at the price you want … Sometimes success means not buying,” says Leeds. “On the benefits side, perhaps the most important thing is have a plan: This is what we want to accomplish in our city, and here is how this facility, this team or this event is going to fit into that vision.”
2. Drive a Hard Bargain
Andrew Zimbalist, the author of several books on sports and finance, including most recently, Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup, explains that cities should shoot for “as much private financing and as little public financing behind the stadium as possible. Furthermore, [cities should] like to have as much rent paid as possible or sharing of the revenue from the stadium as possible.”
Zimbalist, as well as Leeds, is quick to note though that big cities are in a much better place to strike a smart deal. “Sports teams don’t need small cities. They need large cities. The Yankees needed New York,” says Zimbalist. “Smaller cities have a harder time getting the leverage they need to negotiate.”
3. Ask for More Than Just the Stadium
“Cities need to make deals with owners that they will develop the land that surrounds the stadium for retail, commercial and residential use — a financial commitment beyond the stadium. If the city’s able to do that, then the sports team and the sports facility are much more likely to have a positive impact on the local economy,” says Zimbalist.
Leeds offers similar advice: “You want to view this as one element in a broader vision and not as an end in itself. Too often cities view this as an end.”
Charles A. Santo, co-editor of the anthology Sport and Public Policy: Social, Political, and Economic Perspectives, would remind city officials to make the most out of community benefits agreements (CBAs), which, he writes in an email, “can ensure that benefits accrue not just to team owners and real estate interests, but to the community’s less fortunate as well. And planners can help lead these dialogues.”
The Equity Factor is made possible with the support of the Surdna Foundation.
Cassie Owens is a regular contributor to Next City. Her writing has also appeared at CNN.com, Philadelphia City Paper and other publications.