The editors of Bloomberg have a fantastic editorial shining light on the economics of publicly funded football stadiums, like Lucas Oil Stadium — home to Sunday’s Super Bowl. The opener:
As you watch the Super Bowl Feb. 5, spare a thought for the taxpayers in the host city of Indianapolis. The stadium in which the game will be played has been financed largely at their expense and, like so many sports venues built with public money, the cost just keeps growing.
Lucas Oil Stadium, where the Colts play eight regular season games per year, has every amenity: a retractable roof, state-of-the-art turf, seven locker rooms, 137 luxury suites, 1,000 flat-screen televisions. And well it should: It cost $720 million to build.
Of this, the Colts paid only $100 million. To cover the rest, local officials raised taxes on hotels, restaurants and rental cars, and issued bonds that soon led to ballooning financing costs.
As Bloomberg News reported Feb. 2, the cost overruns resulted partly from the city’s reliance on auction-rate securities, which became extremely expensive as the market for such bonds collapsed in 2008. Interest rates on some of the stadium bonds reached 15 percent at one point, according to data compiled by Bloomberg.
All told, this led to about $43 million in unexpected financing costs. As projected deficits grew larger, the county board that operates the stadium had to reduce arts and cultural grants, and the city increased taxes on hotels even further.
Threat to Leave
In its outlines, this is a familiar story. With the Colts threatening to leave town in 2006, an economic-impact study done for Indianapolis suggested wondrous civic advantages would soon flow from a new stadium: Along with the expansion of an adjacent convention center, the project would create $2.25 billion in economic benefits over 10 years, 4,200 new permanent jobs and 4,900 construction jobs. And, of course, the team would stay. The stadium duly opened in 2008.
But like many studies of its kind, this one will probably turn out to be fantasy. Public funding for sports stadiums has been found, in dozens of studies over several decades, to fall short of its promised benefits and to cost taxpayers more than expected.
This same debate is raging in Minneapolis, where the state and the city are desperately trying to find a way to come up with the money for a new stadium for the Vikings. Their latest scheme has hit a snag as money they thought they could divert from the city’s convention center now must be used to repair said convention center’s artistic, yet ineptly designed, copper roof.
Here’s hoping the good people of Minnesota “just say no” and put an end to taxpayer-financed boondoggles.