Taxpayers lose when politicians schmooze for pro sports teams.
Taxpayers lose when politicians schmooze for pro sports teams.
I n the best evidence yet that it’s time for voters to stop politicians from subsidizing stadiums, elected officials in Kansas City are seriously considering a proposal for a new baseball stadium that could end up costing local taxpayers between $4.3 billion and $6.4 billion.
The proposed stadium would replace the Kansas City Royals’ Kauffman Stadium, which was built in 1973 and most recently renovated in 2009. To put the replacement stadium’s price tag in context, the Royals’ total payroll for the 2023 MLB season was $94 million. In other words, the estimated subsidies would be enough to pay for somewhere between half and two-thirds of a century’s worth of the current Royals roster. Sure, that roster may have consisted of a bargain-bin collection of players who finished the 2022 MLB season with a 56–106 record, but that’s still a ridiculous amount of money.
For those who follow the financing arrangements of American sports stadiums, the Kansas City proposal stands apart more for its possibly inadvertent honesty than its final price tag. Unlike most other proposals that make it into the public eye, it was drawn up in a way that captures ancillary costs, such as increased insurance expenses, that normally get kept out of the headlines.
Otherwise, it follows state and local politicians’ standard model of throwing huge amounts of money at professional sports teams. This model persists despite growing opposition from taxpayers and mounting evidence that such deals do not deliver what those who fund them are hoping for.
In just the past 18 months, we’ve seen a $1 billion stadium deal for the Buffalo Bills, $1.25 billion for the Tennessee Titans, the Nevada legislature meeting in special session to give the Oakland A’s $380 million for a Las Vegas stadium, the Carolina Hurricanes getting $300 million for renovations to a 24-year-old arena, and the Milwaukee Brewers receiving $471 million for their stadium upgrades.
We also saw the Baltimore Orioles not only get $600 million in state subsidies for renovations to their existing 31-year-old stadium but also take the opportunity to squeeze potentially hundreds of millions of dollars’ worth of real-estate-related revenue out of local government in the process.
Most recently, Washington, D.C., was asked to cover $600 million of an $800 million renovation project for a privately owned hockey and basketball arena. Other deals are under way, or at least under discussion, in St. Petersburg, Orlando, Milwaukee, Chicago, Indianapolis, New York City, Philadelphia, Memphis, San Antonio, St. Paul, Phoenix and Jacksonville.
These deals involve substantial amounts of money, and they have a very real effect on the choices that go into government budgets. For instance, the $600 million contribution that Washington, D.C., is being asked to make towards arena renovation is as much money as the district plans to collect in business-license and permit fees over the next five years.
There’s a good argument that giving every business in the district a five-year holiday on permit and license payments to the government would do more for economic growth than paying to help renovate the interior of one particular business. That’s why team owners and elected officials go to great lengths to avoid discussions that put subsidy decisions in such blunt terms.
They know that the real-world evidence is squarely against them. Stadium subsidies are one of the areas where economists across the profession actually agree. In 2017, the University of Chicago’s Booth School asked a panel of some of the nation’s most eminent economists (including seven Nobel Prize winners) whether subsidized sports stadiums are likely to cost taxpayers more than they return in benefits. A confidence-weighted 83 percent replied that stadium subsidies aren’t worth the cost, 11 percent weren’t sure and just 4 percent were in favor.
That 4 percent was actually just one person, University of Chicago environmental economist Michael Greenstone, who had just watched the Chicago Cubs win their first World Series in more than a century. His explanation was essentially that Chicago benefited generally from the excitement over the Cubs’ long-overdue triumph — an assertion that White Sox fans on the city’s South Side may have taken exception to — and that subsidies are a way to compensate teams for the generalized benefit they provide a community. That’s not necessarily borne out by the evidence, as it’s been calculated that the combined economic impact of all five major Chicago professional sports teams adds up to less than 1 percent of the city’s entire economy.
A 2022 survey of the academic research on stadium subsidies ought to have closed the book on this issue. It was carried out by respected sports economists J. C. Bradbury, Dennis Coates, and Brad R. Humphreys, all three of whom have served as president of the North American Association of Sports Economists. They reviewed more than 130 studies over three decades into stadiums’ economic impacts on their surrounding communities, finding an overwhelmingly strong consensus against stadium subsidies. The evidence was so clear that the authors concluded that any further studies on the topic would just be “confirming what is already known to researchers in the field” and suggested that economists instead spend their time trying to convince politicians to pay attention.
Politicians tend to be unwilling to risk being blamed for “losing the team” by rejecting stadium subsidy demands. It’s election results, not economic studies, that drive these decisions.
Some point to the fact that big stadiums tend to be built in big cities, which generally aren’t known for fiscal rectitude and competent governance. That may play a role, but the reality is that so many of these modern mega-deals are driven by state governments, not local ones. It’s common for a governor of one party and a mayor from another to set aside their differences in pursuit of these deals.
We also can’t ignore the unfortunate reality that the back rooms in which stadium deals are made and large amounts of taxpayer dollars trade hands are fertile breeding grounds for public corruption. But even when it’s not a matter of outright corruption, there are still plenty of shady games that get played to justify stadium deals to the public.
In an increasing number of cities, team owners and their partners are pitching mixed-use retail, residential, and entertainment districts “anchored” by a subsidized stadium. Of course, as residents in cities such as Detroit and Louisville have learned from the blighted properties and vacant lots that still surround new stadiums, there’s little leverage left to force team owners to follow through on their development promises once the stadium is built.
There’s also good evidence that even when they are built, districts anchored by stadiums aren’t delivering their promised return on investment and have in some cases become ongoing drains on local-government budgets. In Atlanta, an independent 2022 study found that the Braves’ Truist Park and surrounding The Battery development were costing Cobb County taxpayers $15 million per year, five years after the stadium opened.
One potential solution to this problem is for voters to take these decisions out of politicians’ hands and demand the final say on stadium-subsidy deals. Voters across the country have demonstrated that they’re not shy about rejecting bad deals even in the face of threats to move the team. In recent years, voters in Albuquerque, San Diego, St. Louis, and Tempe have all rejected proposed subsidy deals.
Those outcomes aren’t surprising when you look at polls: Last year, polling from Siena College found 63 percent of voters in New York State opposed the Buffalo Bills’ stadium deal, with just 24 percent approving. That wasn’t just a factor of residents far away from Buffalo skewing the results. Even voters in western New York opposed the deal by a 65–31 margin. Similarly, 52 percent of Nashville residents opposed the Titans’ subsidy deal.
Other such votes are on the horizon, such as in Oklahoma City, where voters are being given the chance to decide whether they should pay $850 million — which is roughly 95 percent of the facility’s total estimated cost — toward a new basketball arena. In Nevada, a group run by the state teachers’ union has launched a petition drive to have the A’s baseball-stadium subsidy retroactively put on the ballot.
Meanwhile, in St. Petersburg, the city council there failed to muster the necessary two-thirds majority to even put an “advisory” ballot question on a proposed $600 million subsidy for a contentious replacement for Tropicana Field in front of voters.
Punting the deal to voters could even be a good decision for politicians’ self-interest. It can be a good way to disassociate themselves from backlash against the price tags of these stadiums. Smart politicians have started recognizing that they can have it both ways by publicly supporting stadium deals but leaving the final decision to voters. This means that they can take credit if the deal goes through but dodge blame from fans disappointed by a failed deal by pinning responsibility on the voters. And it seems that voters, more often than politicians, are able to make the smarter decision: Saying “no” to subsidies.