This past January, the city council of Clark County, Nevada, approved over $750 million in tax-free municipal bonds for the construction of a $1.9 billion stadium for the NFL’s Raiders. This comes on the heels of Arlington, Texas, agreeing to provide $500 million for a new $1.1 billion stadium for the MLB’s Rangers.
Around the country, other cities’ budgets are still reeling from the costs of subsidizing stadiums. Bloomberg News linked Oakland’s 2011 decision to decrease its police force by 18 percent to debt from building the Coliseum, cuts which increased average police response time to 17 minutes. And in 2014, Detroit was forced to cut pensions for retirees by 4.5 percent to subsidize a new stadium for the Red Wings, a stadium which the Red Wings will pay one dollar a year to lease.
These projects reflect a larger nationwide trend of local governments footing the bill for the construction of sports stadiums. Of the 45 major stadiums built since 2000, 36 were financed through tax-free municipal bonds. Their total cost to taxpayers? Over $3.2 billion.
Stadium subsidies have had devastating economic impacts on cities, and only through a combination of irrational accounting, unprincipled local politics, and a lack of precedent have sports leagues been able to continue bullying cities into paying heavily for stadiums. It is time to officially recognize these issues plaguing America’s cities and to rally behind legislation to curb their negative impacts.
Proponents of subsidies argue that the economic benefits of hosting a major league team far outweigh the immediate costs of stadium construction. However, only two percent of economists surveyed by the University of Chicago agreed with the notion that stadium subsidies generate more economic benefits than costs for local taxpayers. And in addition to their massive upfront costs, stadium subsidies trade-off with other higher-impact budget items, causing the aforementioned cuts to programs like policing and pension plans. In fact, the majority of studies that conclude in favor of subsidies are either funded by sports teams themselves or methodologically flawed, as they often only report the benefits of stadium construction without factoring in their associated costs.
Despite these critiques, however, cities continue to almost unanimously approve stadium subsidies. Temple University sociology professor Kevin Delaney has identified several explanations for this disconnect, ranging from political pressure exerted by sports leagues to the very monopolistic nature of the leagues themselves.
First and foremost, the subsidy evaluation process is incredibly opaque and oftentimes inaccessible to the general public. Thus, behind-the-scenes operating from team lobbyists and local growth coalitions virtually ensures that city councils adopt a “default position” of believing in “the wonders of publicly subsidized sports stadiums,” according to Delaney.
And even when citizens bring legal action against suspect subsidy decisions, their efforts are often fruitless; state courts have consistently sided with sports teams. In 2008, Florida’s 3rd District Court of Appeals ruled that public money could be used to build a stadium for the benefit of a private entity because the very act of a public body deciding to fund the stadium through subsidies meant that a public need was being promoted. And in 2015, the 22nd Circuit Court of Missouri ruled that St. Louis’s city council did not need voter approval to authorize taxpayer subsidies for a new football stadium.
Second, sports leagues limit the number of teams that can compete in the league, creating a race to the bottom in which cities compete with each other to offer the most generous subsidy packages to retain the prestige of hosting a major league team. The Supreme Court has consistently granted major sports leagues “unregulated monopoly status,” affording them broad powers to control competition and limit the number of teams. Thus, the movement of teams between cities is always a zero-sum game—one city’s gain must be another’s loss. The fear of losing a team to another city offering a more generous subsidy package, therefore, remains ever-present in subsidy negotiations. According to economist Andrew Zimbalist, this effectively allows leagues to “exploi[t] the hell out of…cities” by discouraging individual cities from unilaterally breaking with the precedent of funding subsidies, for another city desperate to host a team will simply steal that team away by offering more generous subsidies.
Fortunately, some city councils have begun to look past overstated economic rationalizations, local politics, and a lack of precedent, and are forcing teams to take more economic responsibility for stadium construction. In particular, there has been a groundswell of positive momentum building in cities across California that could serve as a model for the rest of the country. It was only after Oakland refused to put public money towards a new Raiders stadium that Clark County offered its $750 million deal. San Diego similarly refused to budge on public subsidies when negotiating with the NFL’s Chargers. And even more impressively, San Francisco was able to retain its baseball team, the Giants, and gain a basketball team, the Warriors, without paying any taxpayer money towards the construction of either stadium.
At the federal level, emerging legislation could help more cities follow in the footsteps of their Californian counterparts. Last year, Senators James Lankford (R-Okla.) and Cory Booker (D-N.J.) proposed a bill that would eliminate the federal tax-exemption on municipal bonds used for the construction of sports stadiums. The Brookings Institution estimated that closing this tax-exemption could have saved the federal government over $3.7 billion since 2000.
And though the Booker-Lankford bill does seem promising, it must be noted that similar legislation has already been proposed and rejected by Congress, most recently a 2016 proposal under President Obama. Thus, achieving any real change will require a concerted effort from policy-makers to follow through on their commitment and resist the lobbying efforts of major sports leagues.
What is clear, however, is that American cities can no longer afford to foot the bill for sports teams, especially as sports leagues continue growing at unprecedented rates and raking in record-breaking revenue. Cities across America to stand up for themselves and reconcile the actual economics of stadium subsidies with the political pressure and prestige draw of hosting a sports team.
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