Stadium subsidy

Based on Wikipedia: Stadium subsidy

Here's a question worth seventeen billion dollars: Why do American taxpayers keep building stadiums for billionaires?

That's not a rhetorical flourish. Between 1990 and 2001 alone, state and local governments handed professional sports teams approximately seventeen billion dollars—closer to twenty-four billion when you adjust for inflation—to construct and maintain their playing facilities. And the money keeps flowing. When economists are asked whether these subsidies make financial sense for cities, eighty-three percent say no. The costs to taxpayers exceed any economic benefits.

Yet cities keep writing the checks.

How We Got Here

Professional sports stadiums weren't always a public expense. Before the 1950s, team owners built their own facilities with private money. The shift began in 1951, when Ford Frick, the commissioner of Major League Baseball, made an observation and a demand. Teams were bringing enormous revenue to their host cities, he noted, and owners weren't capturing enough of that value. His solution? Cities should start building and maintaining venues through public subsidies.

What Frick may not have anticipated was the market he was helping to create—a market where cities compete against each other for the privilege of hosting professional sports teams, and teams learn to extract increasingly generous concessions from increasingly desperate municipalities.

The Brooklyn Dodgers famously left New York in 1957, lured to Los Angeles by the promise of three hundred acres in Chavez Ravine. The New York Giants crossed the country that same year, enticed by San Francisco's offer of land that would become Candlestick Park. These weren't isolated incidents. Between 1953 and 1970, twenty-seven of the thirty stadiums built received more than four hundred fifty million dollars in public funding.

A pattern was emerging.

The Subsidy Market

Today, professional sports teams operate in what economists would recognize as a classic market distortion. Teams can relocate with minimal cost to their private contributors. Cities believe—correctly or not—that keeping their teams is critical to civic success. The result is a buyer's market where franchises shop between municipalities to find the highest bidder.

The National Football League has turned this dynamic into an art form. The league allows teams to bid for the right to host the Super Bowl, and recent stadium renovations factor heavily into those decisions. When the Atlanta Falcons wanted a new stadium, they asked for public subsidies, got them, and were subsequently awarded the contract for Super Bowl LIII. The message to other NFL cities was clear: pay up or miss out.

Subsidies take various forms. Sometimes they arrive as direct payments—a city commits a specific amount of revenue to stadium construction, maintenance, or renovation. Other times, they appear as tax breaks, which over twenty or thirty years can equal or exceed what a direct subsidy would have been worth. Municipal bonds exempt from federal taxes allow cities to borrow more cheaply for stadium projects, a benefit that cost the United States Treasury an estimated one hundred forty-six million dollars annually as of 2012.

The European Exception

Cross the Atlantic and you'll find a different world. Public subsidies for professional sports venues are far less common in Europe, and the reason illuminates something important about how sports economics work.

European football clubs—what Americans call soccer teams—have deeper roots in their communities. These aren't franchises that appeared in the 1960s as part of a league expansion. Many date back over a century, woven into the identity of their cities in ways American teams rarely match. When a European club threatens to relocate, nobody believes it. Where would they go? Every major city already has a club with loyal supporters who wouldn't suddenly switch allegiances.

The league structures matter too. North American sports operate as closed systems with fixed membership. The National Football League has thirty-two teams, no more. This creates artificial scarcity—there are more cities that want teams than there are teams to go around. European leagues use promotion and relegation: perform well and your club moves up to a more prestigious league; perform poorly and you drop down. Any city's club can theoretically reach the top tier. This openness eliminates much of the leverage that American franchise owners enjoy.

Geography plays a role as well. The United States and Canada cover vast territories with many large metropolitan areas eager for professional sports. European countries are smaller, with their major cities closer together and already hosting established clubs. An NFL team threatening to move from Oakland to Las Vegas presents a credible choice between distant, distinct markets. A Premier League club threatening to move from Manchester to... where, exactly?

The Case For Subsidies

Proponents of stadium subsidies make arguments that sound reasonable on their face. New stadiums generate economic activity. The Baltimore Orioles estimate that each home game brings three million dollars in economic benefits to their city. Over an eighty-one game season, that's nearly two hundred fifty million dollars annually. Even football teams, with only eight home games, accumulate substantial benefits over a stadium's twenty to thirty year lifespan.

Beyond direct spending on tickets, concessions, and parking, supporters point to indirect effects. Stadiums attract tourists and businesses. Local restaurants and hotels see increased traffic. A multiplier effect ripples through the economy as stadium-related spending generates additional spending elsewhere. Property values near stadiums may increase. Tax revenues from all this activity theoretically help finance the original subsidy.

Some economists have identified what they call a "sunny day benefit." On rainy days, local spending tends to drop measurably. But when a professional team is playing at home, spending increases significantly regardless of weather. Jordan Rappaport of the Federal Reserve Bank of Kansas City estimates this effect adds fourteen to twenty-four million dollars annually—real economic activity that wouldn't exist without the team.

Then there are the intangible benefits. Civic pride. Community identity. The shared experience of watching your team win—or lose—together. These are real phenomena, even if economists struggle to quantify them. A major sports team becomes something like a public good, enjoyed by fans whether or not they personally pay for it.

The Case Against

Here's where the economics profession reaches unusual consensus. Subsidies cannot be justified on grounds of local economic development, income growth, or job creation. The evidence, reviewed across numerous studies, consistently points the same direction.

The fundamental problem is substitution. When fans spend money at a stadium, they're not creating new economic activity—they're redirecting spending they would have done elsewhere. The family that drops two hundred dollars on tickets, hot dogs, and parking isn't spending that money at local restaurants, movie theaters, or shops. Economic activity gets shuffled around, not expanded.

Worse, much of the money that flows into stadiums doesn't stay in the local economy. Player salaries, management compensation, and team profits often flow to people who don't live in the city. A star player earning thirty million dollars per year might maintain a local residence during the season, but their primary economic activity—investments, major purchases, long-term spending—happens elsewhere.

The opportunity costs are substantial and specific. Little Caesars Arena in Detroit was financed through a bond issue that diverts taxes paid by local businesses into stadium construction. Each year, an estimated fifteen million dollars in taxpayer funds earmarked for public schools goes instead to subsidizing the arena. That's fifteen million dollars not spent on teachers, textbooks, or school buildings. Fifteen million dollars not repairing roads, staffing fire departments, or funding public transportation.

And then there's the question of who benefits. Stadium subsidies represent a transfer of public resources to private hands—specifically, to team owners who are frequently among the wealthiest people in the country. When a city contributes hundreds of millions of dollars to a stadium project, it's helping billionaires build assets that generate private profits. The players, already among the highest-paid workers in any economy, benefit too. Meanwhile, the taxpayers footing the bill include people earning minimum wage, struggling to afford housing, sending their children to underfunded schools.

The Calculus of Cities

When city officials decide whether to approve a stadium subsidy, they attempt to weigh all these factors through something economists call social marginal benefit analysis. They try to sum up every effect—the sunny day benefit, job creation, civic pride, tourism, changes in crime rates—and compare it against the costs, including opportunity costs and negative externalities like eminent domain disputes that might drive citizens and businesses away.

But this calculation is inherently political as much as economic. City officials face asymmetric pressures. The benefits of keeping a team are visible, emotional, and immediate—fans cheer, civic pride swells, the mayor throws out the first pitch. The costs are diffuse, abstract, and long-term—marginally worse schools, slightly higher taxes, roads that could have been repaired but weren't. Politicians seeking reelection often find it easier to approve the subsidy than to explain why they let the team leave.

The franchises understand this dynamic perfectly. They've spent decades learning to exploit it, playing cities against each other, threatening relocation, demanding ever-larger subsidies. And cities, fearing the alternative, keep paying.

A Market Failure

What we have, in the end, is a market failure of unusual persistence. The economic evidence is clear. The political incentives point the other way. And so billions of public dollars flow each year from taxpayers to team owners, with economists shaking their heads and city councils signing the checks.

Perhaps the European model offers a path forward—stronger relationships between teams and communities, league structures that limit relocation threats, a culture where public subsidies for private sports ventures simply aren't done. But that would require American sports leagues to accept less bargaining power and American cities to coordinate their resistance to subsidy demands.

Neither seems likely anytime soon.

Meanwhile, the next stadium deal is probably being negotiated somewhere, with a team owner explaining how much economic benefit the city will receive, and city officials calculating whether they can afford to say no. The answer, as it has been for seventy years now, will almost certainly be: we can't.

Even when, economically speaking, we can't afford to say yes.