Sports, Jobs, Taxes: Are New Stadiums Worth the Cost? Author(s): Roger G. Noll and Andrew Zimbalist Source: The Brookings Review, Vol. 15, No. 3 (Summer, 1997), pp. 35-39 Published by: The Brookings Institution Stable URL: http://www.jstor.org/stable/20080751 Accessed: 13/05/2009 19:16 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=brookings. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact [email protected].

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ARE NEW STADIUMS WORTH /

THE

COST?

Sports

Jobs

xes BY ROGER G. NOLL AND ANDREW ZIMBALIST America is in the midst of a sports construction boom. New sports facilities costing at least $200 million each have been completed or are in Baltimore,

under way Cincinnati, San

Cleveland,

Francisco,

St.

Charlotte,

Milwaukee,

Louis,

Seattle,

Chicago, Nashville,

Tampa,

and

and are in the planning stages in Boston, DC, Washington, New York, and Pittsburgh. Major stadi Dallas, Minneapolis, urn renovations have been undertaken in Jacksonville and Oakland.

Industry

experts

estimate

that more

than

be spent on new facilities for professional sports teams before 2006. Most of this $7 billion will come sources. The from public subsidy $7 billion will

starts with

which

the

allows

Roger G. Noll at Stanford Zimbalist

federal

government,

state and local gov is professor of economics Andrew University.

is professor

of economics at

Smith College. SUMMER

1997

35

to

ernments

issue

tax-exempt

bonds

to

lowers

interest on debt

sports facilities. Tax exemption and

so

pay

for

a stadium.

tion

has

varied

amount

the

reduces

cities

that

Since

2.4

between

4.5

and

teams

and

Kingdome

Seattle,

investments

State

and

local

even

pay

governments

nomic

into

subsi

net

the

cost

the

among tion

a

for

as

team,

a national

to win

biggest shown

to

by

Utah

The

for

rationale

cities'

willingness

sports

all

on

investment.

a

As

of

a

noted,

or

city,

benefits

that

on

conclusions extremely econom

overall

recent facility a

approaching recent

has

facility

on

an

entire

net

tax

been

revenues.

is a local the

area, metropolitan are de minimus.

facilities

sports can

stadium

appears

reasonable

the unit of analysis

of whether

as com of dollars

an

has

its impact

of

the

case,

No

No

in terms

case

angles:

neighborhoods

facility

anything

eco

local

of millions

effect

negative)

earned

economic

economic

spur

if

growth

is, if it sports is a significant export industry?that attracts outsiders to buy the local product and if it results in the sale of certain rights (broadcasting, prod

Jazz's

to

have

neighborhood,

uct licensing)

to national

has

on

little

effect

sports facilities is revealed in the campaign slogan for a new stadium for the San Francisco 49ers: "Build

net

attract

sports

exports. nor

tourists

neither

the most

new

export facility is about a third of the crowd at every

industry. Probably Oriole Park, where

subsi

in reality,

firms. But,

regional

facilities

Sports

Cities Subsidize Sports

economic

even

(perhaps

self-financing

Delta Center in Salt Lake City and the NFL's Houston Oilers' new football stadium in Nashville.

Why

even

In every

development. same. A new

Regardless

competi

the NBA's

the

from

and

ic activity and employment. to

league franchise. But a city need not be

nation's

cities

among

the

small

for refurbishing the Oakland local government for the Raiders was about $70 million. Coliseum to spend big to attract Most large cities are willing or keep amajor

examine

argument

sports

return

either:

book, Sports,Jobs, and

Brookings

collaborators

have and have not sunk hundreds

a year.

cheap

15

and

parisons

Sports typically than $10 million a year. Perhaps the most successful new baseball stadium, Oriole Park at Camden Yards, costs Maryland residents $14 million aren't

its workers.

development

are

Renovations

investments.

and

land,

studies of the effect of specific facilities, aswell

Giants

larger

workers,

use

and

we

Taxes,

now

facilities

than Washington. cost the host city more

local

In our forthcoming

each cause Stadium in the New Jersey Meadowlands, an annual federal tax loss exceeding $1 million. dies

of

Building a stadium is good for the local economy only if a stadium is the most productive way to make capital

built in the 1970s and 1980s, including the Superdome in Pontiac, in New the the Silverdome Orleans, now-obsolete

uses

other

points.

and

two

in

arise

beneficial

ways: economically specialization by for the purpose of trading with other the community regions or from local value added that is higher than

a differential of 3 percentage points, the dis Assuming counted present value loss in federal taxes for a $225 stadium is about $70 million, or more than $2 million million a year over a useful life of 30 years.Ten facilities

in

can

productivity

from

reduc

percentage

Increased

productive.

must

rate

interest

the

1975,

finance

help

successful

dize

game

the Stadium?Create

(Baltimore's baseball exports are enhanced because it is 40 miles from the nation's capital, which has no major

claim that the Jobs!" Proponents in four improve the local economy

sports facilities ways. First, building jobs. team

Second, generate

people new local

expanding tourists

and

creates

the facility who

attend

in

spending

to

companies

the

the

host

for

team

causes Advocates nomic offset

more

still

new

growth revenues

that

and

they

other

property

increases

nomic

impact.

/

Unfortunately, reasoning of

benefits when ments,

36

a

stadiums.

community's and

natural

spur

arising

taxes, outside from

sales

the

on

taxes

the

national

?^

balanced

j%?^ \

and eco-

stadium's

these that

arguments leads

to

Economic resources?people, resources

overstatement

like

of takes

growth

capital land?become

eco-

bad

the place

a new

though i

a $200

million

collect

a

million invest

spent

area. Most

be

profes

they play, so their

live where Moreover,

locally.

from

but these must

the

leaving

do not

revenues

substantial

Jf?

increases

stadium

make

players

of

the

revenue

gain

goes

to

no

net

One

local

export

promotional economic

invest

annual

more

nearly $120 million;

to a

gain

other

impact

of

the

another THE

cities.

On

bal

leaving little or

community.

estimated

study

so that

and football,

ance, these factors are largely offsetting,

rev

ticket

attendance,

enues are shared in both baseball part

contain

$3

incre

and

jobs

about

to

gain

inflated salaries for only a few years, so they have high savings, which they invest in national firms. Finally,

con

stadium,

only on

net

the

new

of

and broadcasting, funds

against

is not

income

do

licensing

sional athletes

s?

are

subsidies

a return

of

teams

Sports

creation. job so much eco

self-financing:

ticket

spending

tax

nomic

stadiums are

from

by

cessions

new

that

argue

and

spending

is

area.

Baltimore

so,

terms

in

revenues

much

the

Even

team.)

economy tax

year?not

outside

ment.

increas

further

city,

Baltimore's

attracts

ing local spending and jobs. Finally, all this new spending has a "multiplier effect" as increased local income

from

baseball

league

mental

the

community,

a

Third,

employment.

construction

or work

games

*

comes

Denver

estimated

BROOKINGS

that

the

Broncos

local was

that the com REVIEW

bined

economic

annual

benefit of was $245 studies over

Bengals million. Such promotional state the economic impact because

confuse

they

nomic

spending

inside

is a substitute

for

local

spending,

such

ational restaurants.

are

stadium

entertainment

a sta recre

as movies

most

Similarly,

a

inside

other

eco

net

and

tax

and

collections as other

substitutes:

businesses

tax

decline,

col

lections from them fall. studies also fail to take into

Promotional account

differences

other

revenue

sports

sports has an

amount

team

are

that

substitutes

for

on

centrates

for

sports

other

reduces

sports.

income,

recreational the

total

stadi-

of

jobs,

alternative

ment.

local

investments.

There

Professional to

comparable

?

sumers who

er

and

They

so many