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Should Taxpayers Subsidize Pro Teams?

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Americans love their sports, and according to some new research, they are willing to pay for them.

U.S. taxpayers have spent upwards of $5 billion to help build over 50 professional sports stadiums since 1990.
That was one interesting statistic discussed at an April 2 Cato Institute policy forum on taxpayer subsidies for sports arenas.
Casey Lartigue of the Washington, D.C.-based Cato Institute moderated the forum and noted the recent deluge of taxpayer-funded ballparks. For example, the Milwaukee Brewers built a $400 million stadium, receiving $310 million from taxpayers.
Pittsburgh demolished Three Rivers Stadium, former home to both the Pittsburgh Pirates and Pittsburgh Steelers. The city built a new stadium for each team, with each stadium receiving $200 million from taxpayers.
Three Rivers stadium “was completed in 1970,” Lartigue noted. “The bills for it still haven’t been paid off, and it was blown up earlier this year.”
Lartigue asked: “Since when did it become a legitimate function of government to fund baseball stadiums like this?” He also suggested politicians too readily wonder where they can build a stadium instead of first questioning whether a new stadium is necessary.
Raymond J. Keating, chief economist for the Small Business Survival Committee, noted he was a baseball fan, even though he was “not a fan of taxpayer subsidies for these facilities.”
“My bottom line is there is no reason to subsidize ballparks,” he said, “especially when you consider the revenue sources that come out of stadiums today, the amount of money that you are able to get from naming rights, signs in the stadium, concessions, you can go all the way down the line.”
Stephen S. Fuller, economist at George Mason University, spoke in favor of taxpayer subsidies for sports arenas. In fact, the Virginia Baseball Stadium Authority (VBSA) commissioned Fuller to prepare an economic impact study to assess the feasibility of a professional baseball team in Northern Virginia.
The study indicated a major league team in Northern Virginia “would generate over $8.6 billion in total economic impact and a fiscal impact totaling $693 million for state and local governments during its first 30 years of operation,” according to a VBSA press release.
“I believe that the positive economic impact that baseball can have on Virginia will justify the Commonwealth’s participation in a responsible public-private partnership,” said Virginia Gov. James S. Gilmore III in the release.
Dennis Coates, economist at the University of Maryland, expressed a lack of trust in economic impact studies, enumerating what he believed were fallacies contained in such reports.
He said a typical study does not factor opportunity cost (i.e. what is forfeited or ignored by choosing a certain project). “All of those other projects, we don’t know what their returns are,” Coates said. “Nobody ever computed those.”
Coates also addressed the confusion of costs and benefits in economic impact studies. He illustrated the confusion with an example.
“If you were to hire a contractor to put an addition on your house, and then you paid that person, what would you call the money you paid? A cost, right? Impact studies call it a benefit,” Coates said. “It is no more a benefit when the state takes your tax dollars and gives them to the contractor than when you take your income and give it to the contractor.”
With a number of professional baseball teams still looking to build new stadiums, the issue seems more relevant than ever.
“It does make sense for the teams to try to get this money, because as long as someone else will build something for you, why would you stop them?” Lartigue said.
Cliff Vaughn is BCE’s associate director.