By Tristen Berenjfoorosh
When new stadiums are built or renovated for professional sports stadiums in the U.S., they are either privately funded or, more commonly, publicly funded. A privately funded stadium is where the team’s owner uses private funds to build the stadium. A publicly funded stadium is built using tax dollars; thus, the local or state government owns the stadium, or tax dollars are used to subsidize the cost, meaning that both the team and the local or state government fund the stadium together. There has been much debate over the practice of publicly funded stadiums. Should stadiums for professional sports teams be publicly subsidized?
Analysis
- In The Last Thirty Years, A Majority of Professional Sports Teams’ Stadiums Are Publicly Funded.
As stated above, there are three ways that stadium construction or renovations are funded: 1) complete private funding, 2) complete public funding, and 3) private and public funding, with the third option being the most popular.[1] It was not till the 1980s that wealthy professional sports teams sought public funding for their stadiums.[2] The event that spurred the subsidy boom was when Maryland gave hundreds of millions in public funding and an excellent lease agreement for the Baltimore Orioles’ new stadium.[3] “[Major League Baseball (MLB)], sportswriters, and obliging local politicians were [ ] quick to credit [the stadium] with spurring a revival of Baltimore’s downtown…”[4] Yet, “[t]he neighborhoods surrounding [the stadium] actually shed employers in the decades after the park opened, while unemployment and crime rose.”[5]
The damage was done. Publicly subsidized stadiums were seen as great ways to help the economy around new stadiums. “[B]y 1992 taxpayer funds had played a part in subsidizing 77 percent of U.S. professional sports stadiums.”[6] “Between 1970 and 2020, state and local governments devoted approximately $33 billion in public funds to construct major-league sports venues in the United States and Canada.”[7] Not only do local and state governments argue that public funding increases the local economy to secure tax dollars for stadiums, but teams will often threaten to move elsewhere if local or state governments do not provide them with public funding.[8] Thus, the result has been that only 14 out of the 124 teams in the National Basketball Association (NBA), National Football League (NFL), MLB, and National Hockey League are fully privately funded, 5 of which are in Canada.
- Publicly Funded Stadiums Do Not Promote Employment Or Per Capita Income Growth.
“[P]ublicly financing professional sports stadiums has been widely criticized by the media, scholars, and taxpayers.”[9] “[T]here is little evidence that stadiums provide even local economic benefits. Decades of academic studies consistently find no discernible positive relationship between sports facilities and local economic development, income growth, or job creation.”[10] The jobs created by a new stadium are mostly seasonal and low-wage ones, and “[t]hey tend not to increase commercial property values or encourage much in the way of economic activity.[11] “Economically speaking, stadium subsidies mostly just transfer wealth from taxpayers to the owners of sports franchises.”[12] “Despite universal agreement among economists that sports venues represent poor public investments, elected representatives continue to subsidize their construction as economic development catalysts.”[13] Overall, public subsidies only benefit professional sports teams worth millions to billions of dollars, and these stadiums should not be publicly subsidized.
Recommendations & Solutions
- Federal Legislation To End Publicly Subsidized Professional Sports Stadiums.
The best solution to curtail public subsidization for professional sports stadiums is federal legislation. In 1913, Congress made interest on municipal bonds tax-exempt, but the purpose was not to finance private construction, so Congress tried to stop this by passing the 1986 Tax Reform Act.[14] A loophole remained, which “enabled state and local governments to issue tax-exempt bonds for private projects as long as they finance at least 90 percent of the cost of the project themselves and pay no more than 10 percent of the debt service using revenues generated by the project.”[15] Thus, Congress needs to pass a new law that either ends this loophole or makes it illegal for professional sports stadiums to be built or remodeled using public subsidies.
- Taxpayers Voting Against Publicly Subsidized Professional Sports Stadiums.
Another solution would be for taxpayers to be against public subsidies for professional sports stadiums. This means that any time a vote is put to the public, if there should be public subsidies given to professional sports stadium construction or remodels, then voters need to band together and vote against it. Politicians “seem to be afraid to buck the trend” of not giving public subsidies to sports teams for stadiums, but if voters make it clear that they do not approve of taxpayer subsidies being given to teams worth millions and billions of dollars, then more politicians will be willing not to entertain the teams’ requests.[16] This has happened in a few cities, such as when voters in St. Louis rejected funding for a new Major League Soccer stadium in 2017.[17] Voters can cause change, and banding together could limit or end public subsidies for stadiums.
- Professional Sports Teams Should Follow The College Model Of Raising Funds.
Another solution is for professional sports teams to “follow the model that many college teams have with their stadiums: hold fundraising campaigns with their boosters and fans.”[18] This can involve large donations from the wealthy or “average fans chipping in 3-, 4-, or 5-figure donations in exchange for tickets and behind-the-scenes access.”[19] This way, teams can raise the capital in their usual ways and from their fans, in donations in exchange for anything from tickets, plaques with their names on them, or behind-the-scenes access. The Golden State Warriors raised $300 million from their fans when building their new stadium, with it as a “membership” that the Warriors “pay back in 30 years” like an “interest-free loan.”[20] Many fans would be willing to give some money so their team stays in their city, and for something in return, such as tickets or their name on a plaque. Therefore, raising capital from fans is a viable way to fund stadiums.
- Professional Sports Teams Should Raise The Funds Needed Privately.
Professional sports teams are worth more than they ever have been, and recently, teams such as the Golden State Warriors in the NBA and the Los Angeles Rams in the NFL have shown that privately funded stadiums are possible, even with each of their stadiums costing billions of dollars.[21] The owners of these teams should want to have their stadiums privately funded because, as Joe Lacob, the owner of the Golden State Warriors, said, it’s easier because they do not have to deal with the red tape of public funding and they get complete control of the stadium.[22] Teams could raise money by selling stadium naming rights, raising capital from investors, and using team revenue. The Warriors and Rams have shown that it is doable. Therefore, other teams can also privately finance their stadiums.
Conclusion
Public subsidies for professional sports stadiums are the norm in the U.S., but research shows little evidence of local economic benefits, and the subsidies only benefit the sports teams worth millions to billions of dollars. Some solutions to this problem are federal legislation that ends publicly subsidized professional sports stadiums, taxpayers voting against such public subsidies, teams following the college’s fundraising model, and teams deciding to raise funds privately. Overall, stadiums for professional sports teams should not be publicly subsidized.
Tristen Berenjfoorosh is a third-year law student at the Santa Clara University School of Law. He is part of the inaugural class of the Sports Law Certificate program and has completed relevant coursework, including Sports Law, Labor Law, Tax Law, and Intellectual Property Law.
[1] Daniel McClurg, Leveling the Playing Field: Publicly Financed Professional Sports Facilities, 53 Wake Forest L. Rev. 233, 235 (2018).
[2] Dan Moore, Taxpayers Are About to Subsidize a Lot More Sports Stadiums, The Atlantic (May 8, 2024), https://www.theatlantic.com/ideas/archive/2024/05/sports-stadium-subsidies-taxpayer- funding/678319/.
[3] Id.
[4] Id.
[5] Id.
[6] When sports teams fleece taxpayers, The Week (Oct. 29, 2018), https://theweek.com/articles/803881/when-sports-teams- fleece-taxpayers.
[7] Andrew Zimbalist, Stadiums as Public Investments, EconFact (Sept. 4, 2023), https://econofact.org/stadiums-as-public-investments.
[8] When sports teams fleece taxpayers, The Week (Oct. 29, 2018).
[9] McClurg, Leveling the Playing Field: Publicly Financed Professional Sports Facilities, at 239.
[10] Alexander K. Gold, et al., Why the federal government should stop spending billions on private sports stadiums, The Brookings Institution (Sept. 8, 2016), https://www.brookings.edu/articles/why-the-federal-government-should-stop-spending-billions-on-private-sports-stadiums/.
[11] Moore, Taxpayers Are About to Subsidize a Lot More Sports Stadiums, The Atlantic.
[12] Id.
[13] John Charles Bradbury, et. al., Public policy toward professional sports stadiums: A review, 43 Journal of Policy Analysis and Management 899, 899 (2024).
[14] Moore, Taxpayers Are About to Subsidize a Lot More Sports Stadiums, The Atlantic.
[15] Id.
[16] Moore, Taxpayers Are About to Subsidize a Lot More Sports Stadiums, The Atlantic.
[17] When sports teams fleece taxpayers, The Week.
[18] Scott Beyer, How To Stop Subsidizing Stadiums: Follow the College Model, Catalyst (April 14, 2022), https://catalyst.independent.org/2022/04/14/college-subsidizing-stadiums/.
[19] Id.
[20] Point Forward Podcast, Joe Lacob Describes How He & His Team Funded and Built The Chase Center, YouTube (Jul. 17, 2022), https://www.youtube.com/watch?v=_aUDbitHLgk.
[21] Beyer, How To Stop Subsidizing Stadiums: Follow the College Model, Catalyst.
[22] Point Forward Podcast, Joe Lacob Describes How He & His Team Funded and Built The Chase Center, YouTube.
