Sports venue construction in the U.S. tends to happen in waves, roughly every three decades. Sports economists suggest another wave is happening now, with numerous proposed or approved venue construction projects around the country seeking or having secured public dollars, from Tennessee to Wisconsin to Nevada to Florida.
Professional sports owners often justify asks of hundreds of millions in taxpayer dollars for new or revamped stadiums with estimates of huge economic returns for communities. It’s important that journalists covering these projects understand how public dollars are raised to pay for them and how to interrogate economic impact claims that teams produce.
Across the four biggest sports leagues in the U.S. — Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League — there have been eight new venues built since 2020 at a total construction cost of roughly $3.3 billion, according to a September 2023 paper in the Journal of Policy Analysis and Management. About $750 million in public funds went toward those construction projects, not including bond interest, the paper finds.
Research conducted over decades indicates these investments almost never lead to massive economic gains for host cities. Legislators have since pushed the recent public contribution figure even higher. This includes $500 million to renovate the Milwaukee Brewers ballpark, more than $1 billion in bonds toward a new stadium for the NFL’s Tennessee Titans and $380 million for a new ballpark for the A’s, which are poised to move from Oakland to Las Vegas in 2028.
We recently published two pieces on public financing of sports venues: A research-based primer and research roundup and a short tipsheet for covering the topic.
To give journalists an even stronger foundation for their coverage of sports venue financing, The Journalist’s Resource co-hosted an hourlong webinar May 16 with Econofact, a nonpartisan, online publication out of The Fletcher School at Tufts University.
I co-moderated the panel discussion with Michael Klein, the William L. Clayton Professor of International Economic Affairs at Tufts and founder and executive editor of Econofact. The panelists were:
- Andrew Zimbalist, the Robert A. Woods Professor Emeritus of Economics at Smith College.
- Victor Matheson, a professor of economics and accounting at the College of the Holy Cross who specializes in sports economics.
- Alan Snel, the publisher of LVSportsBiz.com, a news outlet that covers the convergence of sports, business, stadiums and politics.
One takeaway: There are numerous examples of professional sports franchises that built their venues with little or no public investment.
“We have the Golden State Warriors playing in an entirely privately financed stadium in San Francisco,” Matheson said during the webinar. “We have SoFi stadium in [Los Angeles], almost entirely privately financed there, and that’s about a $5 billion stadium. I think one of the most important things to take from this hour is that public financing is not required.”
Here are 7 key tips from the webinar.
1. Ask these three questions about economic impact estimates. If team officials can’t explain their numbers, don’t report them.
Who commissioned the study?
“If it is a study that is paid for by the league or the team, that is not an economic impact study,” Matheson said. “That is a press release.”
Can I see a copy of the study?
While teams or municipalities may or may not release lengthy economic impact reports, public officials and journalists sometimes cite big number estimates from teams without scrutiny of the underlying analysis.
“You would be amazed by how many people say, ‘There is a study that says [the economic impact] is a billion dollars,” Matheson said. “But you can never get your hands on that study.”
What do economists think?
“Call an economist,” Matheson said. “You can find lots of us. Whatever your local jurisdiction is, there’s a sports economist there who teaches in your state or your local region who understands these issues who has a good local feel. Most of us have a good national feel as well.”
If team representatives can’t justify estimates of economic growth, or show than an independent analysis exists, don’t report those estimates.
“The big problem with these gigantic economic impact numbers is that the methodology is not explained,” said Snel.
He noted that LVSportsBiz will not publish economic impact estimates unless team officials explain how they did their analysis.
2. Note that when people spend money at a sports venue and nearby businesses, this often means they don’t spend that money elsewhere.
A new or revamped sports venue tends to shift economic activity, not create new spending, economic research shows.
Interview an economist or two to help explain to audiences how this works. The basic idea is that spending shifts within communities, or from one community to another. The underlying reason has to do with household budgeting.
“Most of the money spent at a sports facility is money that is part of people’s leisure budgets, and they have a certain amount of money that they can spend on various kinds of leisure,” Zimbalist said. “When they spend $200 or $500 taking their family to the ballpark, that’s $200 or $500 they don’t have to spend at the local bowling alley, at a local theater, at a local restaurant. That’s money being displaced, from spending in one part of the city to spending in another, and the net impact can be very close to zero.”
3. Ask hotel owners and rental car firms how they incorporate tax rate changes into their pricing. If public money is raised through hotel and rental car taxes, proponents may claim the tax burden will fall on tourists. But local businesses and franchises may bear some of the burden, too.
Tourists do not necessarily pay hotel and rental car taxes. Why? Because of something called tax incidence, which is how the burden of a tax is divided among consumer and producer — essentially, who pays the tax and at what proportion.
“It’s not always the person who buys the product who pays the tax,” Matheson said. “It can also be the person who sells the product.”
When legislators increase a hotel tax or pass a new one, hotel owners typically respond by adjusting their pricing in one of three ways:
- Raise prices and pass on the entire cost of the tax to consumers. That can hurt their ability to compete for convention and tourism business, Matheson said.
- Hold prices steady and pay the tax burden entirely, reducing profits.
- Some combination, where they pass some of the cost of the tax to consumers and eat the rest.
The same goes for rental car taxes, another sales tax commonly used to help finance stadiums. Local economic conditions will determine how the tax burden shakes out. In extremely competitive markets, businesses may be able to pass on the entire cost to consumers. Point is, it’s important to ask hotel owners and rental car firms how they incorporate tax rate changes into their pricing.
While officials may claim visitor taxes are a way to pass the cost to out-of-towners, the authors of the September 2023 paper note that local people also rent cars. And residents with lower incomes are more likely to use extended stay hotels and potentially have to pay the higher taxes.
4. Don’t forget that team owners stand to benefit most from these projects.
Teams seeking public financing naturally focus public statements on their estimates of community benefits, typically in the form of jobs created and consumer spending.
But team owners, by far, have the most to gain.
“The bottom line is, it’s the pro teams that are garnering the benefits of the revenues from the stadiums,” Snel said. He recommended journalists also report on how new or improved stadiums affect team valuations.
He pointed to the National Football League’s Raiders, which moved from Oakland to Las Vegas in 2020. The team was valued at $2.2 billion in 2019. That figure nearly tripled to $6.2 billion by the end of 2023.
There are a variety of reasons for the increase, Snel reports, including TV deals that generate tens of billions of dollars yearly across the NFL, and the sale of the Washington Commanders in 2023 for more than $6 billion, which set the market for premium franchises. But according to Forbes, $1.4 billion of the team’s current value is tied to the stadium itself, which was heavily subsidized with public dollars.
5. Learn about “leakage” and how it can affect economic impact estimates.
When people spend money at local businesses, there is less of what economists call “leakage” than when people spend with mega corporations like sports franchises.
This means every dollar spent at a local café has a better chance of staying within the local economy than money spent at a sporting event, which tends to “leak” out of the economy and into the savings accounts of team owners. The café owner, by contrast, uses revenue to, for example, pay staff, who also live and spend in the community, or for laundry services provided by another local businesses, or any number of other things.
“The proprietor of the local restaurant or bowling alley or theater tends to have a more moderate income and tends to live almost 100% of the year in that town,” Zimbalist said. “When you spend money at the restaurant, it tends to circulate and stay in the town more. When you spend money at a ballpark, it’s going to millionaires and billionaires. They generally don’t live in the town year-round.”
This ties back into those economic impact estimates. They’ll sometimes include a simple multiplier equation, suggesting money spent at sporting events “multiplies,” or circulates within the local economy, just like spending at the local café.
But sporting event spending tends to have less chance of staying in the local economy, compared with other types of entertainment spending.
Zimbalist explained that team owners “generally have much, much higher savings rates, so they take the money and they put it into the world’s money markets and the money doesn’t stay in the town for these and other reasons. So the leakages are much, much greater and, therefore, the multiplier, the sports multiplier, is much lower than a typical entertainment multiplier.”
6. Keep track of lease deals. When they expire, teams may come asking for more public money.
When covering a city that has a major professional sports franchise, or several of them, review lease agreements to figure out when team owners might ask taxpayers for help revamping their venue, or building a new one.
The National Sports Law Institute of Marquette University Law School has obtained dozens of lease agreements for professional baseball and football franchises, most of them from the 1990s and early 2000s.
The institute has summarized these agreements, available here. The summaries detail, among other things, the yearly rent the franchise owes the municipality, which may be set below market rates. They outline how much the public contributed toward sports venue construction and how much came from the team, along with whether the team or municipality is responsible for regular operating expenses and repairs.
“We had this huge wave of stadium construction in 1992,” Matheson said. “Most of those stadiums are associated with a 30-year lease deal. And because of that, these teams are tied to the stadiums for 30 years, which means that they really can’t start asking for a new stadium, start asking for new public subsidies, until those lease deals expire. But as soon as those lease deals expire, all of the bargaining power shifts to the teams and away from the taxpayer.”
7. If you don’t have time to do a deep dive, at least include these two “boilerplate necessities” in your reporting.
Journalists may not have time to do a deep investigation into how public money is being used to finance sports venue construction or renovation — especially broadcast journalists, who might only have a minute or two to cover a lot of ground.
Snel recommends reporters at least include these two “boilerplate necessities” in their coverage.
- Report the principal and interest on debt. If public money is raised through bonds, tell audiences about the interest on the principal that the city, county or state will have to repay. For example, Clark County, Nevada, took on debt of $750 million toward building the Raiders’ stadium. With interest, that number will grow over the next quarter century. The final tally will actually be north of $1.3 billion, Snel recently reported.
- Remind your audience that economic activity related to sporting events by and large goes back to team owners. “The beneficiaries are the teams,” Snel said. “They’re garnering the lion’s share of all the revenues.”
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