In short, if there are any positive externalities to governments spending vast sums to erect baseball, basketball, football, or hockey facilities for professional teams … most of the profit is captured by the well-connected and doesn’t benefit the communities who put up the money. I’ve linked to several articles that debunk the usual claims about how building this team a new stadium will provide so many millions of dollars in new spending, and the story always seems to be the same, regardless of the location of the latest corporate welfare pitch.
In 2008, Matheson studied sports projects from across the country to see if taxable sales rose after stadiums were built. The study also examined whether tax collections dipped when sports leagues shut down for strikes or lockouts.
“There was simply not any bump at all,” Matheson said.
Tax collections were as likely to drop as rise when a team started play in a new city. And collections dropped during some strikes, but rose during others.
The main reason relates to how spending ripples through an economy, said Dennis Coates, an economist at the University of Maryland, Baltimore County.
When a couple spends $100 for dinner and a movie, much of that money goes to waiters, ticket takers and other local workers and suppliers. Those people, in turn, spend their paychecks on rent, food and other sectors of the local economy.
Each dollar of original spending can contribute $3 to $4 to economic activity and job creation.
Professional sports mute this ripple effect.
“Spending that goes on inside a stadium tends to flow into the pockets of a relatively few, high-income individuals who live a large portion of the year outside the city,” Coates said. “Much of that money flows out.”
Sports franchises also drain an economy by soaking up taxpayer money that could go to other city services or tax relief — both of which stimulate economic activity.
In her 2005 study, the “Full Count,” Harvard University professor Judith Grant Long pegged Tropicana Field’s public subsidy at 130 percent of its construction cost, one of the highest public shares in the country.
“The real cost of public subsidies for sports facilities is significantly higher than commonly reported,” Long wrote. “Public costs associated with the operation of the facility and foregone property taxes are routinely ignored.”
The best face on Rays economic impact came from two 2008 studies that indicated that baseball bolsters tourism revenues to the tune of $100 million to $200 million a year.
Tourism analysis is an optimistic approach because it focuses only on dollars flowing into the area without examining how baseball might sap local spending levels.
At Field of Schemes, Neil deMause also notes:
The economists note other reasons why sports spending is overblown (some studies could be double-counting fans for each game that they attend even if they’re in town for an entire series, among other things); the whole article is worth reading. And when you’re done with that, check out Shadow of the Stadium’s rundown of other reports on how economists nearly unanimously agree that stadium subsidies are a really, really bad idea. Not that economists are always right, but it should if nothing else put the burden of proof on team owners to show why the heck they should be getting hundreds of millions of dollars in public cash, when nobody can spot any significant public benefits.