Why the federal government should stop spending billions on private sports stadiums | Brookings Institution

Why the federal government should stop spending billions on private sports stadiums | Brookings Institution

When the New York Yankees completed the new Yankee Stadium in 2009, the final construction bill was an estimated $2.5 billion. Of that, nearly $1.7 billion was financed by tax-exempt municipal bonds issued by the city of New York.

Because the interest earned on the municipal bonds is exempt from federal taxes, a large amount of tax revenue that would have been collected—had the bonds been issued as taxable—went toward the construction of the stadium. In other words, the Yankees received a federal subsidy to build their stadium. How much? About $431 million. That’s a lot of money, but it gets worse.

The loss in federal tax revenues was even higher than the subsidy to the stadium. High-income taxpayers holding the bonds receive a windfall tax break, resulting in an even greater loss of revenue to the federal government. In the case of Yankee Stadium, the additional loss was $61 million. That is, the federal government subsidized the construction of Yankee Stadium to the tune of $431 million federal taxpayer dollars, and high-income bond holders received an additional $61 million.†

The Yankees, of course, aren’t the only team to finance their stadium using tax-exempt municipal bonds. Since 2000, 35 other professional sports stadiums have also been financed with tax-exempt bonds.

In “Tax-exempt municipal bonds and the financing of professional sports stadiums,” Brookings Senior Fellow Ted Gayer, Austin J. Drukker, and Alexander K. Gold quantify the federal subsidies given to finance professional sports stadiums built or majorly renovated since 2000, and the total loss in federal tax revenue.

All together, the federal government has subsidized newly constructed or majorly renovated professional sports stadiums to the tune of $3.2 billion federal taxpayer dollars since 2000. But because high-income bond holders receive a windfall gain for holding municipal bonds, the resulting loss in total revenue to the federal government is even larger at $3.7 billion.

Do stadiums benefit taxpayers and local economies?

With so much money at stake, it’s worth asking: Should the federal government be spending money on these stadiums? Federal subsidies are justified for infrastructure projects that provide a public good across states, but local sports stadiums clearly do not meet this criterion.

Indeed, there 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. And local benefits aside, there is clearly no economic justification for federal subsidies for sports stadiums. Residents of, say, Wyoming, Maine, or Alaska have nothing to gain from the Washington-area football team’s decision to locate in Virginia, Maryland, or the District of Columbia.

So why is the federal government still subsidizing their construction?

See the total revenue loss from each stadium built or majorly renovated since 2000*

MLB

New York Yankees $492
New York Mets $214
Cincinnati Reds $142
Miami Marlins $132
Milwaukee Brewers $117
Washington Nationals $107
Minnesota Twins $91
Houston Astros $78
Philadelphia Phillies $68
San Diego Padres $68
Pittsburgh Pirates $44
Detroit Tigers $41
San Francisco Giants $0
St. Louis Cardinals $0

NFL

Indianapolis Colts $214
Chicago Bears $205
Cincinnati Bengals $182
Houston Texans $147
Seattle Seahawks $101
Arizona Cardinals $94
Dallas Cowboys $88
Philadelphia Eagles $68
Minnesota Vikings $65
Denver Broncos $54
Pittsburgh Steelers $44
Green Bay Packers $35
Detroit Lions $7
New England Patriots $0
New York Giants** $0
New York Jets** $0
San Francisco 49ers $0

NBA

Brooklyn Nets** $161
Houston Rockets $112
Orlando Magic $93
Memphis Grizzlies $87
Charlotte Hornets $65
Dallas Mavericks** $44
San Antonio Spurs $44
Miami Heat $0
Oklahoma City Thunder $0

NHL

New York Islanders** $161
Pittsburgh Penguins $65
New Jersey Devils $60
Detroit Red Wings $50
Dallas Stars** $44
Arizona Coyotes $23
Columbus Blue Jackets $0
Minnesota Wild $0

*Estimates calculated using a 3% discount rate. See full paper for estimates using different discount rates.

**Indicates a team that plays in stadium used by multiple leagues. The Brooklyn Nets and the New York Islanders both play at Barclays Center. The Dallas Mavericks and the Dallas Stars both play at American Airlines Center. In the table above, the full subsidy for each stadium is listed next to both teams that use the stadium. For the purposes of the graphic dividing the total subsidy ($3.2B) by league, the subsidy/revenue loss value for each stadium was divided in half, with half attributed to the NBA and half to the NHL. The New York Jets and the New York Giants both play at MetLife Stadium, though MetLife Stadium received no federal subsidies. See full paper for more on shared stadiums.

Source: Why the federal government should stop spending billions on private sports stadiums | Brookings Institution

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