Sports Facilities and Government Funding: Overview
Sports facilities, particularly stadiums and arenas for professional teams, often receive significant government funding, sparking ongoing debates about the appropriateness and impact of such expenditures. The construction of these venues typically requires substantial financial backing, as team owners frequently lack the means to fund these projects independently. Public subsidies can help reduce the financial burden on teams, with local governments often agreeing to fund construction in exchange for commitments from teams to remain in the area for a designated period. While these facilities can enhance local tourism and property values, critics argue that they primarily benefit private team owners, with municipalities deriving limited financial return once the facilities are operational.
The allocation of public funds for sports venues raises ethical questions regarding the use of taxpayer dollars to support private enterprises. Proponents highlight economic benefits, including job creation and increased local business, especially when teams achieve success or host special events. However, detractors contend that the promised economic boosts often fail to materialize and that the burdens of construction, such as displacement of residents or the use of eminent domain, can negatively impact communities. The global trend indicates a growing reliance on public funding for private sports facilities, while debates over funding methods, including public-private partnerships, continue to evolve. This complex interplay between community interests, financial realities, and the cultural significance of sports underscores the challenges in balancing public investment with private gain.
Sports facilities and government funding
The use of public funds to create facilities for privately-owned sports teams is an issue that has generated increasing scrutiny and controversy in recent years. Major cities are typically viewed as potential homes for professional sports teams, but team owners can rarely afford to build arenas or stadiums on their own. Due to the high cost of stadium construction, local and state governments are generally asked for financial support for such ventures. Government funding also saves teams the cost of borrowing to finance a stadium facility.
Public subsidies are granted on the condition that a particular professional sports team will remain in a city for a given amount of time. After public funds are granted, the facility is generally owned by the local government, eliminating the need for property taxes. The team owner retains all rights to the team itself, and profits from ticket sales go toward the maintenance of the facility and player salaries. When these costs have been covered, the remaining revenue goes to the team owner as profit. Team owners also profit from concession sales, parking fees, and in particular, skybox privileges, which are purchased primarily by major corporations. In some cases, part of the deal with the city is to allow locally and minority and women owned companies to compete for the concessions or partner with larger companies. The host city receives little profit once a stadium is up and running. However, most cities are able to translate their status as the "home city" for a particular team into increased tourism revenues and business opportunities, as well as increased property values.
Understanding the Discussion
Eminent Domain: The power of the state to claim land from private landowners for the purposes of the common good.
Referendum: Also known as a plebiscite, a referendum is the submission of a proposal to a popular vote. In the United States, referendums (also called propositions or ballot initiatives) are commonly used to adopt new laws or policies, or to overturn already-established laws.
Statute: A written law created and approved by a legislature.
Subsidies: Grants, tax incentives, or other financial assistance given by a government to help fund a project that is seen as benefiting the public interest.
Tax Revenue: Public funds generated by the taxation of goods, property, income, and/or services.
History
Sports events have been popular since ancient times, and attending them has often been seen as an act of social and civic importance. The Colosseum of Rome was created as an arena to showcase gladiator contests and other spectacles, and was able to seat over 50,000 people. Entrance fees were often waived for attendees, and were paid by politicians and rulers who were seeking popular support. The Olympic Games originated in ancient Greece, and today the event is celebrated so enthusiastically that most host cities build new arenas, housing and stadiums created solely for the purpose of accommodating the Olympics.
The popularity of sports grew dramatically in the United States throughout the twentieth century, resulting in the need to create larger and more sophisticated playing facilities. Prior to the middle of the century, public subsidies for sports arenas were rarely considered or implemented. The Cleveland Indians baseball team played in a public stadium, but was the only professional sports team to do so prior to 1950.
By the 1960s, the privately-owned arenas that had been built after World War II were in need of extensive repair or replacement. By that time, the cost of building new stadiums of the necessary size had skyrocketed, leaving most team owners with little choice but to seek public subsidies. By 1970, roughly 70 percent of sports stadiums in the U.S. had been built with the help of public funds.
From 1970 through the early 1980s, the average sports arena cost around $87 million to build, with approximately 90 percent of the cost being covered by public subsidies. The stadiums and arenas that were built in the 1960s and early 1970s were constructed along utilitarian rather than aesthetic lines. They were generally located on the outskirts of a city and near a highway to allow easy access for attendees.
As the popularity of professional sports continued to build, along with a booming economy in the late 1990s, cities built new stadiums at a quicker pace. Newer stadiums were created with modern amenities in mind, and were more centrally located in cities and urban communities. In some cases, weather conditions caused teams to want to build new stadiums to shield players and their fans from the elements. Other stadiums upgraded skybox and other amenities to attract corporate season ticket holders. With the rising costs of construction, many cities found themselves in the midst of public debate regarding the funding of these structures. Public referendums on the issue were common, and as a result, the overall percentage of public funds dedicated to the construction of new sports facilities declined. Average citizens noticed the exorbitant salaries of sports players and high profits of teams and at times voiced opinions against subsidizing construction.
Between 2000 and 2009, thirty-one major league stadiums and arenas opened in America. The average cost of a baseball or football stadium was $528 million, and the average cost of a basketball or hockey arena was $276 million. Over $8 billion was allocated in public subsidies between 2000 and 2009. Despite a decrease in the percentage of public subsidies allotted to new sports arenas, the actual amount of money dedicated to these ventures has increased due to the growing costs of construction.
Supporters of government subsidies for the construction of sports facilities maintain that new stadiums are an economic boon to their host cities. The idea of having a home team instills civic pride, and popular teams, particularly those that make it to championship games, draw fans and tourists that would not visit the area otherwise. Businesses that are located near stadiums benefit from this influx of tourists, and the stadiums themselves often create new jobs. New businesses may also be attracted to an area with a stadium especially if it can be shared by teams or used year round. If stadiums are located in central urban centers, supporters highlight job opportunities for low income, chronically unemployed and hard to employ young people. Cities that are experiencing difficult economic circumstances may have trouble attracting new business and subsidies may be a way to keep a sports team in a specific location.
Opponents of subsidies claim that the construction of new sports facilities does not typically increase tourism or the local economy, and object to the use of taxpayer dollars for what are essentially private enterprises. During large sporting events, such as championship games, tourists who may have visited the area tend to stay away to avoid the stadium crowds, resulting in no net increase in tourism. Opponents also note the inconvenience to local residents without an equitable payoff.
Opponents also argue that team owners profit from stadium subsidies at the expense of the host city. Additional revenue is generated by the sale of luxury skybox tickets, which are considered separate from regular ticket sales. Skyboxes are typically rented by large corporations who spend more money per person than an average ticket holder, none of which goes to the local government. Many who are opposed to subsidies feel that the funds allocated for stadium construction should the benefit of the community as a whole, rather sports teams and their fans.
Sports Facilities & Government Funding Today
Since the 1970s, public funding for private sports facilities has become a standard practice around the world. As the number of sports arenas has grown, so have the subsidies dedicated to their construction. Because of this, public debate regarding the relative importance of these facilities has escalated, with new issues developing.
The power of eminent domain is an extremely important issue that is linked to the construction of new sports stadiums. In 2006, Washington, D.C. exercised its right of eminent domain for the construction of a new stadium for the Washington Nationals baseball team. Five homeowners were forced to leave their property, and litigation was brought by several homeowners regarding the value of the properties. The city maintained that the area was essential for the location of the new stadium.
During the last several decades, economic issues have prevented the maintenance and updating of many sports arenas in Germany. However, there was little protest over subsidies for a new stadium to host the 2006 FIFA World Cup soccer championship tournament, due to the popularity of soccer in the country.
Italy faced a different scenario when hosting the World Cup in 1990. Several stadiums, including the Stadio Olimpico in Rome, needed extensive renovations before the tournament could be held. Political corruption and the mismanagement of funds created a financial disaster for Italy. The original estimate of €400 million for all of the projects skyrocketed to €645 million. The public backlash was so strong that despite the popularity of soccer in the country, many Italians increasingly prefer to watch matches on television rather than attend a live game.
Chicago, Illinois is a contender for the 2016 Olympics generating many protests over proposed takeovers of land to accommodate events and to house athletes. In one case, low income residents fear being displaced permanently even when the games leave. In another case, the site of a failed hospital is desired for an Olympic Village to house athletes even though there are substantial costs to remediate contaminated soil and few efforts were visible to save the hospital. Now the area is without a major hospital and the land will only cost money until the Olympics several years away.
The New York Mets and Yankees won a court fight in early 2009 to get additional funding for stadiums which were originally funded by tax-exempt bonds for construction in 2006. Independent review of the deal noted that it will cost the city of New York $363 million while saving the New York Yankees $787 million over 40 years. The use of public-private partnerships (PPP) is growing in Europe; this method of funding breaks from the traditional model of relying heavily on public funds. Instead, PPP relies on a variety of funding sources, including money from private investors and stock investments as well as some public subsidies. The practice originated in the United Kingdom during the 1990s, but has expanded in the years since.
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Bibliography
Books
Delaney, Kevin J. and Rick Eckstein. "Public Dollars, Private Stadiums: The Battle Over Building Sports Stadiums." New Brunswick, NJ. Rutgers University Press, 2003.
Noll, Roger G. and Andrew Zimbalist. "Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums." Washington, D.C.: The Brookings Institution, 1997.
Rich, Wilbur C. "The Economics and Politics of Sports Facilities." Westport, CT: Greenwood Publishing Group, 2000.
Yee, Roger. "Sports & Recreational Facilities." New York: Visual Reference Publications, Incorporated, 2006.
Periodicals
DeMause, Neil. "Why Do Mayors Love Sports Stadiums?" Nation. 293.40732 (08/15/2011). 14-17. Points of View Reference Center. http://search.ebscohost.com/login.Aspx?direct=true&db=pwh&AN=63296170&site=pov-live.
Friedman, Michael T., and David L. Andrews. "The Built Sport Spectacle And The Opacity Of Democracy." International Review For The Sociology Of Sport 46.2 (2011): 181-204. Academic Search Complete. Web. 10 Jan. 2013.
Gillespie, Nick. “Why Stadium Subsidies Always Win.” Reason 45.8 (2014): 17. Print.
Goldman, Michael. "New Sports Paradigm." Sound & Video Contractor 25.5 (May 2007): 2-2. Academic Search Premier. EBSCO. 3 Aug. 2009 http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=25260326&site=ehost-live.
“Hole Story.” Crain’s Cleveland Business 35.1 (2014): 8. Print.
Maltby, Emily, and Sean Gregory. “Loser’s Game.” Time 9 Dec. 2013: 14. Print.
Mondello, Michael J. "Stadium Funding and the City of Jacksonville." International Sports Journal 7.2 (Summer2003 2003): 91. Academic Search Premier. EBSCO. 3 Aug. 2009 http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=9993202&site=ehost-live.
Pobiner, Joseph A. "Build or else, the big boys say." Planning 64.5 (May 1998): 6. Academic Search Premier. EBSCO. 3 Aug. 2009 http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=612574&site=ehost-live.
Prall, Derek. “Fields of Dreams.” American City & County 129.1 (2014): 6–7. Print.
Walsh, Michael. "Public/private partnership makes sports dome a reality." Parks & Recreation 33.1 (Jan. 1998): 26. Academic Search Premier. EBSCO. 3 Aug. 2009 http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=193147&site=ehost-live.
Zimbalist, Andrew. “Sports Facilities and Economic Development.” Government Finance Review 29.4 (2013): 94–96. Print.
Websites
Associated Press. "Mets, Yankees stadiums receive more public funding." 16 Jan 2009. Accessed 19 January 2009. http://www.app.com/article/20090116/SPORTS/90116078/0/SPORTS
Coates, Dennis. The American. "A Closer Look at Stadium Subsidies." 29 Apr 2008. Accessed 19 January 2009 http://www.american.com/archive/2008/april-04-08/a-closer-look-at-stadium-subsidies
Houston's Clear Thinkers. "Examining stadium subsidies." 30 Apr 2008. Accessed 19 January 2009. http://blog.kir.com/archives/2008/04/looking_at_stad.asp
The Sports Law Professor. "Public Funding of Private Sports Stadiums" 02 Nov 2008. Accessed 19 January 2009. http://thesportslawprofessor.blogspot.com/2008/10/public-funding-of-private-sports.html