Due to the economic recession, some state and city governments are cutting spending on essential public services such as education and mass transit. Yet in major sports venues across the United States, tax dollars are being used to subsidize the costs of building stadiums for professional teams.
According to the Daily News, the sports stadium for America’s richest professional sports franchise, the New York Yankees, cost $1.5 billion to build. Four-hundred million dollars of the payment came from taxpayers in the form of subsidies. Another $1.5 million of New York state tax revenue was used to build the parking garages. Furthermore, city and state taxpayers will forgo up to $7.5 million annually in lost taxes due to the sale of $225 million in tax-exempt bonds, authorized in October 2007, by the New York City Industrial Development Agency to finance construction and renovation of the parking garages.
In nearby New Jersey, taxpayers are paying $330 million in subsidies for the construction of the new Giants-Jets stadium. Across the country in Texas, billionaire owner Jerry Jones of the Dallas Cowboys decided to replace Texas Stadium with a new stadium, which cost $1.15 billion to construct. To help fund this, the city of Arlington approved an increase of the city’s sales tax by 0.5 percent, the hotel occupancy tax by 2 percent and the car rental tax by 5 percent.
Some officials question whether subsidizing stadiums for private gain is consistent with the goal of aiding ‘public” infrastructure projects. New York State Assemblyman Richard Brodsky (D-Westchester) protested, arguing, ‘Why are we funding stadiums when we can’t fund the MTA and we’re cutting back on city hospitals?” Officials such as NYC Mayor Michael Bloomberg and other proponents of funding stadiums counter that stadiums significantly contribute to the vitality of the local economy.
Analysis of this debate was undertaken by Dennis Coates, professor of economics at the University of Maryland. The research determined the consequences of stadium construction and franchise relocations and incorporated yearly observations on personal income, employment and wages.
Supporters argue that stadiums sometimes host public events at which admission costs are little or nothing, and thus may be worthy of community-wide support. Nearby businesses such as bars and restaurants will also be boosted by increased stadium attendance. Furthermore, jobs in construction and dependent businesses would be created by subsidizing stadiums.
But Coates’ analysis shows it is clear that not all citizens in a community benefit from subsidizing a stadium. The money spent largely translates into salaries for wealthy athletes, many of whom live outside the city where they play. High-income individuals generally spend a smaller fraction of their income than low- and middle-income people. Much of the spending by professional athletes occurs in a different community than where they earned it. As a result, the money spent to finance the stadium does not circulate as widely or abundantly as it would if it were paid to people with less wealth and more attachment to the city.
An important aspect to consider in this issue is the opportunity cost. In other words, what could the tax dollars used to subsidize the stadiums be used for instead? The funding for stadiums does not come directly out of an existing government budget but rather from a new source of revenue, like special taxes on tickets or add-ons to the local sales tax. These additional taxes reduce the disposable income of local citizens taking away money they could spend elsewhere.
Another opportunity cost is that such taxes could alternatively be used to fund services that will benefit the public, such as health care, disability support, education and mass transit. Critics often decry a public health care option as ‘socialism.” Yet, why are professional sport teams, which are private businesses, benefitting from public tax dollars when some average citizens can barely afford the price of a ticket? This is socialism to benefit the already wealthy. Moreover, it is not impossible for teams to finance their own stadiums. In Washington, Miami, Charlotte and San Francisco, owners have built state-of-the-art stadiums with their own money.
Although there may be benefits in subsidizing professional sports venues, the money should be used where the benefit is greatest, namely public services. State and local governments should keep this in mind before pledging millions of dollars to fund the next new stadium project.
Khan is a member of
the class of 2012.