How The NFL Is Scamming Taxpayers Out Of Hundreds Of Millions Of Dollars
The disconnect between the economic impact of a new stadium and what taxpayers ultimately pay to build them.
|Joseph Pompliano||Jul 27|| 9|
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In order to foster a continuous supply of new NFL stadiums, the NFL has been using the same trick for decades. Build a new stadium and you’ll host a Super Bowl, ultimately bringing hundreds of millions of dollars in revenue to your city. But what if the economic benefit is overstated and the public is simply assisting wealthy team owners in funding stadium projects that will never realize their true value? Let’s take a look into why the trickle down effect of multi-billion dollar stadiums may be intentionally overstated.
How Much Do Stadiums Cost?
First, we must understand how much a new state-of-the-art stadium costs to build. Here is a list of the top 5 most expensive stadiums in the world, four of which are NFL stadiums (Source).
SoFi Stadium (LA Rams/Chargers) - $4.9 billion
Allegiant Stadium (LV Raiders/UNLV) - $1.9 billion
MetLife Stadium (NY Giants/Jets) - $1.7 billion
Mercedes-Benz Stadium (Atlanta Falcons/United) - $1.5 billion
Yankee Stadium (NY Yankees/FC) - $1.5 billion
For the purpose of this article, let’s see how the list looks when we rank by most taxpayer funds used. Given taxpayers often make continuous contributions for upgrades, this list only includes the original cost to build (Source).
Las Vegas Stadium: $1.9 Billion ($700 Million From Taxpayers)
Nationals Park: $693 Million ($693 Million From Taxpayers)
Yankee Stadium - $2.3 Billion ($600 Million From Taxpayers)
U.S. Bank Stadium $1.1 Billion ($498 Million From Taxpayers)
Marlins Park: $634 Million ($488 Million From Taxpayers)
The Sales Pitch
State and local governments contribute taxpayer funds to the building of a new stadium for one simple purpose - The idea that all the visitors coming to spend money at and around sports events will produce enough economic activity to pay for the stadium. For perspective on the popularity of this concept, currently 28 out of the 32 NFL teams used public funding to build their current stadium.
Among a variety of less meaningful pleas, there are typically two reasons why state and local governments comply.
The idea that thousands of jobs including construction, concessions, parking, etc. will be created when building the new stadium, which in turn provides financial gain for the local residents.
That spending on ticket sales, hotels, parking, restaurants, and other tourism activities will flow down creating a boom within the local economy.
Ultimately, a teams greatest negotiation tactic is the threat of moving the franchise. Occasionally we’ll see teams like the Rams, Chargers, and Raiders move cities when their local governments don’t support new stadiums being built.
An Alternate Reality
From an economic perspective, the argument for a publicly funded stadium falls apart when you consider two key elements:
Economic impact is different than tax revenue
The budget constraints of potential visitors
It’s likely true that a new stadium can produce enough in economic activity to cover the cost of public financing. However, the increase in sales at local businesses doesn’t necessarily matter, what matters is that the taxes collected from all that activity is equal to or greater than the stadium cost. For example, someone visiting for the super bowl may spend $3,000 in expenses (tickets, hotel, food, etc.) but in reality that only equates to ~$300 of tax revenue, which might be used to cover public expenses for the event (security, traffic control, etc.).
When it comes to budget constraints of potential visitors, stadium boosters tend to forget the fiscal budget most families have. Attending an NFL game typically means that I am spending less elsewhere, whether that is one less family dinner or a night out at the movies. The key point being that other local businesses are going to lose a roughly equal amount in spending that I would have done with them instead. Both activities generate a similar amount in tax revenue, but the spending at sporting events isn’t necessarily “new” revenue.
In reality, there are only two ways that state and local governments can increase tax revenue to fund stadiums: increase purchases in activities with higher tax rates (hotels & rental cars) or increase the amount of out-of-town visitors. A Super Bowl helps, but even those revenue estimates are grossly overstated due to displaced tourism and loss of productivity.
What Does The Data Say?
According to a 2016 study analyzing the impact of municipal bonds and the public funding of stadiums, the experts agree the local economic impact of a publicly funded stadium is “weak” (Source):
“The evidence for large spillover gains from stadiums to the local economy is weak. Academic studies consistently find no discernible positive relationship between sports facility construction and local economic development, income growth, or job creation.”
And when it comes to family budgets?
“Given that most consumers have a relatively inflexible leisure budget, any economic activity generated while attending a game will largely if not entirely be offset by reduced spending on other local leisure activities.”
So the question remains - If the privately owned teams earn the stadiums revenue, why are they built with public money? Because as long as there are more cities that want football teams than there are franchises, state and local governments will continue to pay the bills (Source).
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Rather watch than read? This clip by Vox breaks down the concept in 4 minutes (Source).
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