The Nation: Stop The Subsidy-Sucking Sports Stadiums

Aug 5, 2011

Neil deMause, a journalist based in Brooklyn, New York, is a contributing editor to City Limits, a senior editor for Baseball Prospectus and the ­co-author, with Joanna Cagan, of Field of Schemes.

On a busy streetcorner in downtown Brooklyn, the steel girders are starting to rise. After a decade of protests by residents (including local celebrities like Steve Buscemi, Jennifer Egan and Jonathan Lethem) and innumerable lawsuits, developer Bruce Ratner's vision of a new arena to bring the New Jersey Nets basketball team to Brooklyn — with the aid of about $500 million in city and state subsidies — is taking root, with a scheduled opening in September 2012.

Yet Atlantic Yards, as Ratner has dubbed his twenty-two-acre development project on the edge of the bustling neighborhood of Prospect Heights, won't look much like the image he first unveiled in 2003. The "Miss Brooklyn" office tower, which was supposed to bring jobs to the community, is gone, a victim of the virtual collapse of New York's commercial real estate market. Meanwhile, the condo towers that were supposed to provide more than 2,250 units of affordable housing are unlikely to be built anytime soon, if at all. (The latest plan involves a "modular" building, akin to stacking shipping containers thirty-four stories high.) The Nets, meanwhile, are spending two seasons playing in Newark's Prudential Center, another heavily subsidized building ($200 million fronted by taxpayers) that was supposed to revitalize its surrounding neighborhood but that still rests among the same discount stores and fast-food joints that lined Market Street before the arena opened in 2007.

It's a story that could have been told in almost any American city over the past two decades. Owners of teams in the "big four" sports leagues — the NFL, MLB, NBA and NHL — have reaped nearly $20 billion in taxpayer subsidies for new homes since 1990. And for just as long, fans, urban planners and economists have argued that building facilities for private sports teams is a massive waste of public money. As University of Chicago economist Allen Sanderson memorably put it, "If you want to inject money into the local economy, it would be better to drop it from a helicopter than invest it in a new ballpark."

Studies demonstrating pro sports stadiums' slight economic impact go back to 1984, the year Lake Forest College economist Robert Baade examined thirty cities that had recently constructed new facilities. His finding: in twenty-seven of them, there had been no measurable economic impact; in the other three, economic activity appeared to have decreased. Dozens of economists have replicated Baade's findings, and revealed similar results for what the sports industry calls "mega-events": Olympics, Super Bowls, NCAA tournaments and the like. (In one study of six Super Bowls, University of South Florida economist Phil Porter found "no measurable impact on spending," which he attributed to the "crowding out" effect of nonfootball tourists steering clear of town during game week.)

Meanwhile, numerous cities are littered with "downtown catalysts" that have failed to catalyze, from the St. Louis "Ballpark Village," which was left a muddy vacant lot for years after the neighboring ballpark opened, to the Newark hockey arena sited in the midst of a wasteland of half-shuttered stores.

"Public subsidies for stadiums are a great deal for team owners, league executives, developers, bond attorneys, construction firms, politicians and everyone in the stadium food chain, but a really terrible deal for everyone else," concludes Frank Rashid, a lifelong Detroit Tigers fan and college English professor. Rashid co-founded the Tiger Stadium Fan Club in 1987, and for the next twelve years he fought an unsuccessful battle against Michigan's plans to spend $145 million in public funds to replace that historic ballpark. "The case is so clear against this being a top priority for cities to be doing with their resources, I would have thought that wisdom would have prevailed by now."

Yet the amount of public money being spent on sports facilities continues to rise. According to Harvard urban planner Judith Grant Long, cities, states and counties spent a record $6.5 billion on stadiums and arenas in the 1990s, then shattered that mark the following decade with an additional $10.1 billion — a 31 percent increase after accounting for inflation. And that's not counting hidden subsidies like lease breaks, property tax exemptions and the use of tax-exempt government bonds, which Long estimates have added at least another 10 percent to the public's tab.

Why do new sports facilities have such a hold on local elected officials? The simplest explanation is fear: because team owners can choose new cities but cities can't choose new teams — thanks to the leagues' government-sanctioned monopolies over franchise placement — mayors feel they must offer owners anything they want. "Politicians continue to believe that it would be political disaster to lose a team on their watch," Baade says.

Actually losing a team, though, is extremely rare. Most team owners prefer to keep plugging for new stadiums in their hometowns even after their bluff has been called. Florida Marlins president David Samson first declared in 2004 that a new stadium bill "has to happen in the next week. And if not, we'll move on." He repeated similar threats for four years, until the city of Miami and Miami-Dade County finally agreed to kick in more than $478 million for a new stadium with a retractable roof.

Similarly, after successfully using relocation threats to get the city of Pittsburgh to help fund a new hockey arena, Penguins owner and NHL legend Mario Lemieux admitted, "Our goal was to remain here in Pittsburgh all the way. Those trips to Kansas City and Vegas and other cities was just to go, and have a nice dinner and come back.... That was just a way for us to put more pressure, and we knew it would work at the end of the day." (It's also worth noting that even in those few cities where teams have moved, no local elected official has yet been voted out of office as a result. A Wisconsin state senator who cast the deciding vote for a new Brewers stadium in 1995 did, however, become his state's first legislator to be recalled by voters.)

There are other theories that explain local officials' enduring love for sports facilities. The "edifice complex" predisposes them to build big, shiny structures — which can display a plaque bearing your name more easily than, say, reduced kindergarten class sizes. Then there are the perks that accrue to those who befriend team owners, like getting to throw the first pitch or entertain donors in your own luxury box.

For politicians eager to embrace sports deals, it's easy to find consulting firms willing to produce glowing "economic impact studies" — even though sports economists nearly unanimously dismiss them as hogwash. For example: Economic Research Associates told the city of Arlington, Texas, that spending $325 million on a new stadium for billionaire oil baron Jerry Jones's Dallas Cowboys would generate $238 million a year in economic activity. Critics immediately pointed out that this merely totaled up all spending that would take place in and around the stadium. Hidden deep in the report was the more meaningful estimate that Arlington would see just $1.8 million a year in new tax revenues while spending $20 million a year on stadium subsidies.

Jeanette Mott Oxford, who was an antisubsidy activist before being elected a Missouri state representative, says it's easy for her colleagues to be distracted with flashy claims. "Unfortunately, it doesn't appear that elected officials are much into evidence-based decision-making," she explains. "Folks believe the threat that jobs will be lost, that somehow the team will move. Then there's the civic pride element around the status of having a team. I think that too often, those motivate people no matter what the evidence says."

Outright manipulation also plays a role. As Kevin Delaney and Rick Eckstein discovered while researching their book Public Dollars, Private Stadiums, cities were far more likely to approve subsidy deals if they had strong "growth coalitions" of local political and business leaders spearheading campaigns on the owners' behalf. Explains Delaney, "That can then keep the team owner more in the background, so they're not getting so smacked with the idea that this is some kind of corporate welfare."

Business leaders have also been known to donate to local political campaigns, of course. Yet even stadium critics in local government say that the sway provided by corporate pressure is not simply a matter of buying votes. For my book Field of Schemes, I asked Minnesota State Senator John Marty about how the Twins ownership had persuaded the state legislature to approve about $387 million in public stadium funds after more than ten years of repeated rejections. "One of the lobbying efforts that's very effective is, 'The only way this issue will ever go away is if we pass it,'" explained Marty. But more than that, he noted, the ubiquitous presence of lobbyists helped legislators dismiss polls that consistently showed two-thirds of Minnesotans opposed stadium subsidies. "Because of lobbying, most legislators don't believe that: 'This may be true statewide, but not in my district.'" The main impact of the lobbying, insisted Marty, was less to change minds than to provide political cover. "It warps our perspective of what's going on in the world," he said.

Even where elected officials have gotten smarter about rejecting subsidies, the sports industry is increasingly outmaneuvering them. Twenty years ago, most sports subsidies came in the form of straight cash giveaways for construction costs. Today, they are more likely to arrive via tax breaks, free land, government-subsidized tax-free loans, or discounts to offset operating and maintenance costs. When Long looked at these hidden subsidies, she found that they added an average of 40 percent to sports facilities' public sticker price. The most notable examples are the new stadiums for the Yankees and Mets, which opened in New York City in 2009. The team owners promised to pay all $1.7 billion in construction costs — but it was later revealed that they were collecting a combined $1.8 billion in lease and tax breaks against the outlays.

Jim Nagourney, who spent three decades negotiating stadium deals on behalf of government agencies and team owners, describes how he helped snooker city officials as a consultant to the Los Angeles Rams, who were then negotiating a move to a new stadium in St. Louis. "We had a whiteboard, and we're putting stuff down" to demand in a stadium lease, he recalls. "I said, 'Guys, some of this is crazy.' And John Shaw, who was president of the Rams at the time — brilliant, brilliant guy — said, 'They can always say no. Let's ask for it.'" The result, which Nagourney calls "probably the most scandalous deal in the country," included a clause requiring the new stadium to remain "state-of-the-art," or else the team could break its lease and leave. "The city was poorly represented — the city is always poorly represented.... We put in all of these ridiculous things, and the city didn't have the sense to say no to any of them."

The reason this dynamic recurs is simple, Nagourney says: cities rely on in-house legal teams to negotiate stadium deals. "A city attorney is not going to know where the money really is. They're not going to understand advertising, they're not going to understand concessions — just a whole range of issues that the team officials intimately understand. They know where the dollars are, and the municipal attorneys do not."

Despite recession-strapped state budgets and the fact that most teams occupy homes that are less than twenty years old, there appears to be no end in sight to the stadium-subsidy game. Teams that have recently received new stadiums have begun to go around to the back of the line for still newer ones. Latest on the list are the Atlanta Falcons (housed in the Georgia Dome, built in 1992 for $214 million in state money) and the St. Louis Rams (in the Edward Jones Dome, opened in 1995 for $280 million). The Rams are threatening to use Shaw's "state-of-the-art" clause to move if they don't get their way.

For Baade, the only answer is for local elected officials to start standing up and saying no to all demands for sports subsidies. "I think cities need to band together and say, Look, we've got some countervailing power, we're simply not going to compete with one another for a professional sports presence." (A bill briefly proposed by US Representative David Minge in the late 1990s would have forced localities to end the "economic war among the states," as a Minneapolis Federal Reserve vice president called it, by slapping an excise tax on any subsidies designed to benefit individual corporations; the legislation died without a whimper.) "If they do that, then pro sports leagues that hold the ultimate negotiating card — 'We're going to leave if you don't give us what we want' — will have no place to go."

But, he admits, "I think that's a long way off."

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