Stadiums and Arenas: Economic Development or Economic Redistribution?
Coates, Dennis, Contemporary Economic Policy
This article explores the literature on the impact of professional sports teams and stadiums on their host communities. A large body of research has addressed these issues, some of it academic and much of it for hire by team and sport boosters. The broad conclusion of this literature is that stadiums and franchises are ineffective means to creating local economic development, whether that is measured as income or job growth. There may be substantial public benefits from stadiums and franchises, but those too are insufficient to warrant large-scale subsidies by themselves. In combination with consumer surpluses from attendance, however, subsidies may be efficient. (JEL R58, J30, H71, L83)
In the past 20 yr, stadium and arena construction has occurred at an incredible pace. Cities that had one stadium for both baseball and football suddenly needed stadiums dedicated to each individual sport. Cities without professional sports franchises believed that the way to attain a franchise, either through movement of an existing team or through expansion, was to build a state-of-the-art facility. Teams used the existence of willing suitors to pressure their home towns for bigger, better, and more modern facilities for sweetheart deals on the use of the facilities and, even to a share, sometimes 100% shares, of the revenues generated by the publicly owned facilities.
All this stadium-related activity attracted the interest of academic and nonacademic public policy analysts. Millions of dollars of public spending on stadiums for professional sports franchises, while streets needed repair and schools and other vital public services were facing cuts, made subsidies for stadiums even more attractive an issue to researchers from economics, public policy, sociology, political science, and sport management. The nature of the research was and is as varied as the background and training of the individuals conducting it.
I focus on the research on the public sector side of construction of stadiums and arenas. (1) I restrict attention to two general issues in the literature. First, I review the literature on the relationship between construction and operation of the facilities and economic outcomes in the host community. (2) Second, I review the research into the politics of stadium and arena subsidies. Researchers have studied the referendums on subsidies, wherein the voters get a chance to express their support for or opposition to the public subsidies, and the process by which stadium construction gets onto the public agenda. Besides the general effects on the economy, new stadium construction is also justified as necessary to attract mega-events such as the Super Bowl or All-Star games. An active literature focuses on these events but is neglected here due to space limitations.
The next four sections focus on separate aspects of the public sector issues. In order, I discuss the size of the stadium and arena subsidies, the relationship between facilities and economic outcomes, the politics and campaigning surrounding facility construction, and the future of this literature. Finally, a concluding section recaps the issues.
A discussion of stadium and arena issues must address the cost of these facilities and the extent to which public money is used to finance them. It is also important to understand how the characteristics and the prospective uses of the stadiums have changed over time. Perhaps, the first published work to provide this information is from 1926 in a journal called The Playground. The article notes that "Not only universities but cities and high schools and private agencies are also joining the stadium ranks and building large structures to accommodate the crowds who attend the athletic activities, festivals, pageants and other large community events." A building boom was in progress at the time as the number of stadiums rose from. …