Should Cities Be Ready for Some Football? Assessing the Social Benefits of Hosting an NFL Team
Carlino, Gerald A., Coulson, N. Edward, Business Review (Federal Reserve Bank of Philadelphia)
Are the large public expenditures on new stadiums a good investment for cities? Does hosting a major sports team have benefits? Although public subsidies for professional sports teams are controversial, the answer to these questions may well be yes. In this article, Jerry Carlino and Ed Coulson report the results of their 2003 study: When quality-of-life benefits are included in the calculation, building new stadiums and hosting an NFL franchise may indeed be a good deal for cities and their residents.
Rapid population growth in many metropolitan areas in the United States has made them economically viable locations for professional sports franchises such as those of Major League Baseball (MLB) or the National Football League (NFL). But since all four of the major sports leagues tightly control both the creation of new franchises and the relocation of teams, cities' demand for teams far exceeds the supply. (1)
As a result, the price cities have to pay to get teams has gone up. Cities have offered favorable stadium deals in their efforts to retain or attract teams. Partly as a result of this fierce competition for teams, "America is in the midst of a sports stadium construction boom," as noted by Roger Noll and Andrew Zimbalist. Professional sports teams are demanding--and receiving--subsidies from local governments for the construction or restoration of sports stadiums. According to Raymond Keating, the total cost of 29 sports facilities that opened between 1999 and 2003 is expected to be around $9 billion. Keating found that taxpayers' money financed around $5.7 billion, or 64 percent, of this $9 billion.
The boom in stadium construction coupled with the increased public support for these facilities raises the question: "Are subsidies to sports teams a good investment for cities?" The answer has been controversial.
Often, subsidies are justified by claims that attracting or retaining sports teams more than pays for itself in increased local tax revenue by creating new jobs and more spending. More recently, local officials have come to view a downtown stadium project as an important part of the revitalization of the central city's urban core. Advocates of this approach point to Jacobs Field in Cleveland, Coors Field in Denver, and Camden Yards in Baltimore as models of how stadium-based development can work. However, independent studies by economists often indicate that taxpayers may not be getting such a good deal. Most studies that have attempted to quantify the creation of jobs, income, and tax revenue have found that the direct monetary impact fell by a city hosting a sports team is less than the sizable outlay of public funds. Yet civic leaders continue to make the case for professional sports and the beneficial role they play in the community.
Recently, economists have pointed out that previous studies missed a basic point: Professional sports teams add to residents' quality of life in cities that host teams. It's possible that people obtain benefits from having a local sports team even if they never go to a game. They root for the local athletes, look forward to reading about their success or failure in the newspaper, and share in the citywide joy when the home team wins a championship.
Economists have long studied the effects of an area's quality of life on wages and the cost of housing. Past studies have found that people are willing to pay indirectly for local amenities, such as good weather, scenic views, and nearness to the ocean, in the form of higher rents and lower wages. Similarly, if people benefit from having a professional sports franchise in their community, they are presumably willing to pay for it--if not directly through the purchase of tickets, then indirectly through an increased willingness both to pay more for housing in the area and to accept lower wages.
We did a study in 2003 in which we looked at the quality-of-life benefits residents receive in cities that host an NFL team. …