Public vs. Private Spending for Sports Facilities - the Case of Germany 2006

By Rebeggiani, Luca | Public Finance and Management, July 1, 2006 | Go to article overview

Public vs. Private Spending for Sports Facilities - the Case of Germany 2006


Rebeggiani, Luca, Public Finance and Management


Abstract

After a long period of stagnation, many sport stadiums have been built or renovated across Germany during the last years. This boom was induced by the successful application for the FIFA Soccer World Championship 2006 and was commonly regarded as necessary, given the obsolete facilities of German soccer clubs. While in the past stadiums in Germany were wholly financed by public subsidies, current financial difficulties of the German government and especially of the municipalities, joint with changes of the legal form of German soccer clubs, make it necessary and possible to search for alternative financing forms. This paper reviews private and public financing models for sports facilities and provides a detailed analysis of the effective financing of the venues for the FIFA World Championship 2006.

Introduction

In June the 9th 2006, the futuristic Allianz-Arena in Munich will host the opening game of the 18th FIFA Soccer World Championship (hence WC). Five years have passed since Germany was designated as hosting country. The infrastructure is almost completed. About 3.2 million spectators are expected to attend the games and the German population seems to be quite confident and considers the holding of the WC in a throughout positive way (Voeth et al. 2002).

The Organizing Committee around the German soccer idol Franz Beckenbauer was assigned a difficult job when it started running for the World Championship in 1993. While in the U.S. 80% of sport facilities have been renewed since 1987 (Baade, 2003), and, more generally, stadiums are often subject to thorough renovation, Germany's sports facilities have experienced a long period of disregard during the past 30 years. A radical modernization of the whole sports infrastructure was inevitable. This soon alarmed academics both in sports economics and public finance, worried about an additional burden that was likely to be put on public shoulders.

The state of the German public finance is indeed alarming: The aggregate public debt rose from 62,927 Mill. EUR in 1970 to 1.451 Bill. EUR (66.4% of GDP) in 2004. In 2005, Germany has failed to meet the Maastricht debt criteria for the fourth year in a row. Even more worrying then the federal is the debt burden of the federal states (Länder) and the cities (Kommunen), which are often mainly involved in financing sports facilities. Therefore, the question whether the new facilities should be financed by the government or by private investors soon emerged and has been widely discussed in literature (see for the U.S. e.g. Baade, 2003; Coates & Humphreys 1999, 2003; Noll & Zimbalist, 1997; Siegfried & Zimbalist, 2000, 2002; Long, 2005; for Germany see Dietl & Pauli, 2002a, 2002b; Napp & Vornholz, 2002, among others).

Noteworthy is the fact that public reactions and the political debate have been much more relaxed. As described below, local governments engaged in a true competition in order to be elected as a venue of the WC 2006, despite all financial problems of the municipalities. Furthermore, a public debate about money wasting for the WC 2006 did not occur at all,1 especially in the mass media. This does not reflect the usual situation in German public and political debate, where public money wasting has become one of the most disputed issues. Panke and Rebeggiani (2004) report a case in which, almost contemporaneously, a regional government cut culture funding dramatically and supported a WC venue generously, without provoking a significant resistance in public opinion. We interpret this as a clear sign of the political and social importance of soccer in Europe, which remains by far the most popular sport. Supporting soccer constitutes, therefore, a quite safe investment for politicians who aim to increase their popularity.

The common result in the literature mentioned above is that public funding of professional sports facilities can hardly be justified economically, least of all under bad public finance conditions. …

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