Lawmakers in Salt Lake City recently approved giving the city’s NBA team, the Utah Jazz, $22.7 million in tax revenue collected from businesses in the basketball arena’s zoning district. The subsidy will be doled out over the next 25 years.
The “reimbursement,” as lawmakers on the Redevelopment Agency of Salt Lake City termed the gift, is expected to be used to help pay for the planned construction and renovation of the Vivint Arena, where the Jazz play ball.
Elected officials often justify using taxpayer money to pay for the construction or renovation of sports stadiums. They argue it’s an investment leading to local economic growth, which effectively makes everyone a winner. Instead, this kind of corporate welfare is really a losing proposition for the very people elected officials claim to be helping: the taxpayers.
Using data from the U.S. Census Bureau, University of Maryland-Baltimore County economics professors Dennis Coates and Brad Humphreys discovered sports stadiums may actually depress the local entertainment industry and the local economy as a whole, as consumers divert their entertainment spending toward the new home team and away from other diversions.
“The presence of pro sports teams in the 37 metropolitan areas in our sample had no measurable positive impact on the overall growth rate of real per-capita income in those areas,” Coates and Humphreys wrote. “The presence of pro sports teams had a statistically significant negative impact on the retail and services sectors of the local economy. The average effect on employment in the services sector of a city’s economy was a net loss of 1,924 jobs as a result of the presence of a professional sports team.”
Sports-stadium subsidies don’t just impact workers in the entertainment industry, Coates and Humphreys found. In fact, sports-stadium welfare has a negative effect on the entire city’s taxpayers, even if they’re employed in other fields.
“The evidence suggests that attracting a professional sports franchise to a city, and building that franchise a new stadium or arena, will have no effect on the growth rate of real per-capita income and may actually reduce the level of real per-capita income in that city,” Coates and Humphreys wrote. “Moreover, specific sectors of the economy that are frequently predicted to be the big winners from stadium construction are likely to benefit very little or even be harmed by it.”
In the study, Coates and Humphreys say lawmakers are ignoring the economic data and ultimately pursuing a faith-based model of stadium-subsidy mania, which only benefits a few sports team owners — at the detriment of taxpayers.
“Yet government decision-makers and politicians continue to try to attract professional sports franchises to cities or to use public funds to construct elaborate new facilities to woo them,” Coates and Humphreys wrote. “One thing is clear from the evidence: pro sports team owners are reaping substantial benefits for their teams by touting sports as an effective tool for economic development.”
Taxpayers may receive intangible benefits, such as home-team pride, from lawmakers’ handouts to sports team owners, but the costs greatly outweigh those benefits. Taxpayers should demand lawmakers stop socializing the risk of investing in sports teams and let team owners spend private money on stadium construction, if they want to reap the stadium’s revenue.
Jesse Hathaway (email@example.com) is a research fellow with The Heartland Institute.