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,
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
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. 11 in 1917 to 70 in 1926.
By contrast, Long (2005) referred to 65 "new" facilities
(stadiums and arenas) opened since 1990. In the 5 yr from 1921 until
1926, 56 stadiums had been built. Construction of the 70 stadiums built
between 1917 and 1926 cost in total about $295.65 million in
today's dollars or just $11 million more than the average cost of
development of one of the 17 Major League Baseball stadiums opened since
1990 (Long, 2005).
Besides cost, The Playground article refers to shape and size as
the most important characteristics of stadiums that communities should
consider before construction. Shape mattered because the traditional
ellipse made it difficult to hold track events that require a
straightaway; the horseshoe structure did not have this problem.
Planners were admonished to be sure that the facility had seating enough
for the current attendees and could be expanded as the city grew or when
"the university has graduated more enthusiastic alumni to add to
those already crowding the bleachers for the big games." Two
additional concerns listed in 1926 are adaptability of the structure and
its management. Adaptability was important "in order that the
stadium may have as broad a use as possible." Obviously, the modern
focus on sport-specific stadiums places far less value on stadium
adaptability than did The Playground.
Concerning management of facilities, Wulz (1957) argued that public
ownership of stadiums was justified if "private enterprise could
not provide the service which the public demanded and at the same time
realize an adequate profit upon its investment." He also argued
that the facilities often house events of a "civic nature and thus
may be worthy of community-wide support," but city managers may
have been tasked with operating at a profit enterprises "which lost
money or indeed went bankrupt under private management." Therefore,
Wulz focused on what the municipality should charge the private entities
that use the stadium and whether, after an analysis of the functions the
facility will serve, "a tax subsidy is warranted." He foresaw
public subsidies for "governmental activities and perhaps
activities at which no admission is charged, ... while at the same time
insisting that commercial type activities pay the full cost of the
services or facilities which are provided." Wulz did not suggest
subsidization for profit enterprises as is a common practice today.
Unfortunately, he does not provide information on actual subsidies prior
Okner (1974) provided the first of the modern discussions of
stadium costs and subsidies. Quirk and Fort (1992) and Keating (1999)
updated the subsidy estimates, and Fort (2006) reviewed this literature.
(3) The most recent and comprehensive studies of stadium and arena
subsidies are by Long (2005) and Zimbalist and Long (2006).
Long (2002) collected data on all aspects of public subsidies for
stadiums and arenas, with a particular focus on the period since 1990.
This recent period let her include information on operating subsidies
for the facilities still in use. This is important because stadiums and
arenas may be subsidized both at the construction phase and during
operations once the facility is completed. Emphasis on the public share
of capital costs produces misleading results regarding the extent of the
subsidy if operations are also subsidized. Zimbalist and Long (2006)
showed the importance of operational subsidies because generally
"when net operating costs are included, the public share goes
Interestingly, they also found that a two-decade long decline in
the public share of stadium and arena capital costs stopped about the
year 2000. After 2000, the public sector share stagnates at about 58% or
rises slightly to 63%. The average public contribution to the total
cost, capital and operating, is $158--$164 million in 1990-1994,
$149-$161 million in 1995-1999, and $249-$280 million in 2000-2006. They
documented that the extent of the public participation varies between
stadiums and arenas and suggested that the public share is highly
sensitive to the bargaining skills and efforts of the public officials
III. PUBLIC ECONOMIC IMPACTS
The most basic question in the research about stadiums, arenas, and
sports franchises is the extent to which these contribute to the
vitality of the local economy. The literature on this issue is of two
basic types: the ex ante economic impact study and the ex post
econometric analysis. The economic impact studies invariably suggest
that there are large benefits from stadium and arena construction. The
consensus of the ex post studies is that there is little convincing
evidence for large income and job creation benefits attributed to
stadiums; rather the evidence largely points to there being none of
those benefits. Crompton (1995) and Hudson (2001) reviewed the pitfalls
in impact studies.
Econometric research relating professional sports and stadiums to
local incomes and employment has taken several forms (see, e.g, Baade,
1996; Baade and Dye, 1988, 1990; Baade and Sanderson, 1997; Coates and
Humphreys, 1999, 2001, 2003; Noll and Zimbalist, 1997; Rosentraub, 1997;
Rosentraub et al., 1994). siegfried and Zimbalist (2000), Rappaport and
Wilkerson (2001), and Fort (2006) have all recently surveyed the
literature on sports' effects on the local economy, including many
of the works just listed.
There are some researchers who contend that the consensus from this
literature is wrong. Recently constructed stadiums are integrated into
the downtown and are explicitly used to anchor downtown redevelopment,
while the earlier stadiums that dominate the data in existing research
were built in the suburbs and were frequently surrounded by acres of
parking lots. Because of the difference in the context of the two types
of stadiums, the impacts on local development will also be different.
Moreover, given the high degree of aggregation in the data used in many
studies, the positive but possibly small effects of sports and stadiums
will be swamped.
I discuss both these criticisms of the consensus literature, with a
focus on recent research. Despite the resurgence in the view that
stadiums are good economic development tools and criticisms of the
methodology used to find the opposite, I contend that the issue is
really settled on the consensus that they are not. This does not mean,
however, that stadium and arena subsidies cannot be justified based on
their actual benefits, measurements of which I discuss to close out this
A. Job and Income Creation
Empirical research relating professional sports and stadiums to
local incomes and employment has taken several forms (see, e.g, Baade,
1996; Baade and Dye, 1988, 1990; Baade and Sanderson, 1997; Coates and
Humphreys, 1999, 2001, 2003; Noll and Zimbalist, 1997; Rosentraub, 1997;
Rosentraub et al., 1994). Siegfried and Zimbalist (2000), Rappaport and
Wilkerson (2001), and Fort (2006) have all recently surveyed the
literature on sports' effects on the local economy. The consensus
of this literature is that professional sports and stadiums do not cause
income or employment to grow.
Some proponents of stadium- and sports-led development programs
have suggested that downtown stadiums are likely to have larger benefits
than suburban stadiums. For example, Chema (1996) said that the value of
stadiums "as catalysts for economic development ... depends upon
where they are located and how they are integrated into a metropolitan
area's growth strategy." Nelson (2001, 2002) found that teams
that play in the central business district tend to be associated with an
increase in the metropolitan area's share of the regional income.
Wassmer (2001) pointed out that Nelson's results may only reflect
the positive association between a healthy central business district and
a healthy metropolitan area. An additional weakness in Nelson's
findings is that raising the share of regional income that goes to the
metropolitan area could be evidence of redistribution of income or
economic activity from one area to another rather than evidence of
region-wide benefits from having a sports franchise or new stadium.
Wassmer (2001) recognized this re-distributive interpretation of the
results of Nelson (2001) but suggested that such findings "may
alleviate some of the reverse Robin Hood results of the stadia
subsidy." In other words, income transfers from the suburbs to the
central city may offset the redistribution to wealthy suburbanites who
attend games from the poor city-dwelling taxpayers who do not.
Santo (2005) and Austrian and Rosentraub (2002) suggested that the
emphasis on the impact of stadiums and arenas on general economic
well-being should be replaced by focus on whether they foster the
redevelopment of a specific area of the city. (4) Downtown, for example,
is deserving of help even if it comes at the expense of the rest of the
metropolitan area. Of course, this argument is normative. The
implication is that the studies that find no metropolitan-wide increase
in income or jobs are beside the point.
Santo (2005) investigated the effects of downtown stadiums,
following the methodology of Baade and Dye (1990) but restricting his
focus to "the new generation of sports facilities [that] would have
more favorable economic impacts than their predecessors." He
suggested that a "retro-style ballpark in a downtown or retail
setting is likely to attract visitors from a wider area than its more
utilitarian suburban counterpart, and is likely to induce longer stays
and greater ancillary spending." While he found positive and
statistically significant coefficients on the stadium variables in
regressions explaining the city's income as a share of the regional
income, the results are difficult to interpret and of questionable
practical significance. For example, Santo reported that
Baltimore's M and T Bank Stadium, which opened in 1998, accounted
for an increase in aggregate income of more than $3 million. That is
clearly an impressive sounding boost to income. What he does not report
is that personal income in the city of Baltimore that year was, in
current dollars, more than $15 billion. (5) The statistically
significant boost to Baltimore's income then amounts to about
0.02%. At the same time, Camden Yard's baseball stadium, often held
up as an example of what a downtown "retro" stadium can do for
a city, has an estimated impact of about--$4.8 million. Santo did not
mention this odd result.
The upshot of the focus on new stadiums built where they can make a
difference for urban redevelopment, in the central city or downtown, is
that the evidence on these effects is not conclusive. Moreover, even if
the evidence is that the central city benefits from a downtown stadium,
it is not necessarily the case that those benefits spill over to the
broader metropolitan area. In the most likely case, economic activity
relocates from the suburbs to downtown, redistributing income in the
process. Critics of stadium-led economic development programs have
consistently argued that a city or a metropolitan area that builds a new
stadium is simply moving income around. Now, it seems that some stadium
proponents have adopted redistribution as the goal of stadium-led
A second criticism of the existing research is that the data used
are not fine enough to capture the effects. For example, Baade, Baumann,
and Matheson (2005) pointed out that finding the effects of sporting
events in annual data is likely to be very difficult. Chema (1996);
Baade, Baumann, and Matheson (2005); and Lavoie and Rodriguez (2005) all
argued that sports is much too small a component of the economy for the
effects to be visible in aggregate data. Baade, Baumann, and Matheson
(2005) used monthly sales tax data, and Lavoie and Rodriguez (2005)
turned to monthly hotel occupancy rates in Canadian cities to focus on a
less aggregate measure of economic activity that may be linked to
sporting events. Neither study produces strong evidence for the effects
of the sporting environment on its dependent variable. However, Lavoie
and Rodriguez produced some evidence that the NHL lockout and the MLB
strike reduced hotel occupancy rates in some Canadian cities. (6) Some
of the effects are considered reasonable, others, they conclude,
"seem quite a lot."
The point of this criticism is a good one. Studies using annual
data representing entire metropolitan areas are likely to be incapable
of distinguishing the effects of a sector as small as the sports
industry. Indeed, that argument makes the point that critics of stadium-
and arena-led development want understood; professional sports and
stadiums and arenas are unlikely to be effective economic development
tools because they are tiny parts of the aggregate economy. Moreover,
one can also apply this criticism to the studies done by the critics of
aggregate data. Extended discussion of this issue is not possible here,
but consider how six to eight hockey games in a month, many of which are
weeknights, must account for a small share of the hotel room nights in a
month. Surely, sports-related hotel occupancy is likely to be a very
small share of total monthly occupancy and consequently have little or
no impact on citywide income.
Despite the lack of evidence for widespread growth in income and
employment, or even increased hotel occupancy, it still may make
economic sense for local governments to invest in stadiums, without
resorting to the redistributive, "beggar-thy-neighbor"
rationale. Stadiums, arenas, and sports franchises provide consumption
and public goods benefits to the citizens of the host community. The
issue that remains unresolved is the size of these unmeasured benefits.
B. Measuring the Benefits
Alexander, Kern, and Neill (2000) estimated consumer surplus for
each of the four major professional sports in the United States to
measure the private benefits of stadium or arena construction. (7) They
found that consumer surplus is less likely to justify stadium or arena
construction the more elastic is attendance demand and the greater is
the annual cost of financing the facility. Their estimates of private
benefits imply fairly modest values of the public benefits of stadiums
or arenas to justify public subsidies. In Seattle, for example, they
found that public benefits per household (2.6 persons) of $20.36 were
sufficient to warrant the public subsidy for the Mariners' baseball
stadium. The figure for Milwaukee was $37.35/household. On a per person
basis, these values are quite similar to the $10 reduction in per capita
income associated with an existing baseball franchise playing in a
37,000 seat stadium found by Coates and Humphreys (1999) and the
approximate cost of the Camden Yards baseball stadium per Baltimore
household of $14 estimated by Hamilton and Kahn (1997).
The literature seems to find a generally consistent rough estimate
of the necessary public benefits of baseball stadiums if those stadiums
are to merit public subsidies. The question that remains unanswered is
the size of those public benefits. Next, I review attempts to estimate
the value of the public benefits of stadiums and professional sports
Zimmerman (1997) noted that one public benefit of professional
sports is the "satisfaction people get from living in a 'big
league' town, from having another topic of conversation that is
common to most citizens, from reading about its successes and failures
in the newspaper, and the like." Because none of these benefits
passes through the market in the way that ticket demand does, they are
what Alexander, Kern, and Neill (2000) referred to as public benefits.
The value of these unmeasured benefits is important for judging whether
subsidies for sports franchises are warranted. Naturally, measuring the
value is difficult and subject to substantial uncertainty. In this
section, I discuss alternative means of measuring this value both
conceptually and practically. Before turning to that discussion, I point
out how much of what may be benefits of "world-class" city
status may be addressed in the literature on job and income creation
One of the benefits of world-class city status is that the city is
more attractive to businesses seeking to open new or expanded
operations. The theoretical argument is that businesses wish to locate
in places that potential or relocating employees will find attractive.
An important attraction of any location, the argument continues, is the
presence of major league sports. This aspect of world-class city status
is, of course, evaluated in the literature that finds little evidence
that stadiums and professional sports franchises generate large benefits
in job and income growth. Consequently, on these grounds, there is
little benefit in being a world-class city.
The second aspect of world-class city status is that the
appearances on national, and even international, television are good
advertising for the city. Whether spending tens or hundreds of millions
of dollars for stadium construction to acquire that exposure makes sense
depends on the cost of advertising time and the frequency and duration
of those views of the city. A quick look at the evidence suggests,
however, that there are more cost-effective ways of advertising the
city. For example, Gaebler Ventures, which explains the costs of
national television advertisements on its Web site
(http://www.gaebler.com/Television-Advertising-Costs.htm), reports that
the typical 30-sec national spot costs $350,000 to produce and more than
$100,000 for the airtime. Obviously, one ad can be produced and aired
dozens of times nationally for a fraction of the cost of a $200-$600
million stadium. Indeed, a city could purchase one 30-sec spot on the
broadcast of the 2006 Super Bowl at a price of $2.5 million, around
one-hundredth of the cost of a new stadium for its football or baseball
franchise. Regardless of the cost-effectiveness of stadiums as sources
of advertising, these advertising benefits are touted as a valuable
means of conveying to the nation and the world that the city has a
bright future with a vibrant business environment. Businesses are
supposed to be attracted to this city as are conventions and conferences
and tourists. Consequently, if the argument is correct, the free
advertising the stadium generates should also produce job and income
creation. Again, there is little evidence that stadiums and professional
sports enhance job and income growth.
Consider the third aspect of the world-class or "big
league" city argument. People find professional sports a valuable
amenity in a community in the same way that clean air, good public
schools, and low crime are desirable attributes of a city. Consequently,
people will pay more for housing or will accept lower wages to live and
work there. The greater demand for housing or supply of labor may be a
consequence of the "common topic of conversation," bringing
the city together, making it a community, or simply the value of reading
about the team's "successes and failures in the
newspaper." It may also be that people are willing to pay to live
in a world-class city. Whatever the exact source of the increased demand
for housing or supply of labor, all other things constant, the increase
in demand for housing raises equilibrium property values and rents,
while the increase in labor supply reduces the equilibrium wage rate.
(8) The approach to addressing the effects of these "public
goods" aspects of sports and stadiums on housing demand or labor
supply is the estimation of hedonic models of the determination of
wages, rents, or property values.
Tu (2005) and Carlino and Coulson (2004) used the hedonic
regression approach to estimate the value of stadiums and professional
sports. Tu analyzed property values, using sale prices, in the area
around FedEx Field outside Washington, DC. Accounting for the
possibility that the stadium location was determined by the low value of
property in the area, rather than the other way around, he estimated the
sales price model on data from the following three time periods: prior
to development of FedEx Field, during development, and post-development.
Tu found that the price discount on properties near the stadium was
smaller in the postdevelopment period than in the predevelopment period,
which he interpreted to mean that proximity to the stadium raises
The results of Tu are not so clear, however. He neglects the
existence of U.S. Airways Arena (opened in 1974 as the Capital Center,
with a seating capacity of almost 19,000) only about a half mile from
the site of FedEx Field. Both an NBA and an NHL franchise called U.S.
Airways Arena home until 1997, the same year that FedEx opened. (9)
Given the close proximity of the two venues, many of the houses in his
sample are similarly close to each. Accounting for proximity to both
venues may be important, and failing to do so may bias the results.
Similarly, the opening of the football stadium simultaneously with the
closing of the basketball and hockey venue confounds the effects of the
two events in the analysis by Tu, making the source of the change in
property values indeterminate.
Carlino and Coulson (2004) argued that hosting a professional
football team will affect willingness to pay for rental housing and/or
the wages of workers. Their results with respect to wages provide little
evidence one way or the other, as the variable indicating the presence
of an NFL team in the city is not statistically significant in their
wage regressions. In their rent equations, Carlino and Coulson (2004)
found that the NFL variable is positive and statistically significant
when they focus their analysis on the housing units in the central
cities of metropolitan areas, but the results get weaker as they analyze
broader geographical areas. For the central city, their estimate is that
rents are higher by about 8%/yr because of the presence of a National
Football League team. That number seems implausible, however, as it
indicates that the presence of a football team has the same impact on
rent as does having a garage. The 8% boost to rent from the NFL
franchise is just enough to counteract the reduction in the rent from
having holes in the floors.
Coates, Humphreys, and Zimbalist (2006) argued that the results of
Carlino and Coulson (2004) are unreliable. They showed that inclusion of
a large number of low rent and low rent growth units that are omitted
from the analysis by Carlino and Coulson reduces the size of the
coefficient on the NFL variable and makes that coefficient statistically
insignificant. Carlino and Coulson (2006) criticized the methods of
Coates, Humphreys, and Zimbalist and resurrect their results. Obviously,
hedonic models have not yet produced a consensus on the public benefits
of stadiums and franchises.
Dehring, Depken, and Ward (2007) cleverly took advantage of a
series of public announcements regarding locations for a new stadium to
host the Dallas Cowboys to estimate the public benefits of stadium
proximity. (10) After the first announcement, which suggested that a new
stadium would be built in downtown Dallas' Fair Park area, property
values near the proposed site rose, but property values elsewhere in
Dallas county fell. A subsequent announcement that removed that first
site from consideration had the opposite effect. Announcements about a
proposed stadium site in Arlington, Texas, did not individually
statistically significantly affect property values there. However, taken
together, the three announcements raised the level of certainty about
the selection of the Arlington site and are linked to a statistically
significant reduction in average sale price of 1.3%-1.5%.
The important lesson of the study of Dehring, Depken, and Ward is
that the amenity, or public benefits, value of the stadium is likely to
roughly offset the added costs of paying for the stadium. In other
words, while the benefits of the stadium are capitalized into the value
of property, so too are the costs of the stadium and at approximately a
dollar for dollar rate. A corollary to this lesson is that the
capitalization of benefits and costs is not necessarily or, even likely,
spread evenly across the jurisdiction. The Dallas announcements raised
property values in one area of Dallas while reducing them in other
areas. In such a case, the stadium construction is less about economic
development than it is about redistribution.
Clearly, the issue of how best to estimate the public benefits of
professional sports franchises using hedonic methods is unresolved. The
hedonic approach has the advantage of relying on market-generated data.
It has the disadvantage of only indirectly addressing the values.
Contingent valuation relies on nonmarket-determined data to estimate the
value of professional sports and stadiums. It is, however, a direct
approach to the valuation of sports franchises. In this approach,
individuals are surveyed about their willingness to pay to keep or
attract a franchise. The survey instrument also asks a variety of
questions designed to elicit information about the individual's
preferences and ability to pay. Individual willingness to pay is then
explained using personal characteristics of the survey respondents and
their income levels. The objective is to obtain an estimate of the
inverse demand function and to use that function to compute estimates of
aggregate willingness to pay.
In the context of stadiums and professional sports franchises, CVM
analyses include the examination by Johnson, Groothuis, and Whitehead
(2001) of the value of the Pittsburgh Penguins (NHL); the assessment by
Johnson, Mondello, and Whitehead (2007) of the value of the Jacksonville
Jaguars and of a prospective NBA franchise in Jacksonville (NFL); and
the study by Fenn and Crooker (2005) of the value of the Minnesota
Vikings (NFL). In each of these studies, the local population's
willingness to pay is a fraction of the cost of building a new stadium
or arena. For the Pittsburgh Penguins, the estimated willingness to pay
(use and nonuse values together) was about $66 million and the cost of a
new arena was projected to be $180-$220 million; for the Jacksonville
Jaguars, $52 million of aggregate willingness to pay versus $112 million
spent on renovating their stadium; and for the Minnesota Vikings, $96
million of willingness to pay compared to $300 million or more for new
Alone, these estimates of aggregate willingness to pay clearly
indicate that the public benefits aspects of professional sports are
insufficient to justify the large public subsidies. But what if they are
taken together with the consumer surplus or the private goods benefits?
The estimates of consumer surplus for the average NFL franchise in 1996
according to Alexander, Kern, and Neill (2000) ranges (in 2000 dollars)
from $7.94 to $23.93 million. Assuming the life of a stadium to be 20
yr, and with discount rates ranging from 2% to 8%, the present value of
the consumer surpluses from NFL attendance fall between $77.96 and
$391.26 million. The larger values result from lower discount rates and
lower price elasticities. Using the same 2% discount rate that produced
a $52 million total willingness to pay (Johnson, Mondello, and
Whitehead, 2007), the present value of consumer surplus is between $129
and $391.26 million. In this case, the total benefits of the stadium
renovations in Jacksonville exceeded their cost.
Calculations of this sort, combining the consumer surplus from
attendance at professional sporting events with the public benefits from
having stadiums and franchises, suggest that there are circumstances
that justify public subsidies. Calculations like this are rarely done,
however. Moreover, this type of aggregate comparison does not address
the distribution of the costs and benefits. If the attendees who obtain
consumer surplus benefits are different from those who pay the taxes
that support the subsidy, then despite the overall value to society of
the franchise and stadium, the policy remains one of redistributing
income away from taxpayers to sports fans.
IV. VOTING ON STADIUM AND ARENA SUBSIDIES
I turn now to one additional approach to assessing the value of
sports and stadiums to citizens. Stadium subsidies often go before
voters. Fort (1997, 2006) described the referendums and addressed the
theoretical political economy issues but did not provide econometric
analysis of the determinants of voting on stadium or arena referendums.
Empirical analysis of referendum voting was conducted by Agostini,
Quigley, and Smolensky (1997) for two referendums in San Francisco and
by Coates and Humphreys (2006) on several votes in Green Bay, Wisconsin,
and Houston, Texas.
Fort (2006) emphasized a dramatic change that has occurred. Prior
to 1995, he said that "stadium votes typically did not pass,"
but since 1995, 80% have passed. The percent passing since 1995 has
recently taken a hit with the defeat at the polls of a proposal to
support an arena for the NBA's Sacramento Kings in November 2006.
In a preemptive strike of sorts, Seattle voters passed Initiative 91,
also in November 2006, which restricts the use of public funds to build
an arena for the NBA's Supersonics. The hitch is that the
Initiative applies to city funds, it does not restrict King County or
the state of Washington from funding construction. That is the model
used to build Safeco Field for the Mariners and Qwest Field for the
A similar situation occurred in Pittsburgh. Delaney and Eckstein
(2003) described voting results in 11 Pittsburgh area counties in
November 1997. In each of the counties, the Regional Renaissance
Initiative, also known as the stadium tax initiative, was soundly
defeated. Among the counties that rejected the initiative is Allegheny
County, which includes Pittsburgh. The initiative would have raised the
sales tax from 6% to 6.5% to fund a variety of local development
projects, the two most expensive of which were stadiums for the Steelers
and the Pirates. Less than 2 yr later, the state of Pennsylvania voted
to spend $320 million on two stadiums each for Philadelphia and
Pittsburgh. Clearly, stadium proponents will find a way to get their
stadium even when it is rejected by the local voters.
There are two absolutely clear lessons from this line of research.
First, a negative vote on a stadium referendum is never the last word.
Stadium proponents may reshape the proposal and bring it before the
voters again or they may fall back on "Plan B." In Houston,
for example, Coates and Humphreys (2006) found that dropping taxes on
ticket purchases from the 1999 proposal in favor of taxes on rental cars
and hotel rooms in the 2000 proposal led to a reversal of fortune for
the Houston Rockets' arena. Pittsburgh is an example of Plan B. In
fact, the Pittsburgh model is common. Fort (1999) reported that of the
ballot measures that failed between 1980 and 1998, half were eventually
funded outside the referendum process.
Second, stadium proponents will generally outspend opponents by
wide margins. Coates and Humphreys (2006) reported that proponents of a
sales tax increase to support the renovation of Lambeau Field in Green
Bay spent $1.42 million, with $435,000 of it on television and radio
advertisements and market research, while opponents of the sales tax
increase spent $34,996. That is, stadium proponents outspent opponents
by over 40:1. In Houston, opponents of the arena subsidy spent more than
$700,000 fighting the 1999 ballot issue but then were unable to spend
significantly to fight the 2000 proposal. At the same time, proponents
of the arena subsidy spent $2.5 million pushing the measure in 2000.
Fort (2006) reported the spending differential when a referendum was
held on public funding for a new home for the Seattle Seahawks,
"Paul Allen alone spent around $3 million in advertising, whereas
opponents spent only $160,000." This is 18.75:1 in favor of
building the stadium. (11) Fort (1997) also reported that the Chicago
White Sox spent $100,000 to the opponents' $3,000.
These spending differentials and the resort to funding outside the
referendum process are consistent with highly concentrated benefits but
widely dispersed costs of stadium subsidies, that is, of redistribution
in the subsidies. The Houston case is also clear evidence that subsidies
have a substantial redistributive component. The voters there decided
not to tax people who attend games to pay for the new facility but
rather to tax visitors staying in hotels. Geographic voting patterns
discernible from the referendums also suggest redistributive effects.
Coates and Humphreys (2006) identified voting precincts close to the
stadium or arena in their voting regressions. They found that living
close to existing facilities raises the probability of a voter
supporting stadium subsidies. The farther one lives from the stadium or
arena, the smaller is support for subsidies. This is consistent with
redistribution from the more distant areas to the locations closer to
the stadium or arena. Importantly, experience living close to a facility
may also matter. In the Houston context, some voting precincts were in
close proximity to both the existing arena and the site of the proposed
arena. (12) Voters close to the existing facility were more likely to
vote for subsidies for construction of a new facility farther from them
than was the average voter. This suggests that some voters wish to avoid
the disamenities associated with close proximity to a sports arena.
V. FUTURE RESEARCH
In this section, I briefly lay out where I think future research on
the economic benefits of stadiums and professional sports franchises
should go. I believe that further hedonic, CVM, and voting studies are
necessary to improve our understanding of the public benefits and the
political economy of stadium and arena subsidies. I begin by discussing
the types of extensions and applications of these various methods that I
think are necessary. I finish this section with a discussion of a body
of research that is now developing but is still in its early stages.
To date, hedonic regressions have focused on wages and residential
property. Future hedonic regressions should try to address the implicit
value of close proximity to a stadium or arena for the profitability of
businesses. The old adage about "location" is apt for the case
of business property. Proponents of stadiums as economic development
tools argue that the facilities serve as an anchor for local
development. Business owners, particularly of bars and restaurants near
football stadiums, report that they do brisk business on game days. If
this added business on game days and local development around the
stadium carry over into greater profits, then the value of those
locations should be bid up. Regressions explaining either property
values of businesses or rents of commercial space as a function of
proximity to the stadiums, all other things held constant, should
provide valuable information on the extent to which the profit
opportunities of locations around a stadium or arena are enhanced by the
facility. If these greater profits do not arise and economic development
does not occur, then one will not find proximity to stadiums and arenas
associated with greater property values or higher commercial rents.
Hedonic regressions of housing values should extend the analysis
along the lines of Tu (2005) and Dehring, Depken, and Ward (2007), using
observed sale prices and distance from stadiums and arenas as
explanatory variables. Tu (2005) began this with his rings around FedEx
Field, but these rings may be too wide to distinguish real effects of
distance. Using GIS software, it is possible to measure the distance
between two properties, making the measurement of distance more precise
and improving the estimates of the effects of distance from the stadium.
Work along these lines must also account for spatial autocorrelation in
Studies like that of Carlino and Coulson (2004) are valuable
because they use a broad cross-section of cities, drawing upon the great
variety of geography, history, and sporting traditions, to improve the
estimates of the effects of professional sports. Studies of this sort
should be expanded, however, to consider and control for more sports
than just football and baseball. Presumably the NBA and NHL franchises
in cities also have value to the community. Future work should also
include Major League Soccer and NASCAR. Extension to studies in Europe
and the rest of the world are also important.
Hedonic studies should also make more use of quasi-panel and, where
possible, panel data. This approach enables the researcher to control
for time and location effects and to compare pre-and post-stadium
development. Panel data also would allow researchers to exploit
franchise relocations and league expansions in assessing the impact of
sports on property values. (13)
Contingent valuation studies are proving a valuable tool in
analyzing the benefits, especially the public benefits, of franchises
and stadiums. Studies of this sort should expand to other cities and
sports. Of the contingent valuation studies described here, two address
professional football, one addresses professional basketball, one
addresses college hoops, and one is focused on NHL hockey. Only one
values the national pastime and that at the minor league level. CVM can
address the value of a baseball franchise by going to one of the many
cities that attempted to entice MLB to relocate the Montreal Expos to
their community or to Minneapolis whose Twins were recently on the
chopping block during discussions of contraction. One could conduct a
CVM study in Baltimore where fans, fed up with 9 yr of losing baseball,
have recently begun calling for current Orioles owner Peter Angelos to
sell the team.
More work should be done on voting on stadium and arena subsidy
legislation and referendums. Empirical work has relied upon
precinct-level data from referendums to draw inferences about individual
voter behavior. One advance in this line of research is, therefore, to
get individual voter-level data. For referendums, this is not possible,
though extensive exit polling might provide some of this information.
However, for sports subsidy legislation that is voted on in state
legislatures, it is possible to connect individuals to their votes.
Empirical analysis of legislator voting on stadium subsidy issues can
provide some insights into the influences on the individuals that we
cannot gather from analysis of vote totals by precinct. For example,
stadiums and professional sports franchises are often very
emotion-filled topics for voters. Legislators do not want to be
perceived as the reason that a city or a state loses a sports franchise.
Legislators, and governors and mayors, who feel more electorally secure
may be more willing to fight against inefficient or ineffective
subsidies than are less secure legislators. (14)
Finally, studies of the effects of stadiums and professional sports
should study taxation. While proponents of stadium-led development
programs frequently argue that the stadiums and arenas will increase the
tax collections of the city, little research has been done on this
topic. At one level, the ability of stadiums to induce greater tax
collections is highly doubtful, given that there is scant evidence that
there is increased income or increased employment associated with
professional sports in a community. At another level, the fact that
stadium lease agreements sometimes give franchises all revenues from
parking in the city-built and maintained lots on game days and for non
game events as well implies that what new revenues might be linked to a
stadium do not accrue to the city treasury. Yet, if the stadium raises
taxable sales and if taxes are imposed on ticket purchases, then there
may be increased tax collections attributed to the stadium or arena.
What little research there is on tax collections is not focused on
stadium, arena, and franchise existence but on the effects of onetime
mega-events. For example, Porter (1999); Baade, Baumann, and Matheson
(2005); and Coates (2006) examined the effects of large one-time
sporting events on taxable sales in a community. (15) An exception to
the focus on mega-events is Coates and Depken (2006) who examined
monthly sales tax collections over a period from 1990 until 2005 for 126
jurisdictions in Texas. They estimated the effects of an additional game
of a specific type in a month on the sales tax collections and the
taxable sales activity in that month. The results vary by sport and
between professional and collegiate games, but generally speaking, an
additional regular season game has, at best, a modest effect on sales
tax collections. For some sports, an additional game actually reduces
sales tax collections in the month.
Studies of the consequences for tax collections of stadiums and
franchises need to branch out more. One branch is to move beyond Florida
and Texas, the sources of the data in all but the Porter (1999)
research. The basic question is whether the results for tax collections
hold up for other states. Beyond that, the research on tax collections
should delve into other types of taxes. A key alternative tax is the
property tax. Institutions with respect to the property tax vary by
state and may change over time within a state, so caution is necessary.
However, both residential and business property are taxed in many
states, and the data are often reported separately. Even if the property
tax data are only available for a city over time, that allows
researchers to test for differences in average collections before and
after a stadium or arena is built and before and after a franchise
locates in the jurisdiction.
VI. WRAPPING UP
In this article, I have reviewed the literature on the economic
effects of stadiums, arenas, and sports franchises. Little of the
academic research that investigates effects ex post finds significant
increases in income, employment, taxable sales, or tax revenues
associated with sports and sports facilities. Measures of the consumer
surplus and public benefits of stadiums and franchises are often
substantial. As large as these benefits are, rough calculations indicate
that they are not necessarily large enough to justify subsidies of
hundreds of millions of dollars.
The evidence that exists for positive effects on local economies
tends to be focused on small geographic areas. Rather than being
evidence of development effects, these results indicate redistribution
from one area to another within a region. Calls for stadiums and arenas
to be studied in the context where they will be most effective, in the
central city, are implicit arguments for redistribution. Results
suggesting that stadiums and arenas are successful in anchoring downtown
development are often accurately interpreted as evidence that
redistribution has occurred.
There are a variety of ways for research into the effects of
stadiums and franchises on local communities to go. I have described
several of them above. All these will help us gain a better
understanding of the relationship between professional sports and the
economic well-being of the host community. As long as professional
sports franchises and their boosters turn to government for help and as
long as stadiums and arenas are perceived as tools for economic
development, the study of the effects of stadiums and arenas on the
local economy will be an active and thriving area of research. I foresee
a long and busy future for economists and urban planners studying the
economic analysis of sports-led development strategies.
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CVM: Contingent Valuation Method
GIS: Geographic Information System
MLB: Major League Baseball
NASCAR: National Association for Stock Car Auto Racing
NBA: National Basketball Association
NFL: National Football League
NHL: National Hockey League
(1.) There are interesting and important private consequences that
I do not consider due to space limitations.
(2.) It is essentially impossible to separate the question of the
impact of stadiums and arenas from the impact of professional sports
because it is, after all, the activity in the stadium that generates
activity around the stadium. Consequently, for the purposes of this
article, the public impact of the stadium or arena is always bound so
tightly to the impact of the tenant of that sports venue that the two
effects are indistinguishable.
(3.) Fort (2006); also discussed the literature on sladium impacts.
More is said about this below.
(4.) Rosentraub (2006) evaluated the tactics of cities to distil!
what types of public/private partnerships are most likely to be
beneficial for taxpayers when their city builds a stadium.
(5.) Baltimore income data were accessed at economagic. com.
(6.) Contrary to expectations, the arrival of the NBA Grizzlies to
Vancouver also reduced hotel occupancy rates.
(7.) Irani (1997) found that consumer surplus from attendance at
Major League Baseball games ranged from $2.2 to $54.1 million in 1985.
depending on the city. Because his study is old and limited to baseball,
I do not discuss it in more detail.
(8.) A large literature measures the implied value of neighborhood
amenities of various sorts. Ridker and Henning (1967) estimated the
implied value of air quality; Roback (1980, 1982) addressed
quality-of-life effects on wages; Oates (1969) assessed the value of
local public spending on residential property values. Coates and
Humphreys (1999) stated that one explanation for their finding that
incomes per capita are lower in cities with professional sports may be
that these lower incomes measure the implicit value of professional
(9.) U.S. Airways Arena was demolished in 2002.
(10.) In the case of Arlington, "announcements" include a
statement by the mayor that negotiations with the Cowboys had been
taking place, a city council approval of a ballot initiative on raising
the Arlington sales tax rate and hotel and car rental taxes and land
acquisition, and the voter approval of the referendum.
(11.) Fort (1999) reported Allen's spending in support of the
issue as $6 million. If this is correct, then the ratio is 37.5:1.
(12.) Recall that Tu (2005) ignored overlap in promiximity to a
stadium and an arena.
(13.) Coates and Humphreys (1999) are, perhaps, the first to use
expansion and relocation to measure the impact of franchises on local
communities. Carlino and Coulson (2004) identified the NFL effect off of
expansion and relocation of franchises.
(14.) Coates (1995) and Coates and Munger (1995) found evidence
that legislators are more likely to vote their conscience or their own
preferences when they are more secure in their positions than when they
are insecure about reelection.
(15.) These articles contribute to a broad literature on the impact
of mega-events. There are frequent intersections between the stadium and
the mega-event impact literatures because cities are often chosen to
host an event such as the Super ?Bowl or the MLB All-Star game in part
because they have opened a new stadium. Mega-events may be one shot
deals for a host city, like the Olympics, or recurring events like the
Daytona 500 automobile race. Baade and Matheson (2001, 2004) have a
number of articels in this literature.
Coates: Professor, Department of Economics, University of Maryland,
Baltimore County, 1000 Hilltop Circle, Baltimore, MD 21228. Phone
410-455-3243, Fax 410-455-1054. Li-mail email@example.com