public subsidies in sports topic lecture jeffrey miller, marist school 2014 debate institutes at...

Public Subsidies in Sports

Topic LectureJeffrey Miller, Marist School

2014 Debate Institutes at Dartmouth

Resolved: On balance, public subsidies for professional athletic organizations in the United States

benefit their local communities.

Why this topic?

• “Since 2000, 28 new major league stadiums have been built costing over $9 billion dollars. More than half, over $5 billion, of the costs of the new stadiums were funded using public dollars. Even more, two thirds of teams in the five major sporting leagues are playing in stadiums built or significantly renovated since 1990—with 28% built or significantly renovated since 2000. So despite the precarious results, the success rate at which owners get subsidized for their requests is astounding.”

Important Terms in Resolution

• On Balance – just to create a broader resolution and to prevent cherry picking

• Public subsidies – money from the government (specifically tax payers) to a organization, specifically for this resolution – a sports team, for something that benefits the public.

• Professional Athletic Organizations – Most literature defines it as the Big 4 (NBA, MLB, NHL, NFL)

Framework Arguments

• Cost Benefit Analysis

• Pro – Only non economic impacts must be weighed

• “…one cannot answer the question ‘Is it worth it?’ solely by focusing on economic data. The ultimate value of a sports facility or event is more or less than its net economic impact.” (Johnson and Sack, 1996)

• “the focus on economic impact, both by its advocates and critics, misses the true source of public support of subsidies to sports stadiums.” (Owen, 2006)

• Con – Obviously you want to weigh economics

• Weighing in terms/perspective of the local community

• Is the debate about public subsidies or the result of public subsidies?

Pro Arguments on the Topic

• Spin Off Development– Defining the topic as an tool for infrastructure, therefore you gain benefits for infrastructure. Think of these stadiums as multi-use arenas.

• “Major league teams have become a critical talisman of the status of cities and metropolitan areas because of the popularity and visibility of professional sports. Art museums, symphony orchestras, theaters, and zoos are all marks of major cities, as are libraries and universities, leading law firms and banks, and great commercial and industrial corporations, but big league teams are seen by many as more easily and widely recognized symbols of a place’s importance.” (Danielson, 2007)

• “by generating increased spending on lodging, meals, and other travel and entertainment that takes place outside the stadium or arena, and will not accrue to the team or building owners.” (Groothuis, 2004)

Jacobs FieldCleveland, Ohio

A Success Story


• Community Pride – Pro teams will have to look at intangible benefits, like ‘psychological income.’

• “The justification of subsidies tends to be based on the concept of ‘psychological income,’ that is on the effects of identification or stimulation and on the feelings created within the community. Thus subsidies are justified by their internal rather than their external effects.” (Szymanski, 2005)

• “Sports teams provide a tangible focus for building community consciousness and social bonding. They are an important part of the collective experience of urban dwellers since they tie them together regardless of race, gender or economic standing. They are one of the few vehicles available for developing a sense of community.” (Crompton, 2004)


• Property Values Increase with Sports Facilities

• “the presence of both facilities has a significant positive effect on the value of surrounding houses and this positive effect decreases as the distance from the facilities increases” (Feng, 2008)

• “these results suggest that there were expectations of amenity effects of a Cowboys stadium but these benefits were outweighed by the expected tax burden of the stadium.” (Dehring et al, 2006)

Nationwide ArenaColumbus, OH

Property Values Increased

Pro Arguments on This Topic

• Human Capital

• “As a result, linking real estate development and revitalization efforts to the building of big ticket amenities has the potential to eliminate negative impact of subsidies and avoid conflict based approaches to negotiations with team owners.” (Rosentraub, 2010)

• “Instead of choosing one approach or another, perhaps the evidence is that a balance between big-ticket images and neighborhood scenes is key to human capital attraction.” (Rosentraub, 2010)

• “While it may be unclear if amenities attract human capital, the absence of amenities does reduce a region’s attractiveness to workers, (and) investments in amusements and sports attractions were associated with higher levels of employment in the tourist sector, increasing household income levels , (and) the number of businesses in the area. Further, sports have a positive effect on the regional economy in both fast- and slow-growth cities.” (Rosentraub and Joo, 2009)


• Regionalism – subsidies require governments to work together

• “The big-ticket projects were undertaken to maintain some degree of centrality and vibrancy for Cleveland, but were financed at the county level requiring cooperation for development from residents of 57 different cities.” (Rosentraub, 2010)

Consol Energy CenterPittsburgh, PA

An Answer to Civic Pride using CVM (Contingent Valuation

Method)


• Community Visibility – remember though ‘local community’• “Professional sports increase community visibility given the magnitude of media

coverage that is showered upon major sports franchises. When a major sports franchise is mentioned throughout the print, television, and electronic media, the host city is typically given positive exposure.” (Shwester)

• Since direct expenditures result in indirect expenditures, the direct expenditures are said to “multiply” through the economy. Economists attempt to quantify this effect by calculating a “multiplier.” For a given level of direct expenditures, higher multipliers indicate higher levels of economic impact.”

• Television exposure can lead to more tourism and business.

Con Arguments on the Topic

• Sports Economics – A strong con argument, since every study concludes neg.

• "In no instance did a positive, significant correlation surface among stadiums, professional sports, and city income as a fraction of regional income.” (Baade, 2000)

• “Increased export sales result from attracting net new inflows of spending from outside the area. This regional increase in exports might occur if, for example, people from another region decide to attend a baseball game in the area, rather than go to their local movie theater. If, on the other hand, people from another region spend money at an area stadium rather than at a movie theater or restaurant near the stadium, the stadium is not increasing export sales-it is simply shifting them.” (Baade, 2000)


• Subsidies Harms Economies – focus on local economy• “Many public subsidies do little to promote economic equity, and rather than correcting for

market failure, they induce distortions in economic decisions and behavior; such programs may justifiably be scaled back or terminated when they come under increased scrutiny” (Treist, 2009)

• “it creates lost tax revenues that under normal circumstances would be assessed and paid. To illustrate the effect, consider the following: for a stadium completely financed with tax-exempt bonds, costing $225 million, and built today, it is estimated that the lost federal tax revenues will total $75 million over the life of the bonds.” (Jensen, 2000)

• “The type of work is generally non-technical, and requires little or no skill, unless you consider the ability to hit a fan with a bag of peanuts from several rows away or the ability to balance a tray full of beer while scaling a flight of stairs, a skill.”


• Gentrification/Eminent Domain – this is offense against the ‘economic revitalization’ theory.• When a new stadium is financed with public dollars, the lower-income citizens of a host city are

nonetheless the first to have their wallets raided (Cagan and deMause 1998)

• “The inability of average working families to go to a game--and let their children watch famous athletes in the flesh--has eroded interest. Professional sports is becoming so "gentrified" that only upper-income people can afford to go to the games, and these fans--with the many choices of activities that wealth brings--tend not to be as die-hard in their support as their middle- and lower-income counterparts. "The middle-income and lower-income fans are being priced out of the game," says Andrew Zimbalist, a professor of economics at Smith College. "It threatens the mass character of sport, and over time there is a gradual loss of interest, which hurts TV ratings and licensing deals.” (McGraw, 1998)

Barclays CenterBrooklyn, NY

Watch “Battling for Brooklyn” to see the local communities perspective on an arena.


• Taxpayer Tradeoff – other things that get public subsidies are not as controversial, lets think why?• “In addition to cuts to parks, transit and other services, she notes, the city police force has

stopped recruiting new officers because of budget cuts, and murders have risen dramatically this year. ‘The basic services of the city are suffering at the same time the Simons and [Colts owner Jim] Irsay are making out like bandits.’” (DeMause, 2013)

• "Our police and fire departments were the first ones that started seeing their budget cut back," says Ken Jones, a Glendale resident who led several unsuccessful attempts to force a public vote that could have overturned the Coyotes lease deal. "Libraries were hit pretty hard. They raised our water bills 80 percent, our sales tax was raised, and our property tax was raised. They have robbed the things that people really expect to get from their taxes in order to keep supporting sports.“ (DeMause, 2013)

Bakers Life Fieldhouse

Indianapolis, IN


• Team Extortion – Threats to move cities makes the professional sports in control of the sports team.

• “The leagues carefully control entry, artificially maintaining scarcity and enhancing bargaining power” (Abrams 2013)

• Tampa Bay Rays

• Oakland A’s

Tropicana FieldSt. Petersburg, FL

Classic story of Extortion

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