Stadiums are indeed elements of economic development. They are facilities where the much loved professional sports such as football, hockey, baseball, soccer, NFL among many other games take place. In any particular town in American, watching a cup final can arguably be the most exciting and proud moments for the people who live there. One thing that is certain is that American love sports and majority of them would do anything for the teams they support. However, the various sports facilities that we see in every city are expensive to put in place. These facilities require millions of dollars to set up raising the eternal question of who is supposed to fund them. Since professional sports began many years ago, cities have been taking up the responsibility of construction of new stadiums mainly hoping that these stadiums would in return benefit the community either culturally or economically. However, economist and other scholars continue to do more and more research putting into question the sponsorship of sports facilities by the cities. The central issue being whether cities should use public funds for other beneficial community projects or build sports facilities. This paper will look at the various evidence presented by different authors about whether cities should finance the building of sports facilities.
Privately Public vs. Public Sports Facilities
Two main types of sports facilities exist namely public and privately public. Cities around the world build some fields and small fields where any member of the public can play without limits, and they can be termed as public sports facilities (Long, 2012). These cities are meant for the general public and have been found to have a positive effect on the communities that use them as it increases their attitude and health (Long, 2012). Economically these facilities are not expensive to build and maintain as some are made up of natural grass that requires less attention.
Privately public sports facilities, on the other hand, are stadiums built for professional sports (Sauer, 2014). Unlike public facilities, accessing these stadiums is not easy for the general meaning that these fields and courts are not regularly in use. To access these facilities, the public who are usually the fans must purchase for parking and admittance while athletes are required to pay for them to train or perform in these facilities. Consequently, since cities typically use public funds to build these rarely used sports facilities, Grieve and Sherry (2012) argues that questions of whether a municipality should support such projects are inevitable.
Costs of Sports Facilities
According to Van den Hurk and Verhoest (2017), there has been a constant increase in the cost of building significant sports facilities within the country, for instance, the New Jersey's MetLife professional stadium which cost over $ 1.5 billion. Maxcy and Larson (2014) on the other hand notes that as the cost of building these professional stadiums increases, calculating the final price that these facilities cause will be hard considering the number of professions needed in construction and design. There is a combination of sophisticated soft and hard figures quoted by the designers and constructors that elevate the cost of creating these facilities, yet they only consider the direct cost of building the sports facility (Maxcy & Larson, 2014).
Humphreys and Zhou (2015) argue that even if some cities do not contribute to the building the of these sports facilities directly, they end up spending more funds through modification of the infrastructure that surrounds these professional stadiums for both aesthetic and practical reasons. Some of the additional projects which run into millions of dollars the city finds itself doing when a stadium is built include addition of parking space, sewer system modification, landscaping alteration, improving roads and sidewalks (Humphreys & Zhou, 2015). Nevertheless, cities continue to build these facilities since they know some benefits would come along and one of the significant advantages is community morale boost that occurs as a result of such facilities. Economically speaking, however, Long, 2012) claims that cities cannot use mere community morale boost as the only explanation for spending such massive amount of public money to build sports facilities.
Economic Benefits of Cities Building Sport Facilities
City leaders and supporters of building sports facilities firmly believe that these facilities bring back a lot to the community. Grieve, and Sherry (2012) claim that making sports facilities positively affect the local economy of that place. The benefits can be both direct and indirect. Direct economic benefits being revenue collected as a result of seating rental, suite rental, advertising, parking, concessions, and rent while the only expenses being insurance, maintenance, repair, utilities and wages (Grieve & Sherry, 2012).
Additionally, Wolla (2017) claims that benefits of building stadiums vary from one sport to the other. Some sport will realize more profit in a short time depending on the frequency of the home games plays in one season (Wolla, 2017). As the years pass, more and more benefits will be realized since stadiums can last for over 30 years. Furthermore, Roult et al. (2014) claim that there are more hidden or indirect benefits of building sports facilities among them being that it promotes tourism and growth of businesses thereby creating more jobs to the community. Also, there is increased tax collection from the spending near the stadium, improved property, concessions and ticket sales (Roult et al., 2014). Security is also said to be enhanced when a stadium is built and also constant spending is maintained even during rainy days (Roult et al., 2014).
Moreover, advocates of sports facilities claim it brings more fan identification and civic pride whereby hosting the main sports event is something good for the city (Long, 2012). The morale of a city is boosted in a way that no other event can. The city on its part claims that there are many social benefits and private benefits that result from local people engaging in stadium-related activities (Long, 2012).
Effects of Cities Paying for Sport Facilities
Many critics exist concerning cities paying for sports facilities. According to Sauer, (2014) newly built sports facilities create little to no new consumption (spending). What the fans usually spend within the sports facility is what they would have spent on other numerous forms of entertainment within the city (Sauer, 2014). Therefore, contrary to the belief that stadiums promote economic growth in a town, critics argue it only lead to increased cumulative income. To them, the money that is used in the form of merchandise, tickets, and concessions can and do harm the economy surrounding the sports facility (Sauer, 2014). Additionally, other critics claim that the much of the money made in the new sports facilities does not stay within the city, but it goes to other parts of the country (Alakshendra, 2016). Rather than the money going to the facility's workers or other sectors within the local community, much of the money mainly goes to pay organizations (Alakshendra, 2016). The city spends a lot of money building the facility where else the much of the revenue collected goes to the paying national employees of the government or other social welfare (Alakshendra, 2016).
Bast (2012) argues that the opportunity cost of a city paying for a sports facility is much higher than the benefits realized and hence it would be better for the town to use these billions of dollars on other pressing things in the community such as improving the police department, public transport, firehouses, and schools. Furthermore, Bennett (2012) also claim that not only that the building of a new stadium is costly, it can also make the original citizens a city to leave and close their businesses. This happens as a result of the necessity of them being forced to relocate their land for the stadium to be built this can have a negative social impact as some of the citizens might become very angry. Additionally, Maxcy and Larson (2014) also claim that some of the stadia are never full enough to provide the projected economic returns. Due to the nature of some sports, the seasons are usually short with fewer home games causing revenue collection to slow down.
In summary, a city can have both privately public and public sports facilities which are all critical to the community that uses them. Evidence from various researchers' shows that the cost of building new sports facilities is high raising the question whether a city should invest in such a business. There are those who argue that a city should pay for a sports facility since it has many benefits it will bring to the community while critics claim that this is not economically sustainable. A review of the literature on whether a city should pay for sports facilities shows that most evidence goes against such subsidization.
Alakshendra, A. (2016). How are we funding professional sports stadiums? An overview. Managerial Finance, 42(9), 885-890.
Bast, J. L. (2012). How to Stop Sports Stadium Madness: Is Fan Ownership the Answer?. Chicago, IL: Heartland Institute.
Bennett, J. T. (2012). They play, you pay: Why taxpayers build ballparks, stadiums, and arenas for billionaire owners and millionaire players. Springer Science & Business Media.
Grieve, J., & Sherry, E. (2012). Community benefits of major sports facilities: The Darebin international sports center. Sports Management Review, 15(2), 218-229.
Humphreys, B. R., & Zhou, L. (2015). Sports facilities, agglomeration, and public subsidies. Regional Science and Urban Economics, 54, 60-73.
Long, J. G. (2012). Public-private partnerships for major league sports facilities. Routledge.
Maxcy, J., & Larson, D. (2014). Reversal of Fortune or Glaring Misallocation: Is a New Football Stadium Worth the Cost to a University?.Roult, R., Adjizian, J. M., Lefebvre, S., & Lapierre, L. (2014). The mobilizing effects and health benefits of proximity sports facilities: urban and environmental analysis of the Bleu, Blanc, Bouge project and Montreal North's outdoor rink. Sport in Society, 17(1), 68-88.
Sauer, R. (2014). They Play, You Pay: Why Taxpayers Build Ballparks, Stadiums, and Arenas for Billionaire Owners and Millionaire Players.
Van den Hurk, M., & Verhoest, K. (2017). On the fast track? Using standard contracts in public-private partnerships for sports facilities: A case study. Sports Management Review, 20(2), 226-239.
Wolla, S. A. (2017). The Economics of Subsidizing Sports Stadiums. Page One Economics.
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