RICHARD SHERMAN IS RIGHT ABOUT GOVERNMENT-SUBSIDIZED SPORTS

richard sherman government subsidies football professional sports

I don’t think National Football League team owners and politicians are feeling Seattle Seahawks cornerback Richard Sherman these days, after he appeared on a sports radio show and suggested a removal of the massive government subsidies used to fund the construction of pro sports facilities.

I think Sherman’s statement is bold — considering that his boss, Seahawks’ owner Paul Allen, is a billionaire who I’m sure wouldn’t walk away from a tax break served up to him — but there’s another point to be made that would really cause a round of ululation from team owners, if made more public: professional sports offer no economic benefit to communities.

Okay — your local pro sports team may fill you and your friends with a sense of pride, but feels have nothing to do with dollars and cents in this case.

I’ll be more precise — add up the jobs created by arenas and stadiums, the associated payroll tax collections, the commerce activity and the tax receipts from overpriced arena hot dogs, and the economic benefits from these facilities get smashed by all those government giveaways demanded by the team owners.

I’ve seen no honest study which supports the idea that stadiums are worth the money.

For example, Stanford economist Roger Noll has doubts about the incremental value stadiums bring to a city:

NFL stadiums do not generate significant local economic growth, and the incremental tax revenue is not sufficient to cover any significant financial contribution by the city.

The St. Louis Fed shares a similar opinion as Noll, when asked if stadiums are good investments for cities emphasis mine):

The short answer to this question is “No.” When studying this issue, almost all economists and development specialists (at least those who work independently and not for a chamber of commerce or similar organization) conclude that the rate of return a city or metropolitan area receives for its investment is generally below that of alternative projects.

The idea that stadiums aren’t good investments is nothing new when you consider that the St. Louis Fed shared this opinion about stadiums approximately 15 years ago. They also made another point worth reading:

[E]vidence suggests that cities and metro areas that have invested heavily in sports stadiums and arenas have, on average, experienced slower income growth than those that have not.

There’s no shortage of studies. Sacramento State University, the City of Los Angeles and the University of Illinois are only a few examples of analyses which don’t see a net benefit for government-subsidized sports facilities.

But state and local governments still can’t seem to stay away from showering their local pro teams with subsidies.

For example, the overwhelming evidence that subsisized sports are poor investment decisions didn’t stop the impoverished town of  Chester, Pennsylvania to spend money it didn’t have and build a $117 million major league soccer stadium.

And building a new stadium for the Detroit Lions didn’t stop the unfortunate host city from going bankrupt. As if there’s a perceived shortage of economic drama in its municipal life, the City of Detroit began building an arena for the Detroit Red Wings hockey team last year.

The City of Glendale, Arizona had no loot but was fully prepared to ho’ itself out in order to keep the NHL Coyotes in the city.

Let’s stay on that Glendale story for a moment — the city never attempted to ho’ itself out for education or something else more socially beneficial, but wanted to do so for a hockey team. Thankfully, the transaction didn’t happen.

The subsidies become even more suspect when you consider that cities can’t even count on payroll tax revenues from these highly-paid athletes.

On top of the bad economics, some sports teams may not act like ideal neighbors

It’s hard to argue with Harvard economist Greg Mankiw, when he mentions in one of his textbooks that 85 percent of economists believe state and local goverments should end subsidies to pro sports teams.

Look, I dig sports — grew up with it, played in leagues and I’m known to yell at a TV screen on occasion.

But Richard Sherman has a point.

Putting the government teet back in the blouse doesn’t mean professional sports — or the communities they live in — will starve to death.

But a change in subsidy behavior could mean that team owners will own a more accurate P&L, which may lead to more innovative approaches in creating the stadiums of their dreams …

song currently stuck in my head: “memphis in june” – nina simone

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