How professional sports became a detriment to local taxpayers around the world
The Olympic Stadium in Montreal was originally budgeted at $134 million, but it ultimately cost Quebec taxpayers $1.47 billion. Image by Bobjagendorf (talk · contribs), CC BY-SA 3.0, via Wikimedia Commons
It didn't have to be this way. Citizens Against Government Waste unpacks how changing tax laws and unseemly competition between cities led to the stadium-subsidy free-for-all which has cost taxpayers billions (while team owners get richer).
Recognizing the power they have over local communities, team owners and league leaders have sought to use their positions to force local residents to finance the construction of the stadiums in which their teams play. According to a December 22, 2022, CNBC report, since 2000, publicly constructed facilities have cost taxpayers more than $43.1 billion. Stadium subsidies are so pervasive that a blog, “Field of Schemes,” was created in 1998 to examine and publicize how approximately $2 billion annually is provided in public subsidies for new professional sports facilities. Team owners and elected officials have long justified this substantial use of the taxpayer’s money with claims that they would lead to increased economic growth and development. Many studies, however, show that publicly funded stadium projects provide little to no economic benefits to local communities.
Citizens Against Government Waste has long argued that taxpayer funded stadiums have become a scourge on the nation, costing taxpayers billions of dollars each year in new expenses and lost tax revenues. But with the exposure and publicity of these issues come opportunities for reform. Proposals range from changes to the tax code to greater civic participation to increased accountability to voter input on stadium financing. Without such changes, taxpayers across the country will continue to subsidize billionaire team owners and some of the richest sports leagues in the world while fans watch their beloved hometown teams leave town at the whims of owners seeking a better deal. While no one is suggesting that teams can never move from one location to another, steps should be taken to help protect taxpayers from being forced to cover bad investments.
History
Professional sports first gained popularity in the United States with the rise of professional baseball in the mid-19th century and the birth of American football near the end of the century. Yet, publicly funded professional sports stadiums did not become common until decades later. Before 1953, only three professional sports stadiums were constructed using public assistance. These facilities—the Los Angeles Coliseum and Chicago’s Soldier Field, both completed in 1923, and Cleveland’s Municipal Stadium, which opened in 1931—were constructed to lure the Olympic Games to their respective cities. However, ever since the city of Milwaukee enticed the Boston Braves to move west with the promise of a publicly funded stadium in 1953, public financing has become the rule, rather than the exception.
The foundation for today’s subsidies was laid when the federal income tax was first adopted in 1913. The statute excluded the interest earned on state and local bonds from the tax code. This exemption has allowed state and local governments to sell bonds to pay for projects without paying federal taxes that would add to the cost. When cities and states provide financing for professional stadiums, they often use public bond sales, allowing them to build new facilities at the taxpayers’ expense without the additional interest earned on the bond revenues being taxed.
The increased use of tax-exempt bonds to pay for sports facilities has led to numerous efforts to reform the tax code and remove the exemption for certain public bonds. The most prominent reform came in the Tax Reform Act of 1986. Under the Act, in order to qualify for a tax exemption, a bond must cover a significant part of the cost of a project, like stadium construction, and be paid for through tax revenues unconnected to that project. In theory, the reform would disincentivize the use of tax-exempt bonds because it would increase the amount of money that state and local governments would have to pay to qualify for the bond and they would have to turn instead to new taxes to cover the bonds. In practice, lawmakers have willingly supported higher bonds and implemented targeted taxes to pay for the new stadiums, nullifying the intent of the Tax Reform Act.
Milwaukee’s successful efforts to coax the Braves into leaving Boston became the standard for other cities to follow. Over the ensuing decades, other cities began offering subsidies to teams to persuade them to move. Team owners and sports leagues began to play incumbent cities against potentially new locations, forcing them to bid against each other to fund the construction of new stadiums. For example, in 2021, within months of reports that the Buffalo Bills were considering a move from upstate New York to Austin, Texas, the team secured a record $850 million for a new stadium after Governor Kathy Hochul (D), who was born in Buffalo, pushed the funding through the state legislature.
As part of an effort to make taxpayer subsidies more palatable, stadium facility construction is being tied to projects like building new retail, housing, and infrastructure improvements. In 2022, both houses of the Virginia legislature passed bills that would have provided public support of up to $1 billion for the construction of a stadium and retail facility to help convince the NFL’s Washington Commanders to move from their current home in Landover, Maryland to a location in Virginia. After purchasing land in Arlington Heights, Illinois, the NFL’s Chicago Bears released a plan for a proposed stadium that would include 326 acres of retail, housing, and entertainment space instead of upgrading Soldier Field, which was built in 1924 and last renovated in 2003.
Finally, talks are underway for the construction of a replacement of the RingCentral Coliseum, current home of the MLB’s Oakland Athletics, to help prevent them from moving to Las Vegas, Nevada, where the NFL’s Raiders play after leaving Oakland in 2020. The discussions have centered on a demand from the team that taxpayers foot the bill for $1 billion in infrastructure improvements around the preferred new site. The inclusion of facilities and infrastructure beyond the stadium itself will substantially increase the cost of those projects for taxpayers.
A study of the cost of the most expensive sports stadiums found that 10 of the 30 most costly venues were constructed during or after 2017. As franchise owners demand ever more extravagant facilities, often in conjunction with housing, retail, and infrastructure improvements, the cost of stadiums will continue to rise in the years to come. Without reforms, including changes to the use of tax-exempt bonds, the cost to taxpayers will increase as well.
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