The Daily Norseman, the SBNation blog on the Minnesota Vikings, has a long post up today about the projected public cost of a Vikings stadium, and in particular whether it should be criticized as a “subsidy.” After all, writes the author, if you’ve gone to a public school, or visited a public library, or ridden public transit, you’ve taken advantage of subsidies, so what’s the harm in that?
Of course, there’s an obvious difference between subsidizing something that’s a pure public benefit like a library and a profit-making enterprise like a pro sports team — hence the book subtitle. So in an attempt to argue that the Vikings provide a public benefit beyond allowing fans to plunk down $100 to watch an NFL game, the Norseman goes on to discuss the taxes paid by the Vikings:
According to the Vikings organization, every year the Vikings contribute $18 million in state and local taxes. Not only does the team contribute to the tax base, but so does the stadium they use-the Metrodome has generated $304 million in tax revenue for the state of Minnesota since it opened. If Minnesota lost the Vikings, we would see a direct loss of millions in tax revenue that the team, and its stadium, brings the state.
Losing the Vikings means the tax base would also suffer indirectly from the loss of Minnesota jobs. Including all the staff, coaches, active players, and practice squad players, the Vikings organization employs approximately 200 people. Vikings’ game days at the Metrodome, including staff, players, and coaches, support 2,800 full- and part-time jobs.
Spot the economic fallacy yet? Let’s think this through: Say the Vikings skip town tomorrow for … okay, Los Angeles doesn’t actually have a stadium yet, and may not ever, so let’s just put them on a barge floating down the Mississippi or something. The team and its employees stop paying taxes, sure enough. But they also stop selling tickets, and jerseys, and overpriced beers. What happens to that money?
Well, it goes back into the pockets of Vikings fans. If those are Vikings fans who live in North Dakota, then yes, they’ll probably spend it on hunting for big game at the local comedy club or something. But for our suddenly NFL-bereft Minnesotans, they’re likely as not going to spend it on something else: Going to the movies to fill their suddenly empty fall afternoons, buying big screen TVs to watch the Barge Vikings, drowning their sorrows in slightly less overpriced beer. And wherever they spend their money (unless they order their beer over the internet), the businesses they spend it at will be hiring people to make their sales, and will pay taxes on it.
There’s even a potential benefit to having money spent this way: Unlike Vikings players, who may or may not live full-time in Minnesota (and even if they do is likely to spend a chunk of their money on things like vacation homes), the average convenience store beer salesperson is likely to spend almost all of their salary within the state. (Movies, because so much of the ticket price goes straight to Hollywood, is less of an obvious gain.) So a dollar spent on the Vikings doesn’t necessarily equal a dollar spent on some other entertainment, in terms of impact on the local economy.
Those, in a nutshell, are the “substitution effect” and “leakage,” the two biggest economic factors that stadium subsidy backers invariably overlook. It’s absolutely fine to argue that subsidies to private enterprises are worthwhile if the payoff for local taxpayers is greater than what they’d be spending. The problem is, in virtually every stadium deal — including the proposed Vikings stadium — that’s not the way the numbers work out.