Nine out of ten economists agree: Sports stadium subsidies are dumb

The Tampa Bay Times ran a story on Saturday headlined “How much do the Tampa Bay Rays boost the local economy?“, and for once, this one talked to actual economists. The result was an article that provides an excellent primer on how it is exactly that despite all the people you see attending games and spending money, study after study shows that sports teams have minimal economic impact.

Do local economies see increased activity when a sports team is playing?

In 2008, [Holy Cross economist Victor] Matheson studied sports projects from across the country to see if taxable sales rose after stadiums were built. The study also examined whether tax collections dipped when sports leagues shut down for strikes or lockouts.

“There was simply not any bump at all,” Matheson said.

But what happens to all that money that fans are spending, then?

When a couple spends $100 for dinner and a movie, much of that money goes to waiters, ticket takers and other local workers and suppliers. Those people, in turn, spend their paychecks on rent, food and other sectors of the local economy.

Each dollar of original spending can contribute $3 to $4 to economic activity and job creation.

Professional sports mute this ripple effect.

“Spending that goes on inside a stadium tends to flow into the pockets of a relatively few, high-income individuals who live a large portion of the year outside the city,” [University of Maryland economist Dennis] Coates said. “Much of that money flows out.”

What about all those economic impact studies released by the teams that show massive tourism revenues as the result of sports spending?

One, commissioned by the Rays, noted that 160,000 tickets were bought via credit cards with out-of-state addresses — presumably tourists. Since the average Florida tourist spent $775 on their visit, the study estimated that the Rays added $122 million to the economy. The actual impact could be higher, the study suggested, because the credit card count did not capture cash-paying tourists.

However, this methodology failed to distinguish between tourists coming specifically for Rays games and tourists who came for other reasons and just happened to take in a ball game.

“A person in town to visit relatives or attend a business meeting or conference is already in town,” said Matheson, the Holy Cross professor. “That visitor would have stayed in a hotel room, gone out to dinner, even if the Rays had not had a game.”

The economists note other reasons why sports spending is overblown (some studies could be double-counting fans for each game that they attend even if they’re in town for an entire series, among other things); the whole article is worth reading. And when you’re done with that, check out Shadow of the Stadium’s rundown of other reports on how economists nearly unanimously agree that stadium subsidies are a really, really bad idea. Not that economists are always right, but it should if nothing else put the burden of proof on team owners to show why the heck they should be getting hundreds of millions of dollars in public cash, when nobody can spot any significant public benefits.

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11 comments on “Nine out of ten economists agree: Sports stadium subsidies are dumb

  1. Well, none of these observations matter in my town, because we want to build an indoor arena. Besides, my team has only one pro team; since Tampa has several pro teams, you can’t compare Tampa’s situation with my town. Besides, the arena in my town will replace blight. Besides, baseball is a dying sport — my sports league is the league of the future.

    I don’t care how many economists agree, my situation is unique and new, therefore you cannot compare the situation in my town with Tampa’s.

    (Did I get my arguments about right?)

  2. I for one and convinced good sir. Just show me where I need to cast my vote for your plan! The voters in my district would be happy to pay for your new facility provided you also add in some new parks for our district paid for by the state and provided I am still in office when this comes up next cycle *hint hint*.

  3. MikeM:

    You really nailed it here:
    I don’t care how many economists agree, my situation is unique and new, therefore you cannot compare the situation in my town with Tampa’s.

    I wish there was a count of politicians who have said this in public when refuting “economists” and their “science”.

    I was very proud to sit in and listen to a congressional subcommittee hearing where Congressman Darryl Issa said this very thing about San Diego…and heard the NY press and politicians say it about three different stadia and one arena for many, many years.

    They never learn, and neither do their constituents.

  4. So econ professors are now “economists”. Cool. Based on my pro wrestling blog, please start calling me a “Pulitzer Prize Eligible Journalist”.

  5. Well, Ben, you may have a point, but if I had to choose between an eyes-glazed-over Mayor or an Econ professor, generally with a Masters or better in Econ, I’m going with the professor, every single time.

  6. “So econ professors are now ‘economists’.”

    Huh? As opposed to …? You can count the number of economists who aren’t professors without using your thumbs – especially if you don’t count the hacks associated with politically-motivated “think tanks”.

  7. Good work, Mike.

    But you did forget to pre-emptively call anyone who might disagree with you a communist and suggest “they hate freedumb”

  8. This is anecdotal, but I believe most fans are like me. After the game, just about everyone gets in their vehicles and goes home. Sure, some will stop to eat or for a drink, but it’s usually in their own area rather than in the vicinity of the sports venue. The number of people who book rooms for in season games can be counted on two hands. The notion that major league sports draws in tourists with wads of cash to shower on the locals is a myth.

  9. But a very profitable myth for team owners, Tim. It’s not that people don’t know it isn’t true… it’s that they think if they just keep saying it, taxpayer dollars will continue to pour into their pockets.

    So far, they aren’t wrong about the latter…

  10. Neil;

    I didn’t see anything in the linked article that addressed the “local” ticket buyer impact fully. They do point out that local (Hillsborough or Pinellas) residents put $37m in economic activity into the stadium district. However, just as not all out of town visitors travel for just a single game, not all “local” residents drive in just for the ball game. Put another way, even relatively local residents might be coming in anyway, and just happen to take in a game.

    Add that to the generally accepted substitution effect (roughly speaking, stadium and baseball related spending isn’t an addition to all other discretionary spending but will actually displace same), and I’m not sure even $70-75m in quantifiable economic impact can be reasonably claimed.

    I would never suggest that sports teams (or other ‘economic aggregators’) have no impact. But every dollar you see spent is certainly not “newly created” spending. Perhaps 75% of it would have been spent in the same district on other attractions, and at least some of the 25% brought in from outside might have been earned anyway. People don’t always shop at home. Ask any small town store owner.

  11. I remember during the 2004–05 NHL lockout, reporters investigated the economic impact in downtown Columbus and Pittsburgh. All they could come up with was a few sports bars that had to cut some of their employees’ hours on game days. Sheesh!

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