The “operating subsidies” epidemic: How sports teams get cities to throw good money after bad

I’m on the road the next couple of days, so posting will be lighter than usual. First, though, I’ll leave you with some reading material: My debut article for Al Jazeera America’s relaunched website, examining how teams like the Phoenix Coyotes, Indiana Pacers, and Atlanta Falcons have extracted sweetheart leases that pay them millions of dollars a year in public “operating subsidies” even as their host cities slash services and raise taxes. Here’s a sample:

To pay off the initial Pacers arena cost — plus the $650 million that it sank into a new stadium for the Colts football team — Indianapolis’ Capital Improvement Board had already cut off all of its arts and tourism grants the year before. To help fill the new gap, Mayor Greg Ballard funneled city property-tax revenues to the board, even as he asked city agencies to reduce library hours and close public pools because of budget shortfalls.

“Indianapolis might be a great place to visit, but it should be a better place to live,” says Pat Andrews, a longtime Indianapolis community activist and blogger who has closely followed the Pacers deal. In addition to cuts to parks, transit and other services, she notes, the city police force has stopped recruiting new officers because of budget cuts, and murders have risen dramatically this year. “The basic services of the city are suffering at the same time the Simons and [Colts owner Jim] Irsay are making out like bandits.”

Read, and discuss.

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18 comments on “The “operating subsidies” epidemic: How sports teams get cities to throw good money after bad

  1. Great read, Neil.

    I’m guessing this was made official after you sent in the article, but here’s yet ANOTHER gem from Orlando:

  2. Indianapolis is so messed up. It’s also using taxpayer money to fund a private residential building on the former Market Square property.

  3. re: the “political graveyard” of ex officials who voted for these deals…

    Does anyone think for even one second that the politicians who supported these plans and then go to work for the clubs aren’t making out like bandits themselves? I think they’ll be handsomely rewarded for effectively stealing from the taxpayers they claim to have represented.

    As Piggy likes to say, they don’t work for you… they work for themselves first and foremost, and their rich friends (or rich people who they want to be their friends) second.

    Why do we keep electing liars and scumbags?

  4. John,

    Because the amount of people who can actually have the monomania to put up with the controlled chaos and zero-tolerance of public life tend to be liars and scumbags.

  5. I dont mind the Colts doing what they had to do to get a new stadium. The team won a superbowl and hosted a superbowl there… it has made the city money.. this website makes me laugh with the anti stadium hoopla.. but at the end of the day the city has to pay up.. so i really think its pointless but hey just my two cents… and i dont mind that half a cent to be used for a awesome football, basketball or baseball arena either.

  6. “… and i dont mind that half a cent to be used for a awesome football, basketball or baseball arena either.”

    Well, if you’re a fan – and I assume you are – of course you don’t mind. Being in favor of spending other people’s money on things you enjoy is normal. But it is shortsighted.

  7. Oh jeez, Neil. I enjoyed the article but you seem to always reference those couple of studies that are rigged to make stadium subsidies look bad.

    To your overarching point about operating subsidies, the reality is that arenas often lose money nowadays. I realize that it’s not very sporting of the Coyotes or Pacers to say, “we’ll operate the arena if you give it to us for free” and then come back eight years later with, “we found out that arenas can lose a lot of money, so we’re leaving if you don’t start covering operating costs”. But it’s still not a handout (except in the Coyotes case, where part of it is a handout). If the Pacers or Coyotes left, Indy or Glendale would be paying millions of dollars to operate a money losing arena. From the city’s POV, isn’t it better to have a team present if you’re paying the money, anyway?

  8. When Democrats say that Republicans are only for Wall Street, people should tell them you’re for corporate welfare also since you guys give huge public subsidies to millionaire and billionaire whom you publicly deride, but privately support

  9. You’re going to have to back up that “rigged,” Ben.

    As for teams being justified in asking to be paid to run arenas that they themselves demanded be built … actually, I don’t think I have anything more to add than that.

  10. “From the city’s POV, isn’t it better to have a team present if you’re paying the money, anyway?”

    Let’s see. If operating the arena without the team would cost the city $X million and the cost of the arena + the team is $X + Y million, then probably not.

    If you don’t call an add-on subsidy to a team to operate a facility that was built for that team a “handout”, you’re engaging in semantic nonsense. And if that operating subsidy wasn’t awarded at the end of a competitive process, it’s fiscal malfeasance.

  11. There are two primary problems with the “sports fan” line of thinking about public financing of stadiums. (Speaking as one who enjoys watching, playing, and following sports)

    1. Public financing makes it unclear what the “right price” for a stadium is, since nearly every improvement is designed solely with the team making more money without spending more money. If the stadium/arena were financed privately with projected revenue generation in mind, stadiums would be much cheaper. From the “fans” perspective, few “improvements” of modern stadiums do much for fans. In fact, in the era of premium seating and boxes, these improvements actually make conditions for fans worse.

    2. “Fans” like to adopt the language of public policy without doing the actual math that public policy demands. Everyone likes to say that stadiums “make millions for cities,” or “are game changers for development” without actually making a real case for it other than the “eyeball test.” Ben–if you don’t like the studies, find one that says the opposite and we can all examine the underlying assumptions and methodology to see if its better. I doubt you’ll find one. On the other hand, if stadium proponents policy goal is to “improve revenue streams for the team while also massively increasing team value,” we’ve probably succeeded, but that may not play well on election day.

    It really is amazing how much prospective employers and residents really like well-run cities, with paved streets, good policing, and good schools–every day, not just on the one Super Bowl Sunday per 20 years. Not as much fun for politicians and sports fans though.

  12. Neil,

    It’s rigged in that it just looks at per capita income. One study even points out that it ignores the number of jobs or number of businesses. I’ve never, ever heard a stadium proponent say, “this whole area’s per capita income will go up.” The selling point is usually overall economic growth. You could have everybody still making $40k/yr on average but if 5,000 new permanent jobs are in town at $40k/yr, then that’s growth. And those studies don’t reward that.

  13. It’s not just per-capita income, though – numerous other studies have looked at citywide sales tax receipts and similarly found little to no positive impact. See:

  14. And my point on the operating subsidies is that it’d be nice if team owners had a sense of honor (for lack of a better word) and were willing to lose $10 million/year to operate a building, but we have to live in the real world. Money doesn’t come from thin air. Someone has to pay to operate the building, and the threat of teams moving (especially in the NBA and NHL) is a real one.

  15. I’d be surprised at any arena promoted that kind of job growth. Most likely the opposite–since arenas take up extremely valuable land and utilize it with non-dense, rarely-tax producing activities.

    You seem to be answering your own public policy question. The point isn’t just why cities pay such subsidies, its why do cities build such technologically advanced and expensive venues for the mere privilege of hosting a mediocre NBA or NHL team? No doubt they could build something cheaper and more efficient that would still attract the sorts of “events” that supposedly will revolutionize urban life.

  16. Ben, do you see any point at which a sports team’s losses are the team owner’s responsibility, not that of the city it plays in?

  17. Neil

    You missed Trotter’s hilarious article on the Chargers stadium which was precisely about throwing good money after bad.

    Trotter claims San Diego will lose $300 million operating Qualcomm stadium and then says that would be enough to cover the public financing for a new stadium. In reality we are set to lose about $100 million over the last 8 years of the lease while the Chargers have publicly asked for almost $1 billion in public subsidies.

  18. I did see the Trotter piece, but there are so many of these columns, I can’t take the time to play Whack-a-Mole with all of them. Though declaring Qualcomm to be beyond redemption because it has an old scoreboard was a particularly nice touch.

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