COVID-19 Plays Havoc with
Government-Financed Sports Venues
By Howard Sierer
Government-financed professional sports venues have always been a bad idea. The pandemic has made them worse.
Social distancing has led to empty venues that were scheduled to host professional sports, concert tours, and the like. As a result, COVID-19 is playing havoc with budgets for those local governments that loaded themselves down with debt to attract or retain a professional sports franchise.
All publicly-owned arenas and stadiums are financed completely or in part by municipal bonds. Since 2000, municipal bonds totaling almost $17 billion have been sold to finance major-league sports venues. Those bonds require regular interest payments: there are no COVID-19 clauses that allow local authorities to suspend or cancel payments.
COVID-19 has whacked tourism in general and especially the tourists expected to fly in for games and concerts. According to the Brookings Institution, over 40 percent of bond payments were expected to come from taxes on hotels and rental cars. Local taxpayers foot the other 60 percent.
Cities all over the country from Glendale (Phoenix), AZ, to Maryland Heights (St. Louis), MO, to bigger ones like Atlanta are facing shortfalls, cities that saw a professional sports team as a sign they had arrived in the big leagues.
A number of studies have shown that professional teams are not an economic boon to their host cities. Raymond Keating in “Sports Pork: The Costly Relationship between Major League Sports and Government,” finds that “The lone beneficiaries of sports subsidies are team owners and players.”
But aren’t a lot of local jobs created? There are surprisingly few jobs associated with a sports stadium. The State of California estimates that 500 jobs will be lost in the Oakland area when the Raiders leave this summer to become the Las Vegas Raiders.
Those jobs will be recreated in Las Vegas when its $1.9 billion Allegiant Stadium opens this fall. But do the math: If jobs were the primary motivation for stadiums as often claimed by local politicians, those jobs taking tickets, selling refreshments and cleaning up after events cost an insane $3.8 million each.
As for the prestige a city can expect from a major league sports team, beauty is in the eye of the beholder. Ticket prices are through the roof: only upper-income fans can afford to go. The rest of us watch games on television or see replays on the evening news.
Adding insult to injury, our tax laws subsidize the privileged few. Businesses buy season tickets in stadium VIP boxes where they wine and dine clients. The cost of those tickets is a business expense on which no taxes are due. Watched many NFL games from a VIP box lately?
Unlike most venues that are 100 percent government-financed, the Las Vegas Raiders’ Allegiant Stadium financing comes in the form of $750 million in public funding and $1.1 billion from the Raiders. In return, the team will pay one dollar per year in rent, own the naming rights, and keep signage sponsorship revenue.
I believe team owners should provide their own venues at their own expense. Joe Robbie built his own stadium for the Miami Dolphins in 1987. The Raiders at least are providing funds for two-thirds of their Las Vegas stadium.
San Diego set a wonderful precedent when its voters refused to build a new stadium for the Chargers. The team moved to Los Angeles and San Diego’s citizens are better off for it, especially now with the pandemic. Sadly, all too many local government leaders are willing to compete for franchises using their constituents’ money, so the beat goes on.
The bottom line, professional sports arenas and stadiums are losers for almost all of a host city’s citizens. It’s time to end this form of corporate welfare.
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