I. Introduction
Many people have spent a summer night or a Sunday afternoon at the ballpark or stadium watching their favorite teams. These stadiums are an integral part of a professional sports franchises operations. In recent years there has been a surge in new stadiums being built by teams as they take advantage of the willingness of cities to provide public financing. Since 2000 there have been 17 new stadiums built for National Football League and Major League Baseball teams. [1]. In addition, several teams are in discussions for the building of new stadiums in the next few years. [2].
II. Analysis
Of those 17 new stadiums only one, SBC Park in San Francisco, was built entirely with private funding. [3]. Sports teams have on average have been able to get 70% of the costs of building a new stadium financed through public funding. [4]. This generally allows sports franchises to cut their costs and increase their profits, while taxpayers pick up the tab. [5].
There are several methods by which teams are able to attain public financing for their stadiums. One of the more common ways is the issuance of tax-exempt bonds. [6]. This exemption works to lower the interest on debt and thus helps to reduce the cost to the team of paying for a stadium. [7]. This can mean that a team can save over $2 million a year in tax payments. [8]. Another way that teams can get public financing is through local tax exemptions and increases in taxes to the citizenry. [9].
It is puzzling as to why cities and taxpayers have been so willing to publicly finance these high priced stadiums. Especially when one considers the following; a recent study by Forbes revealed that the average worth of the 32 teams in the National Football League is $898 million. [10]. In fact, there are five teams that have eclipsed the one billion mark. [11] A look at the television contracts that have been signed by the NFL and Major League Baseball further help to illustrate the influx of money that professional franchises have access to. The NFL recently signed television contracts that will provide the league with $3.1 billion annually for the next five years. [12]. MLB, although not at the level of the NFL, will receive around $300 million annually for the next five years. [13].
The above numbers help to show the wealth and prosperity of professional sports teams. However, in spite of this data, most sports franchises are able to attain the financing necessary to build a new stadium. For example, both the Mets and Yankees have had stadium financing proposals approved and are hoping to open new stadiums in the next few years. [14]. The Yankees new stadium is expected to cost $930 million, and they will receive $866 million from tax-exempt bonds issued by New York City. [15]. The Mets plan to spend $800 million on their new stadium, and will receive $632 million from public funds.
The principle justification for why sports franchises should receive public financing to support the building of stadiums is that it provides a boost to the local economy. [16]. However, these justifications may be overstated in relation to the costs that are imposed via taxes necessary to finance the price of the stadium. Simply put, if a franchise can build a stadium without any cost to the public, then any benefit to the community will come without the community first having to undertake the cost of providing financing for the stadium. In other words, when the franchise receives public financing they are imposing a cost on the community, and the community cannot truly benefit economically until it has repaid those costs.
A study done just two years ago contends that sports franchises can build their own stadiums without public subsidizes. [17]. The study reported that teams could recover half the construction costs within five years, and the entire cost within twelve years. [18]. Furthermore, within twenty years, a franchise’s revenues from the stadium could exceed construction costs by $100 million and $200 million in thirty years. [19]. Under this scenario, not only does the team get its new stadium, but the team has a continuous revenue stream that does not subject taxpayers to the burden of covering the stadium’s costs. Thus, if sports stadiums are really supposed to provide a boost to the economy, then they should do it without first imposing costs upon the community.
One team that has failed to get full public support for the building of a new stadium has been the Florida Marlins. [20]. The Marlins are attempting to get approval for a $360 to $390 million stadium, but have been unable to get the additional public funding they deem necessary to finalize the plans. [21]. The county of Miami-Dade and the city of Miami offered $166 million in tourist taxes to the building of the stadium. [22]. Another option that has been considered for raising more money has been to raise the sales tax. [23]. However, officials feel that the Marlins are over-estimating the costs of the stadium and they don’t want to commit or increase any more taxes in order to fund the stadium. [24]. It may be time for more communities to take the South Florida example and stand firm in their commitment to not provide excess public funding for new sports stadiums.
III. Conclusion
It seems that with the abundance of revenue that sports franchises have they should make a greater effort to finance the building of their stadiums without the assistance of public funding. Sports franchises are generating tremendous amounts of revenue and requiring them to finance their own stadiums will remove the burden from the taxpayer. Taxpayers should be willing to treat sports franchises like the private business that they are. A taxpayer would not subsidize a new building for Fortune 500 Company or any other corporation, and they should not be willing to do it for professional sports franchises either.
[1] See World Stadiums, http://www.worldstadiums.com/north_america/countries/united_states.shtml. (last visited Sep. 23, 2006).
[2] Bryan Virasami, Mets Detail Stadium Financing, NEWSDAY, April 11, 2006, available at http://www.newsday.com/sports/baseball/mets/am-mets0411,0,7473458.story.
[3] James Hannah, Clubs Could Bear the Cost of Ballparks, USA TODAY, March 25, 2004, available at http://www.usatoday.com/sports/baseball/2004-03-25-ballpark-construction-costs_x.htm.
[4] Id.
[5] Id.
[6] Roger G. Noll & Andrew Zimbalist, Are Publicly Subsidized Sports Stadiums Worth the Cost, BROOKINGS REVIEW, available at http://www.oldcity.org/stadium1.htm.
[7] Id.
[8] Id.
[9] Id.
[10] Kury Bandenhausen, The Business of Football, FORBES, available at http://sports.espn.go.com/nfl/news/story?id=2572739.
[11] Id.
[12] Id.; Wikipedia, NFL on Television, at http://en.wikipedia.org/wiki/NFL_on_television#List_of_NFL_television_contracts. (last visited Sep. 23, 2006)
[13] Wikipedia, Major League Baseball on Television, at http://en.wikipedia.org/wiki/MLB_on_Cable_Television. (last visited Sep. 23, 2006)
[14] Virasami, supra note 2
[15] Id.
[16] Id.
[17] Hannah, supra note 3
[18] Id.
[19] Id.
[20] Sarah Talalay, Miami-Dade predicts $100 million shortfall in funding for Marlins stadium, SUN SENTINEL, Sept. 15, 2005, available at http://www.sun-sentinel.com/sports/baseball/marlins/sfl-marlstad15sep15,0,7194397.story?coll=sfla-sports-marlins.
[21] Id.
[22] Id.
[23] Id.
[24] Id.