This article explores the literature on the impact of professional sports teams and stadiums on their host communities. A large body of research has addressed these issues, some of it academic and much of it for hire by team and sport boosters. The broad conclusion of this literature is that stadiums and franchises are ineffective means to creating local economic development, whether that is measured as income or job growth. There may be substantial public benefits from stadiums and franchises, but those too are insufficient to warrant large-scale subsidies by themselves. In combination with consumer surpluses from attendance, however, subsidies may be efficient. (JEL R58, J30, H71, L83)
In the past 20 yr, stadium and arena construction has occurred at an incredible pace. Cities that had one stadium for both baseball and football suddenly needed stadiums dedicated to each individual sport. Cities without professional sports franchises believed that the way to attain a franchise, either through movement of an existing team or through expansion, was to build a state-of-the-art facility. Teams used the existence of willing suitors to pressure their home towns for bigger, better, and more modern facilities for sweetheart deals on the use of the facilities and, even to a share, sometimes 100% shares, of the revenues generated by the publicly owned facilities.
All this stadium-related activity attracted the interest of academic and nonacademic public policy analysts. Millions of dollars of public spending on stadiums for professional sports franchises, while streets needed repair and schools and other vital public services were facing cuts, made subsidies for stadiums even more attractive an issue to researchers from economics, public policy, sociology, political science, and sport management. The nature of the research was and is as varied as the background and training of the individuals conducting it.
I focus on the research on the public sector side of construction of stadiums and arenas. (1) I restrict attention to two general issues in the literature. First, I review the literature on the relationship between construction and operation of the facilities and economic outcomes in the host community. (2) Second, I review the research into the politics of stadium and arena subsidies. Researchers have studied the referendums on subsidies, wherein the voters get a chance to express their support for or opposition to the public subsidies, and the process by which stadium construction gets onto the public agenda. Besides the general effects on the economy, new stadium construction is also justified as necessary to attract mega-events such as the Super Bowl or All-Star games. An active literature focuses on these events but is neglected here due to space limitations.
The next four sections focus on separate aspects of the public sector issues. In order, I discuss the size of the stadium and arena subsidies, the relationship between facilities and economic outcomes, the politics and campaigning surrounding facility construction, and the future of this literature. Finally, a concluding section recaps the issues.
A discussion of stadium and arena issues must address the cost of these facilities and the extent to which public money is used to finance them. It is also important to understand how the characteristics and the prospective uses of the stadiums have changed over time. Perhaps, the first published work to provide this information is from 1926 in a journal called The Playground. The article notes that "Not only universities but cities and high schools and private agencies are also joining the stadium ranks and building large structures to accommodate the crowds who attend the athletic activities, festivals, pageants and other large community events." A building boom was in progress at the time as the number of stadiums rose from. 11 in 1917 to 70 in 1926. By contrast, Long (2005) referred to 65 "new" facilities (stadiums and arenas) opened since 1990. In the 5 yr from 1921 until 1926, 56 stadiums had been built. Construction of the 70 stadiums built between 1917 and 1926 cost in total about $295.65 million in today's dollars or just $11 million more than the average cost of development of one of the 17 Major League Baseball stadiums opened since 1990 (Long, 2005).
Besides cost, The Playground article refers to shape and size as the most important characteristics of stadiums that communities should consider before construction. Shape mattered because the traditional ellipse made it difficult to hold track events that require a straightaway; the horseshoe structure did not have this problem. Planners were admonished to be sure that the facility had seating enough for the current attendees and could be expanded as the city grew or when "the university has graduated more enthusiastic alumni to add to those already crowding the bleachers for the big games." Two additional concerns listed in 1926 are adaptability of the structure and its management. Adaptability was important "in order that the stadium may have as broad a use as possible." Obviously, the modern focus on sport-specific stadiums places far less value on stadium adaptability than did The Playground.
Concerning management of facilities, Wulz (1957) argued that public ownership of stadiums was justified if "private enterprise could not provide the service which the public demanded and at the same time realize an adequate profit upon its investment." He also argued that the facilities often house events of a "civic nature and thus may be worthy of community-wide support," but city managers may have been tasked with operating at a profit enterprises "which lost money or indeed went bankrupt under private management." Therefore, Wulz focused on what the municipality should charge the private entities that use the stadium and whether, after an analysis of the functions the facility will serve, "a tax subsidy is warranted." He foresaw public subsidies for "governmental activities and perhaps activities at which no admission is charged, ... while at the same time insisting that commercial type activities pay the full cost of the services or facilities which are provided." Wulz did not suggest subsidization for profit enterprises as is a common practice today. Unfortunately, he does not provide information on actual subsidies prior to 1957.
Okner (1974) provided the first of the modern discussions of stadium costs and subsidies. Quirk and Fort (1992) and Keating (1999) updated the subsidy estimates, and Fort (2006) reviewed this literature. (3) The most recent and comprehensive studies of stadium and arena subsidies are by Long (2005) and Zimbalist and Long (2006).
Long (2002) collected data on all aspects of public subsidies for stadiums and arenas, with a particular focus on the period since 1990. This recent period let her include information on operating subsidies for the facilities still in use. This is important because stadiums and arenas may be subsidized both at the construction phase and during operations once the facility is completed. Emphasis on the public share of capital costs produces misleading results regarding the extent of the subsidy if operations are also subsidized. Zimbalist and Long (2006) showed the importance of operational subsidies because generally "when net operating costs are included, the public share goes up."
Interestingly, they also found that a two-decade long decline in the public share of stadium and arena capital costs stopped about the year 2000. After 2000, the public sector share stagnates at about 58% or rises slightly to 63%. The average public contribution to the total cost, capital and operating, is $158--$164 million in 1990-1994, $149-$161 million in 1995-1999, and $249-$280 million in 2000-2006. They documented that the extent of the public participation varies between stadiums and arenas and suggested that the public share is highly sensitive to the bargaining skills and efforts of the public officials involved.
III. PUBLIC ECONOMIC IMPACTS
The most basic question in the research about stadiums, arenas, and sports franchises is the extent to which these contribute to the vitality of the local economy. The literature on this issue is of two basic types: the ex ante economic impact study and the ex post econometric analysis. The economic impact studies invariably suggest that there are large benefits from stadium and arena construction. The consensus of the ex post studies is that there is little convincing evidence for large income and job creation benefits attributed to stadiums; rather the evidence largely points to there being none of those benefits. Crompton (1995) and Hudson (2001) reviewed the pitfalls in impact studies.
Econometric research relating professional sports and stadiums to local incomes and employment has taken several forms (see, e.g, Baade, 1996; Baade and Dye, 1988, 1990; Baade and Sanderson, 1997; Coates and Humphreys, 1999, 2001, 2003; Noll and Zimbalist, 1997; Rosentraub, 1997; Rosentraub et al., 1994). siegfried and Zimbalist (2000), Rappaport and Wilkerson (2001), and Fort (2006) have all recently surveyed the literature on sports' effects on the local economy, including many of the works just listed.
There are some researchers who contend that the consensus from this literature is wrong. Recently constructed stadiums are integrated into the downtown and are explicitly used to anchor downtown redevelopment, while the earlier stadiums that dominate the data in existing research were built in the suburbs and were frequently surrounded by acres of parking lots. Because of the difference in the context of the two types of stadiums, the impacts on local development will also be different. Moreover, given the high degree of aggregation in the data used in many studies, the positive but possibly small effects of sports and stadiums will be swamped.
I discuss both these criticisms of the consensus literature, with a focus on recent research. Despite the resurgence in the view that stadiums are good economic development tools and criticisms of the methodology used to find the opposite, I contend that the issue is really settled on the consensus that they are not. This does not mean, however, that stadium and arena subsidies cannot be justified based on their actual benefits, measurements of which I discuss to close out this section.
A. Job and Income Creation
Empirical research relating professional sports and stadiums to local incomes and employment has taken several forms (see, e.g, Baade, 1996; Baade and Dye, 1988, 1990; Baade and Sanderson, 1997; Coates and Humphreys, 1999, 2001, 2003; Noll and Zimbalist, 1997; Rosentraub, 1997; Rosentraub et al., 1994). Siegfried and Zimbalist (2000), Rappaport and Wilkerson (2001), and Fort (2006) have all recently surveyed the literature on sports' effects on the local economy. The consensus of this literature is that professional sports and stadiums do not cause income or employment to grow.
Some proponents of stadium- and sports-led development programs have suggested that downtown stadiums are likely to have larger benefits than suburban stadiums. For example, Chema (1996) said that the value of stadiums "as catalysts for economic development ... depends upon where they are located and how they are integrated into a metropolitan area's growth strategy." Nelson (2001, 2002) found that teams that play in the central business district tend to be associated with an increase in the metropolitan area's share of the regional income. Wassmer (2001) pointed out that Nelson's results may only reflect the positive association between a healthy central business district and a healthy metropolitan area. An additional weakness in Nelson's findings is that raising the share of regional income that goes to the metropolitan area could be evidence of redistribution of income or economic activity from one area to another rather than evidence of region-wide benefits from having a sports franchise or new stadium. Wassmer (2001) recognized this re-distributive interpretation of the results of Nelson (2001) but suggested that such findings "may alleviate some of the reverse Robin Hood results of the stadia subsidy." In other words, income transfers from the suburbs to the central city may offset the redistribution to wealthy suburbanites who attend games from the poor city-dwelling taxpayers who do not.
Santo (2005) and Austrian and Rosentraub (2002) suggested that the emphasis on the impact of stadiums and arenas on general economic well-being should be replaced by focus on whether they foster the redevelopment of a specific area of the city. (4) Downtown, for example, is deserving of help even if it comes at the expense of the rest of the metropolitan area. Of course, this argument is normative. The implication is that the studies that find no metropolitan-wide increase in income or jobs are beside the point.
Santo (2005) investigated the effects of downtown stadiums, following the methodology of Baade and Dye (1990) but restricting his focus to "the new generation of sports facilities [that] would have more favorable economic impacts than their predecessors." He suggested that a "retro-style ballpark in a downtown or retail setting is likely to attract visitors from a wider area than its more utilitarian suburban counterpart, and is likely to induce longer stays and greater ancillary spending." While he found positive and statistically significant coefficients on the stadium variables in regressions explaining the city's income as a share of the regional income, the results are difficult to interpret and of questionable practical significance. For example, Santo reported that Baltimore's M and T Bank Stadium, which opened in 1998, accounted for an increase in aggregate income of more than $3 million. That is clearly an impressive sounding boost to income. What he does not report is that personal income in the city of Baltimore that year was, in current dollars, more than $15 billion. (5) The statistically significant boost to Baltimore's income then amounts to about 0.02%. At the same time, Camden Yard's baseball stadium, often held up as an example of what a downtown "retro" stadium can do for a city, has an estimated impact of about--$4.8 million. Santo did not mention this odd result.
The upshot of the focus on new stadiums built where they can make a difference for urban redevelopment, in the central city or downtown, is that the evidence on these effects is not conclusive. Moreover, even if the evidence is that the central city benefits from a downtown stadium, it is not necessarily the case that those benefits spill over to the broader metropolitan area. In the most likely case, economic activity relocates from the suburbs to downtown, redistributing income in the process. Critics of stadium-led economic development programs have consistently argued that a city or a metropolitan area that builds a new stadium is simply moving income around. Now, it seems that some stadium proponents have adopted redistribution as the goal of stadium-led development plans.
A second criticism of the existing research is that the data used are not fine enough to capture the effects. For example, Baade, Baumann, and Matheson (2005) pointed out that finding the effects of sporting events in annual data is likely to be very difficult. Chema (1996); Baade, Baumann, and Matheson (2005); and Lavoie and Rodriguez (2005) all argued that sports is much too small a component of the economy for the effects to be visible in aggregate data. Baade, Baumann, and Matheson (2005) used monthly sales tax data, and Lavoie and Rodriguez (2005) turned to monthly hotel occupancy rates in Canadian cities to focus on a less aggregate measure of economic activity that may be linked to sporting events. Neither study produces strong evidence for the effects of the sporting environment on its dependent variable. However, Lavoie and Rodriguez produced some evidence that the NHL lockout and the MLB strike reduced hotel occupancy rates in some Canadian cities. (6) Some of the effects are considered reasonable, others, they conclude, "seem quite a lot."
The point of this criticism is a good one. Studies using annual data representing entire metropolitan areas are likely to be incapable of distinguishing the effects of a sector as small as the sports industry. Indeed, that argument makes the point that critics of stadium- and arena-led development want understood; professional sports and stadiums and arenas are unlikely to be effective economic development tools because they are tiny parts of the aggregate economy. Moreover, one can also apply this criticism to the studies done by the critics of aggregate data. Extended discussion of this issue is not possible here, but consider how six to eight hockey games in a month, many of which are weeknights, must account for a small share of the hotel room nights in a month. Surely, sports-related hotel occupancy is likely to be a very small share of total monthly occupancy and consequently have little or no impact on citywide income.
Despite the lack of evidence for widespread growth in income and employment, or even increased hotel occupancy, it still may make economic sense for local governments to invest in stadiums, without resorting to the redistributive, "beggar-thy-neighbor" rationale. Stadiums, arenas, and sports franchises provide consumption and public goods benefits to the citizens of the host community. The issue that remains unresolved is the size of these unmeasured benefits.
B. Measuring the Benefits
Alexander, Kern, and Neill (2000) estimated consumer surplus for each of the four major professional sports in the United States to measure the private benefits of stadium or arena construction. (7) They found that consumer surplus is less likely to justify stadium or arena construction the more elastic is attendance demand and the greater is the annual cost of financing the facility. Their estimates of private benefits imply fairly modest values of the public benefits of stadiums or arenas to justify public subsidies. In Seattle, for example, they found that public benefits per household (2.6 persons) of $20.36 were sufficient to warrant the public subsidy for the Mariners' baseball stadium. The figure for Milwaukee was $37.35/household. On a per person basis, these values are quite similar to the $10 reduction in per capita income associated with an existing baseball franchise playing in a 37,000 seat stadium found by Coates and Humphreys (1999) and the approximate cost of the Camden Yards baseball stadium per Baltimore household of $14 estimated by Hamilton and Kahn (1997).
The literature seems to find a generally consistent rough estimate of the necessary public benefits of baseball stadiums if those stadiums are to merit public subsidies. The question that remains unanswered is the size of those public benefits. Next, I review attempts to estimate the value of the public benefits of stadiums and professional sports franchises.
Zimmerman (1997) noted that one public benefit of professional sports is the "satisfaction people get from living in a 'big league' town, from having another topic of conversation that is common to most citizens, from reading about its successes and failures in the newspaper, and the like." Because none of these benefits passes through the market in the way that ticket demand does, they are what Alexander, Kern, and Neill (2000) referred to as public benefits. The value of these unmeasured benefits is important for judging whether subsidies for sports franchises are warranted. Naturally, measuring the value is difficult and subject to substantial uncertainty. In this section, I discuss alternative means of measuring this value both conceptually and practically. Before turning to that discussion, I point out how much of what may be benefits of "world-class" city status may be addressed in the literature on job and income creation effects.
One of the benefits of world-class city status is that the city is more attractive to businesses seeking to open new or expanded operations. The theoretical argument is that businesses wish to locate in places that potential or relocating employees will find attractive. An important attraction of any location, the argument continues, is the presence of major league sports. This aspect of world-class city status is, of course, evaluated in the literature that finds little evidence that stadiums and professional sports franchises generate large benefits in job and income growth. Consequently, on these grounds, there is little benefit in being a world-class city.
The second aspect of world-class city status is that the appearances on national, and even international, television are good advertising for the city. Whether spending tens or hundreds of millions of dollars for stadium construction to acquire that exposure makes sense depends on the cost of advertising time and the frequency and duration of those views of the city. A quick look at the evidence suggests, however, that there are more cost-effective ways of advertising the city. For example, Gaebler Ventures, which explains the costs of national television advertisements on its Web site (http://www.gaebler.com/Television-Advertising-Costs.htm), reports that the typical 30-sec national spot costs $350,000 to produce and more than $100,000 for the airtime. Obviously, one ad can be produced and aired dozens of times nationally for a fraction of the cost of a $200-$600 million stadium. Indeed, a city could purchase one 30-sec spot on the broadcast of the 2006 Super Bowl at a price of $2.5 million, around one-hundredth of the cost of a new stadium for its football or baseball franchise. Regardless of the cost-effectiveness of stadiums as sources of advertising, these advertising benefits are touted as a valuable means of conveying to the nation and the world that the city has a bright future with a vibrant business environment. Businesses are supposed to be attracted to this city as are conventions and conferences and tourists. Consequently, if the argument is correct, the free advertising the stadium generates should also produce job and income creation. Again, there is little evidence that stadiums and professional sports enhance job and income growth.
Consider the third aspect of the world-class or "big league" city argument. People find professional sports a valuable amenity in a community in the same way that clean air, good public schools, and low crime are desirable attributes of a city. Consequently, people will pay more for housing or will accept lower wages to live and work there. The greater demand for housing or supply of labor may be a consequence of the "common topic of conversation," bringing the city together, making it a community, or simply the value of reading about the team's "successes and failures in the newspaper." It may also be that people are willing to pay to live in a world-class city. Whatever the exact source of the increased demand for housing or supply of labor, all other things constant, the increase in demand for housing raises equilibrium property values and rents, while the increase in labor supply reduces the equilibrium wage rate. (8) The approach to addressing the effects of these "public goods" aspects of sports and stadiums on housing demand or labor supply is the estimation of hedonic models of the determination of wages, rents, or property values.
Tu (2005) and Carlino and Coulson (2004) used the hedonic regression approach to estimate the value of stadiums and professional sports. Tu analyzed property values, using sale prices, in the area around FedEx Field outside Washington, DC. Accounting for the possibility that the stadium location was determined by the low value of property in the area, rather than the other way around, he estimated the sales price model on data from the following three time periods: prior to development of FedEx Field, during development, and post-development. Tu found that the price discount on properties near the stadium was smaller in the postdevelopment period than in the predevelopment period, which he interpreted to mean that proximity to the stadium raises property values.
The results of Tu are not so clear, however. He neglects the existence of U.S. Airways Arena (opened in 1974 as the Capital Center, with a seating capacity of almost 19,000) only about a half mile from the site of FedEx Field. Both an NBA and an NHL franchise called U.S. Airways Arena home until 1997, the same year that FedEx opened. (9) Given the close proximity of the two venues, many of the houses in his sample are similarly close to each. Accounting for proximity to both venues may be important, and failing to do so may bias the results. Similarly, the opening of the football stadium simultaneously with the closing of the basketball and hockey venue confounds the effects of the two events in the analysis by Tu, making the source of the change in property values indeterminate.
Carlino and Coulson (2004) argued that hosting a professional football team will affect willingness to pay for rental housing and/or the wages of workers. Their results with respect to wages provide little evidence one way or the other, as the variable indicating the presence of an NFL team in the city is not statistically significant in their wage regressions. In their rent equations, Carlino and Coulson (2004) found that the NFL variable is positive and statistically significant when they focus their analysis on the housing units in the central cities of metropolitan areas, but the results get weaker as they analyze broader geographical areas. For the central city, their estimate is that rents are higher by about 8%/yr because of the presence of a National Football League team. That number seems implausible, however, as it indicates that the presence of a football team has the same impact on rent as does having a garage. The 8% boost to rent from the NFL franchise is just enough to counteract the reduction in the rent from having holes in the floors.
Coates, Humphreys, and Zimbalist (2006) argued that the results of Carlino and Coulson (2004) are unreliable. They showed that inclusion of a large number of low rent and low rent growth units that are omitted from the analysis by Carlino and Coulson reduces the size of the coefficient on the NFL variable and makes that coefficient statistically insignificant. Carlino and Coulson (2006) criticized the methods of Coates, Humphreys, and Zimbalist and resurrect their results. Obviously, hedonic models have not yet produced a consensus on the public benefits of stadiums and franchises.
Dehring, Depken, and Ward (2007) cleverly took advantage of a series of public announcements regarding locations for a new stadium to host the Dallas Cowboys to estimate the public benefits of stadium proximity. (10) After the first announcement, which suggested that a new stadium would be built in downtown Dallas' Fair Park area, property values near the proposed site rose, but property values elsewhere in Dallas county fell. A subsequent announcement that removed that first site from consideration had the opposite effect. Announcements about a proposed stadium site in Arlington, Texas, did not individually statistically significantly affect property values there. However, taken together, the three announcements raised the level of certainty about the selection of the Arlington site and are linked to a statistically significant reduction in average sale price of 1.3%-1.5%.
The important lesson of the study of Dehring, Depken, and Ward is that the amenity, or public benefits, value of the stadium is likely to roughly offset the added costs of paying for the stadium. In other words, while the benefits of the stadium are capitalized into the value of property, so too are the costs of the stadium and at approximately a dollar for dollar rate. A corollary to this lesson is that the capitalization of benefits and costs is not necessarily or, even likely, spread evenly across the jurisdiction. The Dallas announcements raised property values in one area of Dallas while reducing them in other areas. In such a case, the stadium construction is less about economic development than it is about redistribution.
Clearly, the issue of how best to estimate the public benefits of professional sports franchises using hedonic methods is unresolved. The hedonic approach has the advantage of relying on market-generated data. It has the disadvantage of only indirectly addressing the values. Contingent valuation relies on nonmarket-determined data to estimate the value of professional sports and stadiums. It is, however, a direct approach to the valuation of sports franchises. In this approach, individuals are surveyed about their willingness to pay to keep or attract a franchise. The survey instrument also asks a variety of questions designed to elicit information about the individual's preferences and ability to pay. Individual willingness to pay is then explained using personal characteristics of the survey respondents and their income levels. The objective is to obtain an estimate of the inverse demand function and to use that function to compute estimates of aggregate willingness to pay.
In the context of stadiums and professional sports franchises, CVM analyses include the examination by Johnson, Groothuis, and Whitehead (2001) of the value of the Pittsburgh Penguins (NHL); the assessment by Johnson, Mondello, and Whitehead (2007) of the value of the Jacksonville Jaguars and of a prospective NBA franchise in Jacksonville (NFL); and the study by Fenn and Crooker (2005) of the value of the Minnesota Vikings (NFL). In each of these studies, the local population's willingness to pay is a fraction of the cost of building a new stadium or arena. For the Pittsburgh Penguins, the estimated willingness to pay (use and nonuse values together) was about $66 million and the cost of a new arena was projected to be $180-$220 million; for the Jacksonville Jaguars, $52 million of aggregate willingness to pay versus $112 million spent on renovating their stadium; and for the Minnesota Vikings, $96 million of willingness to pay compared to $300 million or more for new stadium construction.
Alone, these estimates of aggregate willingness to pay clearly indicate that the public benefits aspects of professional sports are insufficient to justify the large public subsidies. But what if they are taken together with the consumer surplus or the private goods benefits? The estimates of consumer surplus for the average NFL franchise in 1996 according to Alexander, Kern, and Neill (2000) ranges (in 2000 dollars) from $7.94 to $23.93 million. Assuming the life of a stadium to be 20 yr, and with discount rates ranging from 2% to 8%, the present value of the consumer surpluses from NFL attendance fall between $77.96 and $391.26 million. The larger values result from lower discount rates and lower price elasticities. Using the same 2% discount rate that produced a $52 million total willingness to pay (Johnson, Mondello, and Whitehead, 2007), the present value of consumer surplus is between $129 and $391.26 million. In this case, the total benefits of the stadium renovations in Jacksonville exceeded their cost.
Calculations of this sort, combining the consumer surplus from attendance at professional sporting events with the public benefits from having stadiums and franchises, suggest that there are circumstances that justify public subsidies. Calculations like this are rarely done, however. Moreover, this type of aggregate comparison does not address the distribution of the costs and benefits. If the attendees who obtain consumer surplus benefits are different from those who pay the taxes that support the subsidy, then despite the overall value to society of the franchise and stadium, the policy remains one of redistributing income away from taxpayers to sports fans.
IV. VOTING ON STADIUM AND ARENA SUBSIDIES
I turn now to one additional approach to assessing the value of sports and stadiums to citizens. Stadium subsidies often go before voters. Fort (1997, 2006) described the referendums and addressed the theoretical political economy issues but did not provide econometric analysis of the determinants of voting on stadium or arena referendums. Empirical analysis of referendum voting was conducted by Agostini, Quigley, and Smolensky (1997) for two referendums in San Francisco and by Coates and Humphreys (2006) on several votes in Green Bay, Wisconsin, and Houston, Texas.
Fort (2006) emphasized a dramatic change that has occurred. Prior to 1995, he said that "stadium votes typically did not pass," but since 1995, 80% have passed. The percent passing since 1995 has recently taken a hit with the defeat at the polls of a proposal to support an arena for the NBA's Sacramento Kings in November 2006. In a preemptive strike of sorts, Seattle voters passed Initiative 91, also in November 2006, which restricts the use of public funds to build an arena for the NBA's Supersonics. The hitch is that the Initiative applies to city funds, it does not restrict King County or the state of Washington from funding construction. That is the model used to build Safeco Field for the Mariners and Qwest Field for the Seahawks.
A similar situation occurred in Pittsburgh. Delaney and Eckstein (2003) described voting results in 11 Pittsburgh area counties in November 1997. In each of the counties, the Regional Renaissance Initiative, also known as the stadium tax initiative, was soundly defeated. Among the counties that rejected the initiative is Allegheny County, which includes Pittsburgh. The initiative would have raised the sales tax from 6% to 6.5% to fund a variety of local development projects, the two most expensive of which were stadiums for the Steelers and the Pirates. Less than 2 yr later, the state of Pennsylvania voted to spend $320 million on two stadiums each for Philadelphia and Pittsburgh. Clearly, stadium proponents will find a way to get their stadium even when it is rejected by the local voters.
There are two absolutely clear lessons from this line of research. First, a negative vote on a stadium referendum is never the last word. Stadium proponents may reshape the proposal and bring it before the voters again or they may fall back on "Plan B." In Houston, for example, Coates and Humphreys (2006) found that dropping taxes on ticket purchases from the 1999 proposal in favor of taxes on rental cars and hotel rooms in the 2000 proposal led to a reversal of fortune for the Houston Rockets' arena. Pittsburgh is an example of Plan B. In fact, the Pittsburgh model is common. Fort (1999) reported that of the ballot measures that failed between 1980 and 1998, half were eventually funded outside the referendum process.
Second, stadium proponents will generally outspend opponents by wide margins. Coates and Humphreys (2006) reported that proponents of a sales tax increase to support the renovation of Lambeau Field in Green Bay spent $1.42 million, with $435,000 of it on television and radio advertisements and market research, while opponents of the sales tax increase spent $34,996. That is, stadium proponents outspent opponents by over 40:1. In Houston, opponents of the arena subsidy spent more than $700,000 fighting the 1999 ballot issue but then were unable to spend significantly to fight the 2000 proposal. At the same time, proponents of the arena subsidy spent $2.5 million pushing the measure in 2000. Fort (2006) reported the spending differential when a referendum was held on public funding for a new home for the Seattle Seahawks, "Paul Allen alone spent around $3 million in advertising, whereas opponents spent only $160,000." This is 18.75:1 in favor of building the stadium. (11) Fort (1997) also reported that the Chicago White Sox spent $100,000 to the opponents' $3,000.
These spending differentials and the resort to funding outside the referendum process are consistent with highly concentrated benefits but widely dispersed costs of stadium subsidies, that is, of redistribution in the subsidies. The Houston case is also clear evidence that subsidies have a substantial redistributive component. The voters there decided not to tax people who attend games to pay for the new facility but rather to tax visitors staying in hotels. Geographic voting patterns discernible from the referendums also suggest redistributive effects. Coates and Humphreys (2006) identified voting precincts close to the stadium or arena in their voting regressions. They found that living close to existing facilities raises the probability of a voter supporting stadium subsidies. The farther one lives from the stadium or arena, the smaller is support for subsidies. This is consistent with redistribution from the more distant areas to the locations closer to the stadium or arena. Importantly, experience living close to a facility may also matter. In the Houston context, some voting precincts were in close proximity to both the existing arena and the site of the proposed arena. (12) Voters close to the existing facility were more likely to vote for subsidies for construction of a new facility farther from them than was the average voter. This suggests that some voters wish to avoid the disamenities associated with close proximity to a sports arena.
V. FUTURE RESEARCH
In this section, I briefly lay out where I think future research on the economic benefits of stadiums and professional sports franchises should go. I believe that further hedonic, CVM, and voting studies are necessary to improve our understanding of the public benefits and the political economy of stadium and arena subsidies. I begin by discussing the types of extensions and applications of these various methods that I think are necessary. I finish this section with a discussion of a body of research that is now developing but is still in its early stages.
To date, hedonic regressions have focused on wages and residential property. Future hedonic regressions should try to address the implicit value of close proximity to a stadium or arena for the profitability of businesses. The old adage about "location" is apt for the case of business property. Proponents of stadiums as economic development tools argue that the facilities serve as an anchor for local development. Business owners, particularly of bars and restaurants near football stadiums, report that they do brisk business on game days. If this added business on game days and local development around the stadium carry over into greater profits, then the value of those locations should be bid up. Regressions explaining either property values of businesses or rents of commercial space as a function of proximity to the stadiums, all other things held constant, should provide valuable information on the extent to which the profit opportunities of locations around a stadium or arena are enhanced by the facility. If these greater profits do not arise and economic development does not occur, then one will not find proximity to stadiums and arenas associated with greater property values or higher commercial rents.
Hedonic regressions of housing values should extend the analysis along the lines of Tu (2005) and Dehring, Depken, and Ward (2007), using observed sale prices and distance from stadiums and arenas as explanatory variables. Tu (2005) began this with his rings around FedEx Field, but these rings may be too wide to distinguish real effects of distance. Using GIS software, it is possible to measure the distance between two properties, making the measurement of distance more precise and improving the estimates of the effects of distance from the stadium. Work along these lines must also account for spatial autocorrelation in the data.
Studies like that of Carlino and Coulson (2004) are valuable because they use a broad cross-section of cities, drawing upon the great variety of geography, history, and sporting traditions, to improve the estimates of the effects of professional sports. Studies of this sort should be expanded, however, to consider and control for more sports than just football and baseball. Presumably the NBA and NHL franchises in cities also have value to the community. Future work should also include Major League Soccer and NASCAR. Extension to studies in Europe and the rest of the world are also important.
Hedonic studies should also make more use of quasi-panel and, where possible, panel data. This approach enables the researcher to control for time and location effects and to compare pre-and post-stadium development. Panel data also would allow researchers to exploit franchise relocations and league expansions in assessing the impact of sports on property values. (13)
Contingent valuation studies are proving a valuable tool in analyzing the benefits, especially the public benefits, of franchises and stadiums. Studies of this sort should expand to other cities and sports. Of the contingent valuation studies described here, two address professional football, one addresses professional basketball, one addresses college hoops, and one is focused on NHL hockey. Only one values the national pastime and that at the minor league level. CVM can address the value of a baseball franchise by going to one of the many cities that attempted to entice MLB to relocate the Montreal Expos to their community or to Minneapolis whose Twins were recently on the chopping block during discussions of contraction. One could conduct a CVM study in Baltimore where fans, fed up with 9 yr of losing baseball, have recently begun calling for current Orioles owner Peter Angelos to sell the team.
More work should be done on voting on stadium and arena subsidy legislation and referendums. Empirical work has relied upon precinct-level data from referendums to draw inferences about individual voter behavior. One advance in this line of research is, therefore, to get individual voter-level data. For referendums, this is not possible, though extensive exit polling might provide some of this information. However, for sports subsidy legislation that is voted on in state legislatures, it is possible to connect individuals to their votes. Empirical analysis of legislator voting on stadium subsidy issues can provide some insights into the influences on the individuals that we cannot gather from analysis of vote totals by precinct. For example, stadiums and professional sports franchises are often very emotion-filled topics for voters. Legislators do not want to be perceived as the reason that a city or a state loses a sports franchise. Legislators, and governors and mayors, who feel more electorally secure may be more willing to fight against inefficient or ineffective subsidies than are less secure legislators. (14)
Finally, studies of the effects of stadiums and professional sports should study taxation. While proponents of stadium-led development programs frequently argue that the stadiums and arenas will increase the tax collections of the city, little research has been done on this topic. At one level, the ability of stadiums to induce greater tax collections is highly doubtful, given that there is scant evidence that there is increased income or increased employment associated with professional sports in a community. At another level, the fact that stadium lease agreements sometimes give franchises all revenues from parking in the city-built and maintained lots on game days and for non game events as well implies that what new revenues might be linked to a stadium do not accrue to the city treasury. Yet, if the stadium raises taxable sales and if taxes are imposed on ticket purchases, then there may be increased tax collections attributed to the stadium or arena.
What little research there is on tax collections is not focused on stadium, arena, and franchise existence but on the effects of onetime mega-events. For example, Porter (1999); Baade, Baumann, and Matheson (2005); and Coates (2006) examined the effects of large one-time sporting events on taxable sales in a community. (15) An exception to the focus on mega-events is Coates and Depken (2006) who examined monthly sales tax collections over a period from 1990 until 2005 for 126 jurisdictions in Texas. They estimated the effects of an additional game of a specific type in a month on the sales tax collections and the taxable sales activity in that month. The results vary by sport and between professional and collegiate games, but generally speaking, an additional regular season game has, at best, a modest effect on sales tax collections. For some sports, an additional game actually reduces sales tax collections in the month.
Studies of the consequences for tax collections of stadiums and franchises need to branch out more. One branch is to move beyond Florida and Texas, the sources of the data in all but the Porter (1999) research. The basic question is whether the results for tax collections hold up for other states. Beyond that, the research on tax collections should delve into other types of taxes. A key alternative tax is the property tax. Institutions with respect to the property tax vary by state and may change over time within a state, so caution is necessary. However, both residential and business property are taxed in many states, and the data are often reported separately. Even if the property tax data are only available for a city over time, that allows researchers to test for differences in average collections before and after a stadium or arena is built and before and after a franchise locates in the jurisdiction.
VI. WRAPPING UP
In this article, I have reviewed the literature on the economic effects of stadiums, arenas, and sports franchises. Little of the academic research that investigates effects ex post finds significant increases in income, employment, taxable sales, or tax revenues associated with sports and sports facilities. Measures of the consumer surplus and public benefits of stadiums and franchises are often substantial. As large as these benefits are, rough calculations indicate that they are not necessarily large enough to justify subsidies of hundreds of millions of dollars.
The evidence that exists for positive effects on local economies tends to be focused on small geographic areas. Rather than being evidence of development effects, these results indicate redistribution from one area to another within a region. Calls for stadiums and arenas to be studied in the context where they will be most effective, in the central city, are implicit arguments for redistribution. Results suggesting that stadiums and arenas are successful in anchoring downtown development are often accurately interpreted as evidence that redistribution has occurred.
There are a variety of ways for research into the effects of stadiums and franchises on local communities to go. I have described several of them above. All these will help us gain a better understanding of the relationship between professional sports and the economic well-being of the host community. As long as professional sports franchises and their boosters turn to government for help and as long as stadiums and arenas are perceived as tools for economic development, the study of the effects of stadiums and arenas on the local economy will be an active and thriving area of research. I foresee a long and busy future for economists and urban planners studying the economic analysis of sports-led development strategies.
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CVM: Contingent Valuation Method
GIS: Geographic Information System
MLB: Major League Baseball
NASCAR: National Association for Stock Car Auto Racing
NBA: National Basketball Association
NFL: National Football League
NHL: National Hockey League
(1.) There are interesting and important private consequences that I do not consider due to space limitations.
(2.) It is essentially impossible to separate the question of the impact of stadiums and arenas from the impact of professional sports because it is, after all, the activity in the stadium that generates activity around the stadium. Consequently, for the purposes of this article, the public impact of the stadium or arena is always bound so tightly to the impact of the tenant of that sports venue that the two effects are indistinguishable.
(3.) Fort (2006); also discussed the literature on sladium impacts. More is said about this below.
(4.) Rosentraub (2006) evaluated the tactics of cities to distil! what types of public/private partnerships are most likely to be beneficial for taxpayers when their city builds a stadium.
(5.) Baltimore income data were accessed at economagic. com.
(6.) Contrary to expectations, the arrival of the NBA Grizzlies to Vancouver also reduced hotel occupancy rates.
(7.) Irani (1997) found that consumer surplus from attendance at Major League Baseball games ranged from $2.2 to $54.1 million in 1985. depending on the city. Because his study is old and limited to baseball, I do not discuss it in more detail.
(8.) A large literature measures the implied value of neighborhood amenities of various sorts. Ridker and Henning (1967) estimated the implied value of air quality; Roback (1980, 1982) addressed quality-of-life effects on wages; Oates (1969) assessed the value of local public spending on residential property values. Coates and Humphreys (1999) stated that one explanation for their finding that incomes per capita are lower in cities with professional sports may be that these lower incomes measure the implicit value of professional sports.
(9.) U.S. Airways Arena was demolished in 2002.
(10.) In the case of Arlington, "announcements" include a statement by the mayor that negotiations with the Cowboys had been taking place, a city council approval of a ballot initiative on raising the Arlington sales tax rate and hotel and car rental taxes and land acquisition, and the voter approval of the referendum.
(11.) Fort (1999) reported Allen's spending in support of the issue as $6 million. If this is correct, then the ratio is 37.5:1.
(12.) Recall that Tu (2005) ignored overlap in promiximity to a stadium and an arena.
(13.) Coates and Humphreys (1999) are, perhaps, the first to use expansion and relocation to measure the impact of franchises on local communities. Carlino and Coulson (2004) identified the NFL effect off of expansion and relocation of franchises.
(14.) Coates (1995) and Coates and Munger (1995) found evidence that legislators are more likely to vote their conscience or their own preferences when they are more secure in their positions than when they are insecure about reelection.
(15.) These articles contribute to a broad literature on the impact of mega-events. There are frequent intersections between the stadium and the mega-event impact literatures because cities are often chosen to host an event such as the Super ?Bowl or the MLB All-Star game in part because they have opened a new stadium. Mega-events may be one shot deals for a host city, like the Olympics, or recurring events like the Daytona 500 automobile race. Baade and Matheson (2001, 2004) have a number of articels in this literature.
Coates: Professor, Department of Economics, University of Maryland, Baltimore County, 1000 Hilltop Circle, Baltimore, MD 21228. Phone 410-455-3243, Fax 410-455-1054. Li-mail email@example.com