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Playing ball with public dollars

Lawmakers should demand economic guarantees before giving taxpayer dollars to billionaire sports owners

July 28, 2014 6:00AM ET

Again and again the same old story plays out in sports stadiums across the country. Team owners in the NFL, MLB and NBA demand hundreds of millions of dollars in public assistance in order to build new venues. Sometimes they offer a carrot: a vague, far-off promise of jobs and future tax revenue. But often they offer only the stick: the threat that they’ll move their team elsewhere if a city or state government does not comply with their demand.

Years later, the promised economic benefits rarely materialize, and taxpayers are left nursing old wounds. Yet sports owners start the process all over again — demanding new rounds of subsidies and tax breaks … or else.

We’ve seen this happen twice in the past two months alone. In Atlanta, construction began on the new Falcon stadium in May. Although the stadium — which is being subsidized with a $278 million bond issue — will be publicly owned, all revenues will go to benefit Home Depot co-founder Arthur Blank, the owner of the Falcons football franchise. Not to be left out of the action, Liberty Media, the conglomerate that owns the Atlanta Braves, demanded a massive subsidy of its own. This time, the city refused. Eight days after construction began on a new suburban Atlanta Braves Stadium, the Cobb County, Georgia, Board of Commissioners approved a $397 million bond issue backed by county property taxes for the team owners’ benefit.

On the other side of the country, the City Council of Sacramento approved $255 million in bonds for the new Kings arena on May 20, committing the city to covering over half the project’s price tag. Having suffered seven years of budget deficits, the city is now responsible for an additional $21.9 million in debt payments each year.

Now is the time for elected officials to require strong guarantees alongside this sort of investment that will force billionaire sports owners to make good on their promises of community benefit — or repay the public for its trouble. 

Economic illusions

Studies show that massive stadium subsidies like these never pay off for taxpayers. As Harvard University professor of urban planning Judith Grant has argued, “Most economic analyses demonstrate that sports facilities produce very few or no net new economic benefits relative to construction costs.” Economists John Siegfried and Andrew Zimbalist write, “there is no statistically significant positive correlation between sports facility construction and economic development.”

Few cities have faced tougher times than Detroit, but its public officials continue to play recklessly with city funds. Last July, Michigan approved a state-level bond issue for Little Caesar’s mogul Dan Illitch to construct a hockey arena just one week after pushing the city into municipal bankruptcy. Though it was unable to halt a water privatization plan for Wayne County or prevent Detroit from slashing pensions for teachers, firefighters, police officers and sanitation workers, the state somehow came up with $284.5 million for a new hockey arena. The Detroit Economic Growth Corp., the public-private partnership overseeing the public contribution, claims the subsidies will create 8,300 jobs and a $1.8 billion economic impact across the state. But taxpayers have every reason to be skeptical.

Nearly every time a franchise builds a new stadium, the public fronts a substantial portion of the cost.

They need look only to Cincinnati. In what The Wall Street Journal called “one of the worst professional sports deals ever struck by a local government,” Cincinnatians in 1996 were promised $300 million in economic benefits plus the opportunity to keep their team in exchange for financing the Bengals’ home field. In fact, what happened was a project whose final cost was nearly double the original estimate. The county sales tax was raised, and promises that the economic benefits would enable a rollback of property taxes were broken. Fifteen years after the deal, the county has found itself saddled with debt payments and without evidence of the economic benefits it expected in return.

The list goes on, and the trend is national. Nearly every time a franchise builds a new stadium, the public forks out substantial portions of the cost. Houston raised taxes and public debt to fund over 70 percent of the Texans’ $424 million stadium. Six counties in Colorado had to raise their sales tax to pay for two-thirds of the $365 million Broncos stadium. Arizona and the city of Glendale are paying for nearly 68 percent of the $455 million Cardinals stadium with sales tax increases and proposed budget cuts.

Private sector lessons

What can be done to stanch this flow of public dollars to profit-making sports franchises?

The easiest and simplest solution is for local and state governments to stop promising tax revenues for private projects. Collective discipline would go a long way toward preventing sports owners from pitting various cities and states against one another in order to extract the choicest concessions.

Governments could also take cues from the private sector. No private sector CEO would be allowed to keep his or her job if he or she invested money in a project without concrete evidence that the agreement would benefit shareholders. In the case of government, it is insane for elected officials to sign on to stadium deals without having some community benefit agreement in place to ensure that promises about jobs and economic development are not pie-in-the-sky fantasies and will produce demonstrable returns for taxpayers.

Public representatives could demand a stake in the enterprises in which they are investing. Were someone to advocate for even partial public ownership, he or she would surely be denounced as the red menace of professional sports. Yet the Green Bay Packers — whose 4 million shares of stock are wholly owned by the public, split among some 300,000 fans — have shown that a franchise can thrive under nontraditional ownership. (As Dave Zirin observes in The New Yorker, for Packers fans, “Even the beer is cheaper than at the typical NFL stadium.”)

Short of giving the public an ownership stake in subsidized firms, the absolute minimum that our elected officials should demand are community benefit agreements — policy tools that require corporations to use some money from tax incentives to help communities — to ensure that developers and teams make good on their promises. Projects such the live entertainment complex at Los Angeles’ Staples Center and the new Yankee Stadium in New York City were negotiated with such agreements attached. In Los Angeles a coalition of community, labor and religious organizations came together to demand that, in exchange for public support, the developer make concrete commitments such as a $1 million down payment for public parks, $650,000 for affordable housing, a public hiring commitment and the guarantee that 70 percent of the jobs created by the project would pay the city’s living wage. Researchers have found that the deal resulted in several benefits to the community, including even more than the minimum number of housing units in the agreement, a land trust and a program to hire locally.

Going further

Not all agreements have worked out so well. In Atlanta, for example, community groups have begun to doubt whether the agreement the city made with the developer around the new Falcon stadium is legally binding. Because of this, a new generation of community benefit agreements needs to be strong and legally enforceable in order to prevent developers from backpedaling.

To that end, states such as Arkansas and Minnesota have begun implementing clawback legislation to allow the public to demand its money back from projects that receive taxpayer support but do not live up to their economic development promises. In Arkansas, Hewlett-Packard received at least $17 million for the promise of 1,000 jobs in the city of Conway. After the company downsized the facility, firing half its workforce, clawback provisions allowed the director of the Arkansas Department of Economic Development to demand that the company return a portion of the public money for the jobs it did not keep in the state. Given this track record, it wouldn’t be unreasonable for states to ban these kinds of deals altogether. But short of that, strong and enforceable standards to ensure public benefits are the minimum we should demand in exchange for any future support. The public has been suckered on stadiums too many times.

Amy B. Dean is a fellow of the Century Foundation and a principal of ABD Ventures, a consulting firm that works to develop innovative strategies for organizations devoted to social change. She is a co-author, with David Reynolds, of “A New New Deal: How Regional Activism Will Reshape the American Labor Movement.”

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

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