Unaffordable Sports Stadiums

by Elaine Schwartz    •    Jul 13, 2011    •    759 Views

The year is 1996. The place is Hamilton County, Ohio. You are standing in a voting booth deciding whether to approve a .5% sales tax increase to help build and maintain 2 new sports stadiums. Although the spending will exceed $500 million, you have been assured that property taxes will fall, school funding will rise, the Bengals will stay, and economic activity will soar. Convinced, you vote yes. Described by the WSJ, so, too, do a majority of Hamilton County’s voters.

That was only the first step. Completed in 2000, the Reds’ stadium cost taxpayers $314 million. 3 years later, for the Bengals’ home, $408 million. Totaling close to $1 billion, municipal bond issues have paid the bills.  But bonds mature. Bonds require interest payments. And that is the problem.

But not the only problem. This year, 16.4% of the Hamilton County municipal budget is paying for stadium obligations. New jobs and spending and even winning teams have not materialized. Public programs have been cut. According to this academic study, the one and perhaps only predictable benefit of new stadiums is psychosocial pleasure.

The Economic Lesson

The tragedy of the commons relates to stadium public finance. When a pool of public funds is created, initially, no one individually bears the cost–except perhaps the politician who might not be re-elected if he/she votes no. So, the pool is abused, overused, and later all of us pay.

We also could cite cost and benefit. Here, the psychosocial benefit is short- and long- term. However, the cost is long term, paid in the future.

Finally, fiscal policy is directly involved. Stadiums can be privately or publicly financed or paid for through a combination of the 2 approaches. You can see recent stadium financing decisions for the NFL in this graphic. In this research paper, you can see the history of stadium finance during the past century.

An Economic Question: Many economists say human beings are rational thinkers. Why do we continue to build sports stadiums?

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