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business newsTaxpayers and the Hidden Costs of Mega Sports Events
By
John F Kelly Nov 02, 2009 9:55 am
Residents pay top dollar for a boost of civic pride.
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Major sporting events are often sold as win-wins to local taxpayers. Bidding on a game usually comes with the promise of extra local taxable spending and the positive publicity that will help draw visitors for years to come.But economists refute those claims by pointing out that most estimates made by leagues and public relations spokespeople leave out the significant dollars paid by local taxpayers to fund the construction of new facilities and improvement of infrastructures needed to support the influx of visitors.
Take the case of the 2009 All-Star Game held last February in Phoenix, Arizona. Former NBA league executive and current Phoenix Suns President Rick Welts told NBA.com that without the construction of the city’s new $1.4 billion light-rail line, the $600 million Phoenix Convention Center expansion, and the $350 million Sheraton Phoenix Downtown Hotel that was constructed with public financing, the city couldn't have held the event.
In 2004, prior to a vote on public funding for a lavish new Dallas Cowboy Stadium in Arlington, Texas, NFL Commissioner Paul Tagliabue visited Dallas-Fort Worth and suggested that the construction of the $1 billion stadium would lead to the opportunity for the metro area to host the Super Bowl in the next decade. Indeed, the venue will be the location of the 2010 NBA All-Star Game and the 2011 Super Bowl.
Since the NFL says the economic benefits from hosting the Super Bowl amounts to $300 million to $400 million, in essence Commissioner Tagliabue was making a claim that hosting the event would pay in full the proposed $325 million public subsidy needed to build the new stadium.
However, it’s a bit more complicated than that, say economists. In an interview with NPR, University of South Florida economist Phil Porter said that the costs of building these new stadiums have negative economic implications that aren't factored into revenue estimates. In fact, he argues that it has never been proven that resulting sporting events have ever made a financial impact on the local economy.
“The cost of your new stadium, in terms of reduced quality of your educational system, poorer hospitals, fewer police and firemen, along with the operating costs of the investment you make in your stadiums and in your team is phenomenal,” he says. “Every time we look back at the historical records and try to find some measure of what could possibly be economic impact, we've come up baffled that it just never shows up.”
But taxpayer spending doesn’t stop at stadiums. Local residents also pick up the tab for incentives created to attract a league’s attention. For example, in order for Phoenix to secure the All-Star game, Arizona’s Governor Janet Napolitano signed a bill granting a tax exception to the league for the sale of tickets to the game and income generated by the league for all related events and activities.
So, what exactly are the benefits to taxpayers?
Sports advocates point to the visibility the city receives in the media for being chosen to host a major event. True, say economists, this is a good thing. Being selected to host a big event can bring both civic pride and added awareness of the city on an international scale. But does a metric exist to adequately measure the economic impact that positive feelings translate into dollars?
Not yet.
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