In the past decade, Nevadans have subsidized private sports stadiums to the tune of over $1 billion dollars. Most notably Nevadans are on the hook for $750 million that was spent building a new stadium for the Raiders, and in June 2023 a more “modest” $380 million to help finance the relocation of the Oakland As. Nevada is not alone here, in the preceding decades dozens of American cities and states have spent billions of dollars of taxpayer subsidies, construction bonds, and tax breaks to help fund the construction of sports facilities.
However, this policy has one particular opponent, virtually the entirety of economic professionals who have concluded that these stadiums are an egregious waste of taxpayer money, with virtually all economists surveyed agreeing that the public sport for these projects should be eliminated.
For decades, proponents of sending billions of taxpayer dollars to build stadiums for sports teams often owned by billionaires have made several arguments that are persuasive on the surface. The simplest is that stadiums will bring jobs. And they are not completely wrong, building and staffing stadiums does require workers. However, this argument fails for many of the same reasons as a more complex argument, the multiplier effect. The logic of the multiplier effect is that positive economic impacts tend to multiply virtually exponentially.
Let’s say someone buys a ticket to an Oakland A’s game. But they live in Salt Lake City, so they also have to buy a hotel room in Vegas and eat at many local restaurants while they are here. The money they spend then trickles down to Vegas workers and continues to multiply, in the process also repaying the taxpayer investment through sales and hotel taxes. As a result, proponents often propose an extra tax on hotel stays or other economic inputs designed to capture this revenue to repay the taxpayer’s investment.
The issue here is that in practice economists have found this falls flat. Economist Roger Noll concluded back in 1997 after studying dozens of stadium deals that the actual economic impact on communities was minimal to none. Noll notes that this is because the stadiums are rarely driving new revenues but rather just providing substitutes for already existing entrainment goods and services, such as restaurants, movies, or concerts. Note that in Nevada and Las Vegas, this is particularly relevant as other forms of entertainment, such as gambling and concerts, drive a larger economic multiplier per consumer than sports games.
In addition, in funding these projects by taxing hotels and other services used by tourism, there is a possibility of harming the border sector beyond sports and creating a decline in tourism as consumers choose to stay, gamble, and dine elsewhere. Even jobs generated by construction are temporary. Generally, owners of sports teams could afford to build stadiums without taxpayer funding, but this would simply not be a profitable business decision. Without subsidies, owners would simply find other profitable places to allocate their capital, which would have a greater multiplier effect on the economy.
In 2022, economists conducted a meta-survey looking at over 120 studies on the economic impact of stadium subsidies and found the same conclusion as Noll did in 1997. The economists concluded that “recent analyses continue to confirm the decades-old consensus of very limited economic impacts of professional sports teams and stadiums. Even with added nonpecuniary social benefits from quality-of-life externalities and civic pride, welfare improvements from hosting teams tend to fall well short of covering public outlays”.
The logic behind stadium subsidies might make sense at a surface level, but upon further examination, the math and logic fail to compute that sports stadiums are a good investment of taxpayer money.
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