Last month, the Buffalo Bills, the National Football League (NFL) team in Buffalo, New York, agreed to a 30-year lease on a new stadium in the city after extensive talks with Erie County. and New York State. Erie County will contribute $250 million, while the state has proposed $600 million in the stadium budget – shocking New York residents. A poll recently released by the Siena Research Institute found that 63% of voters oppose the state’s $600 million.

In addition to the Bills, a number of NFL teams – such as the Washington Commanders, Denver Broncos, Tennessee Titans, Kansas City Chiefs and Chicago Bears – and other professional sports teams like the Oakland A’s and the Los Angeles Angels of Major League Baseball, are considering renovating or building new stadiums.

Joel Maxcy, PhDprofessor at LeBow College of Business, shared his perspective on the real local economic impact of a professional sports team.

Are there economic benefits for the cities or communities where a professional sports team plays?

Most economic benefits are intangible. For example, team civic pride, good feelings for fans, high-level entertainment option, etc. These advantages are all strengthened when the team wins. Buffalo, New York is a rust belt town that has been in relative economic decline since the Bills have been around. But the Bills provide much of the people of Buffalo, Erie County and Western New York with something to feel good about, something to talk about and enjoy with friends and family, and a connection with the rest of the country and the “NFL Nation”. There would no doubt be a lot of desperation if the region lost its team to a better stadium offer from another city. However, translating intangible benefits into financial values ​​is a difficult proposition.

Is it possible to finance new stadium projects without public funding?

Yes, most stadiums and arenas built before the 1950s were privately funded and there are current and local examples to this day. The Wells Fargo Center in Philadelphia was privately funded. However, even if construction costs are privately funded, there is usually public support and spending for additional infrastructure – such as additional highway exits or subway stops and public security around events. One of the benefits of public funding is that the local government has more control over the location of the stadium, which is important.

Is it better to renovate an old stadium or build a completely new one?

It is possible that a renovation is a more profitable investment. However, in practice most renovation projects have been so extensive that the costs are comparable to those of a brand new stadium.

What are the requests for financial support from local governments for new stadiums?

Sometimes there is an additional or specific tax on stadium revenue – for example, a ticket tax or shares of parking and concession revenue. Municipal governments often require signing a lease, but a lease can and often is broken if the team owner wants to move.

Professional teams suggest, even threaten, to move to obtain concessions from the local government. Is this a good tactic to negotiate? How seriously do local governments take these threats?

Moving threats have been a great tactic for team owners. The NFL’s Los Angeles market was teamless from 1995 to 2016, which spurred several new stadium projects as teams threatened to move there. ESPN reported in 2016 that at least 13 different NFL teams, including Atlanta, Seattle, Miami and Cincinnati, have used the Los Angeles open market as leverage to secure government subsidies for new or rebuilt stadium projects. Eventually, club owners St. Louis (Rams) and San Diego (Chargers) moved their teams there in 2016.

Threats of relocation, particularly in the NFL and NHL, proved serious enough that governments responded with very generous stadium subsidies.

What impact would a team’s move have on the local economy it is leaving? The new, he enters?

Numerous studies by independent economists have shown that there is very little economic effect in either case. If not for all the propaganda surrounding this issue, the effect of replacement spending should make perfect sense. Spending on sports is largely discretionary entertainment spending by local consumers. If a source of entertainment disappears, consumers will find a replacement for that activity. If a new option enters the market, consumers will shift their spending from another activity to the new one.

Spending by visitors, such as those traveling from out of town to attend an NFL game, is the only real injection of new economic activity. But spending by visitors is probably only a very small part of a team’s income. We have researched the increase in hotel stays during major game and event weekends and the increases are only marginal. Likewise, the economic losses, if a team leaves, would be people leaving the area to spend part of their entertainment budget elsewhere because the NFL team left. If there is an impact from this spending, it is a small jolt in the annual economic activity of a major metropolitan area.

Taking the local example, the economic activity of Metro Philadelphia is estimated at over $1.1 billion in gross domestic product (GDP) per year. The Eagles’ total annual revenue is approximately $500 million, more than 50% of which comes from league distributions. At best, the revenue generated locally by the Eagles is $250 million, or about a quarter of 1% of metro economic activity. Thus, the marginal impact of out-of-towners coming to the metro area to watch Eagles games is very minimal on the region’s economy as a whole.

What – if any – naming rights for new (or existing) stadiums add to the conversation?

Naming rights are essentially an advertisement for the sponsoring company. It contributes to the team owner’s bottom line and is sometimes applied to the private share of construction costs.

Is there anything you would like to add?

Public spending is far more often about redistribution from taxpayers to subsidy recipients than about creating new economic growth, although this may or may not happen. These recipients range from the war machine (arms industry) and big pharma to team owners and Pell Grant recipients. A stadium is an infrastructure investment for a city or region, but it is not used on many days of the year, compared to other public investments such as airports, public transport, roads and the bridges.

The new stadiums and their associated sports teams make many people happy. Teams and their stadiums provide a significant consumer advantage to a large portion of the population, and this advantage no doubt trickles down to many people who don’t spend on tickets to attend games. Nonetheless, if economic impact or growing the economy is the goal, there are much more efficient ways to spend public funds to achieve that goal.

Publicly subsidizing stadiums may make sense, but in recent years stadium costs and subsidies have ballooned. Philadelphia stadium grants 20 years ago accounted for about 50% of stadiums, with construction costs around $500 million each. Even after adjusting for inflation, that’s far less than Buffalo’s current stadium and subsidy proposal. Unfortunately, subsidies are too often sold on the basis of economic impact rather than actual benefits. In the final analysis, I think there are far more examples of lavish subsidies than there are stadiums.

Media interested in speaking with Maxcy should contact Annie Korp at 215-571-4244 or [email protected].