Are pro sports teams economic winners for cities?
There are a lot of things economists disagree about, but the economic impact of sports stadiums isn’t one of them.
“If you ever had a consensus in economics, this would be it,” says Michael Leeds, a sports economist at Temple University. “There is no impact.”
Leeds studied Chicago – as big a sports town as there is, with five major teams.
“If every sports team in Chicago were to suddenly disappear, the impact on the Chicago economy would be a fraction of 1 percent,” Leeds says. “A baseball team has about the same impact on a community as a midsize department store.”
That’s for a sport with 80 home games a year. NFL teams only play eight regular season games. Still, politicians love building sports stadiums.
“Yes, we will have the NFL back in Los Angeles!” shouted Carson City Councilwoman Lula Davis-Holmes at a rally last month, celebrating plans for a new stadium housing the Chargers and Raiders that would be built in this small city 15 miles south of downtown.
“Stand to your feet and say we want the teams here, for jobs, for revenue, and for our young people,” Holmes said.
Down the freeway, next to Los Angeles International Airport, Inglewood is trying to stay one step ahead of Carson. So last month, its City Council approved plans to build the most expensive stadium in U.S. sports history.
Inglewood – one of poorest neighborhoods in LA — projects a football stadium would generate more than $800 million dollars worth of economic activity a year.
But Victor Matheson, a sports economist at College of the Holy Cross, is dubious.
“A good rule of thumb that economists use is to take what stadium boosters are telling you and move that one decimal place to the left, and that’s usually a good estimate of what you’re going to get,” Matheson says.
Economists say the biggest reason sports teams don’t have much impact is that they don’t tend to spur new spending. Most people have a limited entertainment budget, so the dollars they are spending when they go to a game is money they would have spent elsewhere, maybe even at a restaurant or small businesses where more money would have stayed in the community. Plus, Matheson says, rather than draw people to a neighborhood, games can actually repel them.
“Sporting events can cause significant crowds and congestion that can cause people to stop going to other events in the area,” he says.
That’s part of the reason why a 2003 analysis on Staples Center commissioned by the Los Angeles City Controller included a surprising finding.
“Economic activity in Inglewood actually increased when the Lakers left town,” says Matheson.
That is, sales tax revenue went up when the Lakers and Kings moved to Staples Center in 1999.
Chris Meany, who’s leading development of the Inglewood stadium site, strongly disagrees that Inglewood benefited from the Kings and Lakers leaving.
“To argue that Inglewood is better off because downtown L.A. took the Lakers and Kings is to stretch credulity,” says Meany.
Inglewood’s mayor, James Butts, says even if the economic impact isn’t as good as advertised, building a stadium poses a win/win for taxpayers.
“There’s a lot of numbers floated about but whatever the numbers are, here’s the bottom line: The city is protected,” says Butts. “In every stadium deal you look at before this one the risk is borne by the city. In this case, the risk is borne by the developers.”
That’s not true in Missouri, where politicians are desperately trying to keep the Rams from moving to Inglewood. Governor Jay Nixon announced a plan that would give the team $400 million to stay.
Because as politically popular as it can be to attract a team, it’s seen as political suicide to let one get away.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
