Though Major League Soccer rejected Las Vegas’s bid for an expansion team in February, the city’s push for a professional soccer team and a taxpayer-subsidized stadium to match continues to move ahead, against all evidence that taxpayer funding is a mistake.
Although MLS awarded its 24th franchise to Minnesota in late March, soccer matters are quite alive in the run-up to the June mayoral election in Vegas. The stadium has become a wedge issue between Mayor Carolyn Goodman and her opponent, Stavros Anthony.
For Goodman, luring a professional team to Vegas with a taxpayer-funded stadium is a key priority. At her behest, in December the city council approved $56.5 million in public funding plus land toward a home for a future MLS team. Anthony, on the other hand, has built his campaign on opposition to the project.
At the heart of the disagreement is the claim that stadiums are useful tools for fostering economic development. Goodman’s key talking point has been that a stadium will provide a $450 million economic boon to the downtown area. How much credence should this be given?
If we prescribe any value to precedent or vicarious learning, the answer is a resounding “none”.
The classic argument of stadium proponents is that these projects have multiplier effects that spur new businesses and attract consumer spending, and these effects outweigh the initial public investment. The reality is far different. In fact, stadiums quickly become a political and public headache as the realization dawns that the costs are always higher than they were projected to be, the benefits less, and the only winners are the team owners and the leagues.
Judith Grant Long, a Harvard economist, has estimated that stadium subsidies have cost U.S. taxpayers $10 billion more than originally estimated. She warns that smaller cities tend to fare worse than larger ones because they must continue to offer subsidies to keep a team from relocating to a larger market.
While stadiums can be worthwhile investments if they are part of a broader redevelopment plan (Baltimore’s Camden Yards is a good example), there is a sizeable body of evidence that shows that stadiums, in and of themselves, do not bring economic development. Time and time again, cities have learned the hard way that these projects offer some of the worst returns on investment imaginable and that they, in many instances, would have been better off just building a conventional park for rest, relaxation, and basic recreation.
Yes, stadiums do create jobs, but many of those jobs are low-paying, seasonal ones – hot dog and peanut vendors, for example – that come at an astronomical cost. While the standard job created by an urban renewal project costs the public $6,000 to $10,000, an average stadium job costs $125,000, according to Roger Noll, an economist at Stanford University.
Many of the promised spillover benefits often fail to materialize, as team owners have every incentive to keep business trapped inside the stadium and little substantive interest in abstract, feel-good concepts such as neighborhood renewal and revitalization.
The quintessential example of this is Washington, D.C., whose city council coincidentally approved a subsidy package for an MLS stadium on the same day in December as did Las Vegas. A decade ago, the city was shaken down by Major League Baseball and Chicago White Sox owner Jerry Reinsdorf, who wanted the city to build a stadium for the then-orphaned Montreal Expos. Reinsdorf, negotiating on behalf of the league, famously walked into the mayor’s office demanding that the city foot the entire bill for the stadium even though the league had no other good prospects for where to put the team.
The end result? The city capitulated and doled out a $667 million in public funds for the project, while assuming responsibility for all future capital repairs costs and enjoying zero control of the facility – not even the naming rights, a classic illustration of the “city pays, team controls” model.
In Indianapolis, Cincinnati, and Milwaukee, the public share of stadium costs have also exceeded 100 percent when operating expenses are factored in.
Much of Washington’s folly was psychological. The city had lost two baseball teams in the past half century, and the local elites did not want to suffer the embarrassment of losing a third.
This desire to boast a local professional sports team is apparently well situated on Maslow’s hierarchy of needs; it is an issue of a city’s perceived importance, as evidenced by Mayor Goodman’s support. That, combined with an artificially low supply of professional teams compared to the number of cities that want them, plus ravenous demands from sports fans, is the magic combination for unlocking the spigot of public funds.
Once it has been established that the need for a stadium trumps all traditional demands for fiscal prudence, teams and lobbyists are easily able to swoop in and force local legislators to focus on the question of “how do we pay for the stadium?” instead of “Do we really need a stadium?”
Perhaps the question legislators should be asking is “If similar public subsidies, initially and ongoing, were provided to Walmart or ExxonMobil, how long would it take for protests in the streets to break out?”
Las Vegas should examine the evidence and just say “no” to any type of publicly-financed sports stadium. If a professional sports league truly wants a team in Nevada, it should pay.
