How Journalists Can Better Report on Stadium Subsidies if Nashville Gets An MLB Team
How Journalists Can Better Report on Stadium Subsidies if Nashville Gets An MLB Team
It's not a secret that stadium subsidies are always bad deals for taxpayers, but these facts often go unmentioned in the press. Reporters can do better.
A quick note to my readers and subscribers: You may have noticed it’s been a while since my last post. I got married in October of last year. My wife and I then spent two months traveling around Southeast Asia. It was a wonderful experience, but I didn’t get much time for writing. Now that I’m back, I should be posting more regularly.
While I was out of the country, I noticed some more buzz about the possibility of Major League Baseball eyeing Nashville for an expansion team. That would be exciting for Nashvillians and contribute to a growing Nashville sports culture with the Titans, Predators, and Nashville SC.
But as I pointed out last May, some local media outlets, especially our state’s flagship paper, The Tennessean, failed to live up to their responsibility as a watchdog of bad public policy when it came to covering the deal to provide $1.2 billion in taxpayer funds for the new Titans stadium. Specifically, Tennessean reporters regularly omitted insights from independent experts, failed to properly scrutinize grandiose economic impact claims, neglected to dig into the deal's details, and often parroted the team and the city’s claims as gospel. Instead, it appeared the paper was just another part of the local growth coalition pushing for the new stadium.
Let’s suppose Nashville gets selected for an MLB expansion team, and the prospect of public financing for a new stadium emerges. In that case, local reporters will have another chance to perform their journalistic duty and use the long-recognized economic insights about stadium subsidies to scrutinize claims from team owners or policymakers.
Reporters don’t need to become overnight scholars in the economics of sports stadiums. But they should acknowledge the abundance of research that would arm them with enough ammo to be skeptical of elaborate claims. Plenty of experts are also available and willing to provide valuable insights as sources for their reporting, but they are often ignored or omitted.
Here are some key ideas/concepts that journalists should keep in mind when reporting on future stadium projects:
Economists Overwhelmingly Agree: Taxpayers Should Not Subsidize Sports Stadiums
It is hardly a controversial idea that stadiums are poor targets for public financing or incubators of economic growth. A 2005 survey of members of the American Economics Association found that 85 percent of respondents supported eliminating subsidies to professional sports franchises. In 2017, the University of Chicago Booth School’s Initiative on Global Markets surveyed a panel of U.S. economic experts and found that 83 percent of economists agree that “[p]roviding state and local subsidies for professional sports teams is likely to cost the relevant taxpayer more than any local economic benefits that are generated.”
Since they began studying the issue, economists have long known that they produce no significant economic benefits to local economies. In 1997, Roger G. Noll and Andrew S. Zimbalist published an edited volume for the Brookings Institution called Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums. In a Brookings article about the volume, Noll and Zimbalist summarize their findings as well as those of their 15 collaborators:
In every case, the conclusions are the same. A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus.
In a 2008 review of the economic literature published in Econ Journal Watch, economists Dennis Coates and Brad R. Humphreys found “near unanimity in the conclusion that stadiums, arenas and sports franchises have no consistent, positive impact on jobs, income, and tax revenues." Another recent 2023 survey of the economic literature on the topic published in the Journal of Economic Surveys by J.C. Bradbury, Coates, and Humphreys examined the findings of over 130 articles spanning 30 years. They, too, found “near-universal consensus evidence that sports venues do not generate large positive effects on local economies.”
Despite grandiose claims from local politicians that new stadiums or sports franchises will boost local economies or create jobs, there is no evidence that sports venues have a significant impact. As sports economist Michael Leeds succinctly put it in a 2015 episode of Marketplace, “If every sports team in Chicago were to suddenly disappear, the impact on the Chicago economy would be a fraction of 1 percent. A baseball team has about the same impact on a community as a midsize department store.”
Acknowledge The Seen and The Unseen
In 1850, French political economist Frederic Bastiat published an essay called “That Which Is Seen and That Which Is Not Seen” that introduced a concept that economists now call “opportunity cost.” In this essay, Bastiat discusses the “unseen” alternatives that might have occurred in place of some other economic activity.
It’s easy to mistake a new stadium and the economic activity surrounding it as having a net positive economic impact. We see the new stadium. We see the new businesses open up around it. We see fans in the stadium district spending money. We assume that all these things we see add to the overall economy. What we don’t see are the parts of the local economy — the shops, the theaters, the bars and restaurants, and other entertainment areas — that residents or tourists are not visiting when they go to a game instead.
Economists have repeatedly found that any economic activity and tax revenues produced by sports venues are simply diverted from other areas of local economies. This not only means losses for those other businesses but also means taxpayers eventually foot the bill. In a 2023 policy retrospective, Bradbury, Coates, and Humphreys explain how spending at publicly funded stadiums or in stadium districts
diverts tax revenue that would have been collected through other local commerce to funding the stadium. This results in less available tax revenue for other government services funded by general property and sales taxes, which will necessitate compensating tax increases to recuperate lost tax revenue of reduced services.
Subsidized stadium projects also result in reduced property tax and federal tax revenue. Bradbury, Coates, and Humphreys cite recent estimates that “the cumulative cost in foregone property taxes for all major league sports facilities through the end of their current leases is $18 billion, which translates to an annual public cost of $5.7 million per venue.” Since stadiums are often financed via municipal bonds, that interest is exempt from federal taxation, costing the federal government $4.3 billion in tax revenue since 2000.
When considering alternative uses and opportunity costs, public funding of sports stadiums also encounters many of the same problems as other forms of corporate welfare. Economists Christopher Coyne and Lotta Moberg write in a 2014 study on state incentives to targeted industries:
State-provided targeted benefits contribute to the misallocation of resources because they divert them from the uses that market actors value the most. As [Friedrich A.] Hayek (1945: 519–20) explains, market actors channel resources to their optimal uses with very limited knowledge by relying on prices and profit-and-loss feedback. The knowledge necessary to allocate scarce resources among an array of feasible competing ends emerges through the market process as buyers continually discover new and better uses. For policymakers to improve on the resource allocation that the market process generates, they would need to possess superior information as compared to market actors.
[ . . . ]
Policymakers can still create the illusion of increasing social wealth. If a company is paid to hire people and increases its investments, it looks as though the policy generates wealth and contributes to economic growth. The problem is that the policymaker has no means of judging the opportunity costs, or alternative uses, of the redistributed resources. Because policymakers lack access to the dispersed knowledge possessed by private individuals, they cannot determine what the optimal allocation of resources is. Their judgments are thus likely to lead to resource misallocation. [Emphasis mine.]
Like other subsidized firms, sports stadiums distort local economic activity and misallocate resources. Beyond diverting tax revenues from public services to pay for the stadium bonds or additional associated costs, the stadium (and surrounding mixed-use development) creates a market distortion. The new stadium takes up land that might have otherwise gone to other businesses or housing developments that would be more beneficial to the local economy. Certain restaurant owners or vendors that are chosen to sell their goods at the stadium or in the surrounding stadium district — often due to their participation in the initial lobbying effort — have now reaped substantial gains, not from market competition, but from favoritism and connections to the stadium booster/local growth coalition. Capital, labor, and resources — including government spending — have also been misallocated to other areas of the economy due to the subsidy instead of being put to their highest valued use.
Ignore The Hype Around Special Stadium Districts
As part of their pitch for a new Tennessee Titans stadium, former Nashville Mayor John Cooper and the team promised that a major mixed-use development surrounding the stadium would stimulate economic activity and help fund the stadium. In an op-ed for The Tennessean, Mayor Cooper promised, “Tourists and spending around the stadium will pay for this project, not your family.” Cooper continued, “The primary funding source for stadium construction will be the Titans and visitors to Nashville and the stadium campus.”
Special stadium districts are not a novel approach to financing a new stadium, but there’s also no evidence that they work for the same reasons that stadiums fail to generate economic benefits: spending in stadium districts is just diverted from other areas of the economy. In a 2016 article in Economic Development Quarterly, Robert W. Wassmer, Ryan S. Ong, and Geoffrey Propheter explained
new real estate development adjoining a professional sports venue results from simply a move of economic activity away from other sites within the jurisdiction. Unless residents perceive this intrajurisdictional shift in economic activity as a social benefit, this is a zero-sum gain for the jurisdiction.
One of the most recent examples of a mixed-use stadium development is The Battery Atlanta, which surrounds the Braves’ Truist Park (constructed in 2017). The stadium received $300 million in public funding from Cobb County with the promise of increased economic development and tax revenue from the surrounding campus, but the project has run an annual deficit of approximately $12 to $15 million for Cobb County, according to J.C. Bradbury. Bradbury also found that “approximately one-third of the project’s sales appear to derive from crowding out other local economic activity,” meaning that “added tax collections fall well short of covering the public subsidies provided by Cobb.”
For Nashville, the surrounding mixed-use development will likely fail to produce new tax revenue, and taxpayers will be shafted in the form of higher taxes or less funds for other public services.
Scrutinize Economic Impact Reports
Behind every economic impact report on a proposed stadium project, you will find a consulting firm specializing in telling policymakers what they want to hear using methodology that would never pass muster in a peer-reviewed economic journal. One firm called HR&A Advisors has been very successful in helping cities sell public financing of stadiums to taxpayers.
To help promote a new arena in Potomac Yard for the Washington Wizards and Washington Capitals, the Alexandria Economic Development Partnership (AEDP) hired HR&A to put together an “analysis” of the economic impact. The report, which has yet to be fully released beyond just a memo, claimed that a proposed entertainment district surrounding the arena would create “30,000 permanent jobs” and “generate roughly 2.5 times the economic output.” It’s worth noting that one of the AEDP’s board members is an executive at the real estate investment trust that would develop the Potomac Yard district. HR&A was also hired by St. Pete to evaluate proposals for redeveloping Tropicana Field, produced a report on building a new stadium for the Kansas City Royals, and, in 2016, generated some outlandish estimates for how much tax revenue the new Texas Rangers stadium would produce.
Economists have consistently found reports put out by firms like HR&A to be lacking in methodology and rigor. Citing several academic articles on the topic, Bradbury, Coates, and Humphreys argue that these reports commit “basic errors such as incorrectly identifying costs as benefits, overestimating benefits and underestimating costs, confusing gross and net spending, using excessive multipliers that inflate growth expectations, and relying on unrealistic assumptions about future economic development.”
As economists Michael D. Farren and Philip St. Jean point out in an article for the Mercatus Center at George Mason University, economic impact studies represent “a ‘benefits-only’ approach to decision making, as opposed to a more rigorous cost-benefit analysis.” They continue:
[A] proper cost-benefit analysis not only counts the cost as well as the benefit, it also compares different alternatives that could be pursued. That is, the full economic cost of a proposed project includes what else could be done with those resources -- the tradeoffs that need to be made to select one option over another. [Emphasis theirs.]
When team owners or policymakers tout these reports, journalists should seek independent academic experts to evaluate the claims and methodology rather than report them at face value. They should also remind readers about the costs to taxpayers and the foregone alternative public investments that could have been made instead of subsidizing a new stadium.
Conclusion: The Case for Better Reporting on Stadiums
Timothy Taylor, managing editor of the Journal of Economic Perspectives, recently wrote in a blog post:
If public subsidies for stadiums don’t pay off, why do they keep happening? There are two possible answers here. One is that stadium subsidies arise from an unholy mixture of loudly represented special interests, empire-building local officials, and the threat that a team can move away. The result is a kind of arms race, where cities know they would be better off if they were all to limit these subsidies, but few individual cities are willing to do so on their own.”
Here, Taylor describes the economic concept of concentrated benefits and dispersed costs. Team owners, local policymakers, and business owners in hospitality or concessions all stand to benefit from a new stadium project and have significant resources to devote to lobbying for its approval. Meanwhile, individual taxpayers who might oppose these projects share a small portion of the overall cost and may be less motivated to act against them. Thus, publicly financed stadiums keep getting approved.
As we’ve seen in Nashville, when the media acts as a cheerleader of a stadium project, it makes it that much harder to fight back. However, local media can play a vital role in exposing the undeniable waste of taxpayer dollars. Reporters don’t need to be anti-stadium zealots, but they should at least confront every claim about new stadium projects with an informed and healthy dose of skepticism.
Too often, to appear objective and balanced per standards for journalism ethics, reporters give equal weight to “both sides” of the debate. “Supporters say this, while opponents say this.” The problem is that supporters are often parties with a vested interest in the deal — whether it’s politicians out to cement their legacy or consultants who are paid by stadium boosters to put out glowing economic impact reports. These interests are hardly given much ink beyond maybe a sentence or two.
But this gives supporters and opponents equal weight in the reporting, especially when supporters’ claims are taken at face value. Opposing voices are informed by the “near-universal consensus evidence” and experts who find that stadiums do not produce the promised economic benefits. At the very least, reporters should provide readers with enough context about how certain claims stack up to the overwhelming evidence.
The Tennessee Public Records Act should also be used to uncover any behind-the-scenes discussions before a stadium deal is announced. And when those requests are denied due to “deliberative process privilege,” media outlets should use their resources to fight back to fully inform the public on who stands to benefit from stadium deals.
Here’s hoping reporters get it right next time. If not, readers ought to hold them accountable.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International.