All eyes are on Los Angeles for Super Bowl LVI, where the hometown Rams face the Cincinnati Bengals in the most expensive sports venue ever built. But in the Subsidy Bowl, the Rams have already won in a blowout every bit as decisive as 49ers-Broncos or Bears-Patriots.
Most Super Bowls are played in taxpayer-funded stadiums, but this one is different: Rams owner Stan Kroenke has proven that professional sports don’t need subsidies with his privately funded $5.5 billion complex. In comparison, the raw deal the Bengals pushed on Cincinnati is as ridiculous as not handing the ball to Marshawn Lynch on the 1-yard-line.
Stadium subsidies are neither new nor a small problem. Over the last 50 years, local politicians have handed over $33 billion to wealthy team owners for 135 major-league stadiums, not counting the billions spent on minor-league and other stadiums.
Nor does it count the implicit subsidy from all U.S. taxpayers, since most stadiums are financed using local government bonds which are exempt from federal income taxes. Brookings Institution research suggests that from 1998-2014, federal taxpayers provided an inflation-adjusted $4.4 billion for 44 major league stadiums.
Politicians justify it by claiming that the subsidies pay for themselves, or that the economic growth will be worth it. The research says otherwise. The latest evidence comes from a trio of top sports economists — J.C. Bradbury, Dennis Coates, and Brad Humphreys — showing these handouts simply don’t lead to economic growth or pass a cost-benefit test.
Think about it: Bribing a team to stay or relocate just changes where local residents spend their limited disposable income. Instead of movies, theatre, or live shows, residents spend more on sports tickets and memorabilia.
Returning to this year’s Subsidy Bowl, LA’s privately funded SoFi Stadium is a rarity. The team’s hands aren’t completely clean, since their contract with the local government effectively caps their annual tax payments at $25 million, but it’s the best of a bad lot.
The Bengals, on the other hand, threatened to move to Baltimore in the mid-1990s and extorted what still ranks as the NFL’s largest stadium subsidy — estimated to cost $1.1 billion over the course of the lease. The Wall Street Journal called the deal “one of the worst professional sports deals ever struck by a local government — soaking up unprecedented tax dollars and county resources while returning little economic benefit.” The contract even requires taxpayers to reimburse the team “for any and all expenses of any nature whatsoever” on game day and to provide stadium features that haven’t even been invented yet, like a “holographic replay machine.”
Adding insult to injury, the NFL just refused Cincinnati’s request to host a Super Bowl watch party at Paul Brown Stadium. That’s harsh, considering taxpayers covered more than 90 percent of the stadium’s total cost and discussions are already underway about subsidies to keep the Bengals in town when their lease runs out in four years.
Why are subsidies so common? Currently, Buffalo fans are outraged at the Bills’ demands for a new stadium and Virginia legislators are being pressured to give the Washington Commanders billions in tax revenue.
One reason is league officials keep some viable markets intentionally unfilled. The artificial scarcity provides excessive bargaining power to twist taxpayers’ arms. But if some recent proposals are successful, leagues could lose that leverage, which might lead to franchises in more cities.
In anticipation of the battle over where the Commanders will locate, a bipartisan group of policymakers in Virginia, Maryland, and Washington, D.C. proposed an interstate compact that would keep subsidies out of the competition. More broadly, legislators in Missouri and Arizona introduced legislation that would create a 50-state compact prohibiting subsidies for hometown-hopping teams. And 18 states have introduced a compact to end all corporate handouts, which waste over $100 billion annually.
Even some of the most fervent sports fans understand that billionaires don’t need taxpayer money — they just want it. And by saying no to subsidies, fans are effectively encouraging leagues to add more teams. It’s rare when everyone can walk away with a win.
Michael D. Farren is a research fellow with the Mercatus Center at George Mason University.
Read Full Article »