I have watched with some amusement this week as city after city after city dropped out of the running to host the 2022 Winter Olympics because slow economic times, dwindling revenues, ballooning entitlement responsibilities, and a finally protesting public scared many of them off the huge boondoggle that is being a host city. The city and country with the honor of hosting each Olympiad has often spent buckets of taxpayer money, borrowed buckets more, created entirely new developments and traffic woes in already congested areas, and giant sports structures for which there will be no inhabitants once the international circus leaves town. They do all of it to chase that elusive combination of prestige and economic growth an Olympics embodies. The prestige is a far more tangible and likely byproduct, it turns out, than economic benefits.
People skeptical of public spending boondoggles have known this for some time. We’ve seen it in studies again and again.
An August 2013 study from the non-partisan Institute on Taxation and Economic Policy reports that states and localities are allocating $50 billion a year to corporate tax incentives (with $20 billion and counting going to major American sports teams since 1990) and that “despite the enormous expenditures being made on these programs, the evidence suggests that tax incentives are of little benefit to the states and localities that offer them, and that they are actually a drag on national economic growth.”
Publicly financed sports arenas do not provide a positive economic impact to communities, according to a new report released Friday by the city’s Legislative Reference Bureau…
The reference bureau report cites studies showing publicly financed sports venues have not paid off economically for the city, county or state governments financing them. The report cites the work of Andrew Zimbalist, a sports economist at Smith College, who has questioned the economic impact of new sports arenas.
“One should not anticipate that a team or a facility by itself will either increase employment or raise per capita income in a metropolitan area,” Zimbalist said in 2009.
Let’s look at this particular deal. The stadium costs $975 million on paper, with over half coming from public funds, $348 million from the state and $150 million from Minneapolis—not through parking taxes or other stadium-related user fees, but with a new city sales tax. In return, the public gets an annual $13 million fee and the right to rent out the stadium on non-game-days.
Vikings ownership, NFL commissioner Roger Goodell, and local politicians make a typical pitch for the deal: the stadium will attract investment to the area; local establishments will see a rise in game-day sales of $145 million; jobs will be created, including 1,600 in construction worth $300 million ($187,500 per job?!); tax revenues will increase $26 million; property values will rise; and, of course, the perennially underachieving team’s fortunes will improve.
Such arguments are always trotted out for these sweetheart deals, but the evidence regarding the economic effects of publicly financed stadiums consistently tells a different story. For example, Dennis Coates and Brad Humphreys performed an exhaustive study of sports franchises in 37 cities between 1969 and 1996 and found no measurable impact on per-capita income. The only statistically significant effects were negative ones because revenue gains were overshadowed by opportunity costs that politicians inevitably ignore.
The New York Yankees’ new $1.3 billion stadium—the most expensive ever built in the United States—is being made possible by a generous grant from an increasingly familiar sponsor: the taxpayer…
Sanderson and other economists say while new stadiums create jobs in areas such as construction, food services, concessions, and security, these opportunities are either temporary or low-paying. In addition, the vast majority of fans who use stadiums are local, thus no new money is brought into the community.
At the same time, revenues being brought in by teams are, for the most part, redirected out of the community to the league, to owners who rarely invest in the local community, and to players who, more often then not, do not live where they play.
“You have kind of a reverse Robin Hood effect;” Sanderson said. “A situation where you are transferring income from average taxpayers to above-average income groups—owners, players, and fans who regularly attend games.”
In Cincinnati (whose deal is too bad to even do justice to with excerpts).
Krakow is dropping its bid for the 2022 Winter Olympics after residents voted overwhelmingly against the plan, the Polish city’s mayor said Monday in the latest blow to a race already in disarray.
Almost 70 percent of voters opted against hosting the games in the referendum on Sunday. The turnout was nearly 36 percent, enough to make the vote valid.
The insanely expensive Sochi Olympics (thanks to corruption!) no doubt helped tip the scales, as did apparent misconduct with the press by the former head of this bidding process in Poland.
And, viral lists of abandoned sports structures of the Olympics can’t help, either. The downsides have become more transparent lately than they’ve been in the past.
Meanwhile in Atlanta, which managed to host an entire Olympics without bilking taxpayers (Back then, everyone complained the Games were too “corporate.”), now can’t manage to get the Braves or some other private entity to fund its new stadium.
The Atlanta Braves reached an agreement with Cobb County on an operating agreement that will obligate the county to borrow up to $396 million to build the team’s new stadium, the Atlanta Journal-Constitution reports…
The proposed new stadium will cost $622 million, with $392 million coming from the public. That includes $368 million in bonds, $14 million in transportation sales tax and $10 million in cash from businesses in the Cumberland Community Improvement District.
The deal was done in secret because of fear the public would revolt, and opponents of the plan were not allowed to speak at the meeting where the Cobb County officials voted to approve it.
Democracy!
The Atlanta Falcons hope to build a new stadium in 2017. Go full Krakow on these guys, Atlanta.
As for what to do about the Olympics, Greg Pollowitz has an idea.
