Municipal Funding of Stadium Construction Essay

Submitted By Maeghanan-Fitzgerald
Words: 3601
Pages: 15

Municipal Funding 1

Municipal Funding of Stadium Construction
POL-367 Policy Paper
Cornell College

Municipal Funding 2

Sports stadiums are expensive projects to undertake, and municipalities now bear much of the cost of financing them. Though there are serious economic costs to building these stadiums, there are quality-of-life benefits that accompany these costs. These benefits come through a sense of ownership in the local team, improved socialization opportunities, and increased civic pride. When quantified, this quality-of-life benefit equals the costs of construction, and using public financing to construct new stadiums should be pursued. However, this investment needs to be made with the realization that stadiums are a cultural investment, not an economic investment, and that the benefits associated with a new stadium only exist if a team is occupying the stadium. Therefore, only users of the stadium should pay for the costs incurred by the city, and provisions to keep the sports team in the city should be incorporated into the stadium lease.

Municipal Funding 3

The practice of a municipality funding the construction of new sports stadiums has become commonplace if a city wishes to host a professional sports team.
Controversy has arisen, as many feel the economic cost of funding this construction is too great to carry. However, the quality-of-life benefits gained by hosting a professional sports team, which necessitates publicly financing a stadium, equal the economic costs, and public financing of sports stadiums should be pursued, bearing in mind that stadiums are cultural attractions, and that the benefits of having a new municipally funded stadium in a city only last if there is also a sports team in the city.
Current State of Professional Sports
There are currently four major professional athletic leagues in North America;
Major League Baseball (MLB), the National Basketball Association (NBA), the National
Football League (NFL), and the National Hockey League (NHL). All four of these leagues are monopolies that limit the number of teams allowed to compete in them to 30 teams, with the exception of the NFL which has 32 teams. By limiting the number of teams, the leagues ensure that there are more cities that wish to host a team than teams available, creating a situation where if a city wishes to host a team, it must compete with other cities and offer a team an appealing situation to locate itself in that city.
The key part of enticing a team to either stay in the city in which it is currently located or to relocate to a new city is the construction of a modern stadium for the team.
In today’s sports world, a stadium is not just a venue for a team to play its games in and charge fans to sit in bleachers, but a key part of the team’s revenue stream. Modern innovations in stadium design such as selling the rights to the name of the stadium to a corporate sponsor, offering a large variety of quality concessions and merchandise, luxury boxes which can generate large sums of money from corporate purchasers are all revenue streams a team can gain from acquiring a new stadium. Accordingly, when deciding where to locate a team, the team’s owner will choose to locate where a stadium that can offer these new streams of revenue will be built with the least cost to the ownership (Noll & Zimbalist, 1997, p. 12).
The Cost of Building a Stadium
Building new stadiums is an expensive proposition: the average cost of the 36 new venues built for “big four” teams between 1994 and 2001 was $232 million. Public financing paid for $133 million or 57 percent of the cost, on average. During the same time period, 8 major renovations costing over $60 million were completed on preexisting stadium. On these projects, public financing covered nearly 85 percent of the cost (Rappaport & Wilkerson, 2001). In order to finance its portion of the construction, municipalities will