To generate economic development, many cities try to lure large private businesses using tax breaks and subsidies. One of the more common examples has been sports stadiums. In the last few years, various teams have insisted on public financing for new stadiums, drawing interest from officials. These measures devote taxpayer money to crony enterprises run by billionaires, in a top-down planning model that harms overall dynamism by crowding out better uses. Cities should not only reject these wasteful measures, but look (ironically) to state universities as a better way to fund stadiums. 

In the pro sports world, stadium subsidies have unfortunately become common—more the norm than the exception—leading to whole websites about it (such as Field of Schemes). According to the Brookings Institute, about $7 billion was spent between 1997 and 2006 on stadiums, with the majority of that coming from public sources. In recent years, Atlanta and Charlotte built their teams’ stadiums with public funding, while the governor of Tennessee has endorsed $500 million in bond funding to help the Tennessee Titans build a new one in Nashville, even though their current one is only 23 years old. (Occasionally, these plans are thwarted: Connecticut narrowly avoided a boondoggle in the late 1990s when the New England Patriots wanted to secure public financing for stadium construction in Hartford.)

The argument in favor is that retention or attraction of teams spurs economic activity. A European sports trade association points to data that stadium construction has beneficial economic impact, such as higher property values and employment. 

But these benefits are dubious. Research by the St. Louis Federal Reserve finds that most economists oppose public stadium spending, because the consumer spending that they generate and proponents point to is usually redirected from other expenditures the consumers might have made; while those government funds instead could have gone for things that more broadly support the public. This point about opportunity costs (i.e. how would money be spent if it weren’t used on stadiums) is particularly cogent when factoring for land-use. For example the Titans’ stadium is just across the Cumberland River from bustling downtown Nashville. It’s in the type of neighborhood that could be a trendy, high-yielding mixed-use district, but instead houses a stadium used several dozen times a year and surrounded by parking lots.  

Moreover, experience has shown that private money can cover stadium costs. In Los Angeles, Rams owner Stan Kroenke was aware that the city would not finance a new stadium, and responded by building SoFi Stadium privately for $5 billion. San Francisco has also resisted the stadium subsidy racket, yet managed to draw teams anyway, as the Giants and Warriors financed their own beautiful venues on the city’s waterfront.

Another alternative would be for pro teams to follow the model that many college teams have with their stadiums: hold fundraising campaigns with their boosters and fans. For instance, when Virginia Tech wanted a $93 million football stadium expansion in the late 1990s, it held a privately-funded pledge drive. UVA did the same when building its basketball arena (state law in Virginia prohibits taxpayer funding of college athletics). 

This “fundraiser” model for stadium expansion is common in college sports. The most renowned examples are from moguls like Phil Knight, who has donated $1 billion over the decades to his alma mater, the University of Oregon. But often the pledge drives are much more democratic, with average fans chipping in 3-, 4-, or 5-figure donations in exchange for tickets and behind-the-scenes access.

The implied message from this model gets to the root of what sports are all about, be it the college or pro level: does a fan base really want their team to win? Then they can put their money where their mouth is by giving their team the tools and money to compete. 

But governments should not bring the average non-sports-caring taxpayer into this. It creates a moral hazard wherein any business can claim that the benefits it offers to a community warrants subsidy. Businesses then beg for corporate welfare amid any downturn – and reserve the right to leave anyway. Cities should instead trust that the market will provide the conditions for those benefits that stadiums supposedly provide.

This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.