Say It Ain’t So: Stadium Subsidies in Nevada

Politicians, developers and sports fans in Las Vegas and Reno are pushing to build new baseball stadiums in their cities. Earlier this month the Las Vegas City Council chose the Southwest Sports Group, a Dallas-based firm, to lead “redevelopment” efforts for a 61-acre parcel of land downtown. The company has plans for a publicly funded stadium for the Las Vegas 51s, the city’s Triple A team. In Reno, the city council will soon decide whether to pursue a publicly funded stadium for one of two California clubs looking to relocate to the Truckee Meadows: the Visalia Oaks (Single A) or Tacoma Rainiers (Triple A). As is the case in cities throughout America, Nevada’s pro-stadium voices are extolling the economic benefits of publicly funded sports complexes. But there is substantial evidence that the economic impact of stadiums is exaggerated. Herewith, a look at the reasons why Nevada taxpayers should not be forced to subsidize baseball stadiums.

The Pitch

The discussions over Nevada’s proposed ballparks have featured much of the standard rhetoric heard in other stadium proposals. In Las Vegas, the general manager of the 51s has declared that a downtown stadium for his team “is the best option for Las Vegas if it ever wants to become a major-league city.” His comment is an example of the argument that no city has “arrived” unless it has a pro team, a claim so preposterous it warrants no discussion. But given that many people simply aren’t interested in sports, pro-subsidy politicians and business leaders usually stress economic justifications for devoting public dollars to stadiums. The litany is now well-known—more jobs, more retail sales, etc. In both Nevada cities, ballparks are also being sold as ways to revive decaying downtowns. In Reno, government officials claim a stadium would contribute from $6.7 million (for a Single A stadium) to $11.9 million (for a Triple A stadium) to the region’s economy. Reno’s pro-stadium forces also claim that baseball can be an additional way to lure gamblers away from Indian casinos in California.

Rhetoric vs. Reality

However, research has shown that the economic benefits of subsidized stadiums are monumentally overstated. For years, analysts have searched in vain for proof that the pro-subsidy hype peddled by stadium supporters squares with reality. In fact, on this issue the level of agreement between free-market, conservative and left-liberal economists and policy analysts is startling. Yet perhaps more startling is the mountain of studies they have published that found little or no economic benefit from subsidized stadiums. In 1997, Smith College’s Andrew Zimbalist, perhaps the leading authority on stadium subsidies, co-authored a book on the subject with Stanford University’s Roger G. Noll. “A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment,” the authors concluded. “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.” Raymond Keating, the Small Business Survival Committee’s chief economist, agrees: “The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the ‘substitution effect’ (… the fact that leisure dollars generally will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies.” Dozens of other analysts, academics and economists have reached similar conclusions, including scholars with the Cato Institute, Heartland Institute, Goldwater Institute, Brookings Institution, Pepperdine University, University of Maryland, Marquette University, University of California at Berkley, Indiana University, Lake Forest College and Federal Reserve Bank of Kansas City.

Where Are the Fans?

In recent years, Las Vegas and Reno have seen their sports franchises flee to other cities or go out of business altogether. These failures raise the specter of existing or new teams using the public purse to build themselves new homes, only to leave or go bankrupt when sufficient fan support fails to materialize. Amazingly, average attendance for 51s games is actually lower today than when Triple A ball came to Las Vegas in 1983. The XFL’s Las Vegas franchise saw its attendance drop by almost half between its first and last home games. This year also saw the demise of Las Vegas Bandits of the International Basketball League. Not long ago Sin City’s minor-league hockey team also flopped. In total, 18 minor-league teams have failed in Las Vegas. The situation is not better in Reno. In 1992 the Silver Sox, a Single A team, left for Riverside, California. In 1999, the BlackJacks, from the independent Western Baseball League, left for an even smaller market in the Golden State. One possible reason for the lack of fan interest in Silver State clubs is the origins of today’s Nevadans—only about one in five was born in the state, and many new arrivals seem to remain loyal to their hometown teams.

Conclusion

“Publicly funded sports stadiums are like crack cocaine to local politicians and business bigwigs,” writes Reason’s Michael W. Lynch. “These folks are just like addicts: They deceive everyone around them for the sake of a fix and rarely take no for an answer when voters decline to subsidize their schemes. Instead, they resort to theft—in the form of dubious hotel, sales, and other taxes—to pay for their fix, forcing citizens who couldn’t care less about sports to subsidize teams.” Although Lynch’s language is harsh, his assessment is on target. In cities across America, stadiums funded with direct and indirect taxpayer dollars have not lived up to their carefully crafted images as engines of economic vitality. And the opportunity costs of the projects—in the form of revenue that could have been devoted to police protection, improved infrastructure or lower taxes—are substantial.

Las Vegas and Reno are cities with vibrant economies and rapidly expanding populations. If minor-league (and in the case of Las Vegas, perhaps major-league) teams can turn a profit in Nevada’s two urban areas, they should do so on their own dime. Politicians in Las Vegas and Reno have already squandered millions of dollars on failed redevelopment schemes and unwise “public-private partnerships” that have failed to produce jobs and economic diversification. It is time for both cities’ officials to realize that team owners and fans—not government subsidies—should determine if new ballparks are built in Nevada.