NPRI statement on SB501: Government subsidized stadiums are economically harmful pork projects

Victor Joecks

NPRI spokesman: Government-funded stadiums are government pork at its worst

LAS VEGAS – In testimony submitted to the Assembly Taxation Committee on Senate Bill 501, which would allow Clark County to approve one of multiple proposals for a taxpayer-funded stadium, Victor Joecks, the communications director at the Nevada Policy Research Institute, offered the following remarks today:

Good afternoon, Madam Chair and members of the committee. My name is Victor Joecks and I’m the Communications Director with the Nevada Policy Research Institute. Thank you for the opportunity to testify on Senate Bill 501.

I’d like to make three observations today.

First, despite what the developers may claim, these proposals are not an example of entrepreneurship or the free market. If these were free-market proposals, the developers would be risking their own money. (And if they were investing their own money, we’d be applauding them.) Instead, they wish to risk government tax dollars to build a business venture designed primarily to benefit them. At its core, this is crony capitalism. Government’s role is not to subsidize businesses – big or small – and these proposals are clearly subsidizes. Government’s role is to establish a uniformly low tax and regulatory burden and let individuals in the marketplace – not elected officials in Carson City or Clark County – choose the winners and losers.

Second, although this proposal may not require a direct tax increase (although one option does include a fee for parking spaces), tax-increment financing systematically channels tax dollars away from the legitimate functions of government, including K-12 education, public safety and roads, among other things, and into the hands of private business owners. This means non-subsidized businesses must bear a heavier tax burden.

Third, economists (at least those not directly employed by those seeking these subsidizes) have consistently found that taxpayer-financed stadiums do not provide the promised economic benefits. And I’d like to note that most of these stadiums and arenas had a major-league franchise from one of the four major sports, which no proposal under consideration today can guarantee.

Here is a sampling of what economists have said about government-financed sports stadiums:

The Budget Office of the City of New York: Research consistently finds that new stadiums do not produce economic growth in metropolitan areas. These results imply that stadiums do not lead to increases in tourism, nor do they serve as a significant attraction to non-retail establishments. To the extent that stadiums benefit the businesses near them, the benefits reflect the expenditures of metropolitan area residents.

National Taxpayers Union: Publicly funded stadiums are, at best, an inefficient investment of taxpayer dollars for the meager benefits produced and, at worst, massive payments to rich team owners and players at the expense of ordinary taxpayers.

I’d also like to note that this bill would require the contractors to pay prevailing-wage rates, which would artificially increase the burden on taxpayers.

Neil deMause, who studied the issue for 12 years, during which time $10 billion of taxpayer money was spent on 50 stadiums, co-authored “Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.”

He told a congressional oversight committee, “I have yet to find any independent economists – that is, ones not on the payroll of pro sports teams – who believe there is any significant positive impact to local economies from sports stadiums and arenas.”

Raymond Keating of the CATO Institute: “The economic facts, however, do not support the position that professional sports teams should receive taxpayer subsidies. The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars 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. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports – or a possible negative effect.”

Here is what Brookings Institution Economist Robert Baade found after comparing projected returns from new sports stadium construction, “which frequently are estimated by stadium boosters, with the more objective estimates of returns from stadiums that were actually built reported in studies by economists. He finds substantial divergence, with the former generally predicting positive returns and the latter finding little or no impact.”

Also, researchers have consistently noted that the jobs created by stadiums are generally low-paying jobs that require minimal skills.

I’ve also compiled a list of just a few of numerous other economists and researchers who point out the problems with taxpayer-funded stadiums. I’ve submitted this research to your staff.

Thank you, and I’d be happy to answer any questions.

Additional findings: