Minnesota lawmakers are considering public funding for a new stadium for the Vikings to replace their old stadium, which last year began literally to crumble (see above). A new bill (SF 1164) provides for two-thirds of the estimated $900 million cost to be covered through new state and local taxes. The state would taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. memorabilia at 10%, levy a 5% surtax on players’ salaries, and tax stadium luxury box seats. Local governments where the new stadium would locate would be able to choose from a list of approved tax options, including a local sales tax of half a percent, a lodging tax of up to 3%, or a food and beverage tax up to 3%. The final third of the funding would come from the team.
This is bad policy. Proponents of public funding for stadium usually cite the benefits of job creation, economic activity, and tax revenue, but these arguments have been debunked by academics. The Brookings Institution has a nice summary (and a book, available on Amazon) debunking the arguments in favor of funding sports stadiums with public money. Here is an excerpt:
Unfortunately, these arguments [in favor of public funding] contain bad economic reasoning that leads to overstatement of the benefits of stadiums. Economic growth takes place when a community’s resources—people, capital investments, and natural resources like land—become more productive. Increased productivity can arise in two ways: from economically beneficial specialization by the community for the purpose of trading with other regions or from local value added that is higher than other uses of local workers, land, and investments. Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers. […] A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. 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.
Like a stadium roof strained by the weight of a heavy, December snow, the arguments for a publicly funded arena have collapsed under the overwhelming weight of cold, dismal economics.
In light of the opposition from academics, many proponents have resorted to the intangible, quality of life arguments, noting that there is a sense of regional pride that comes along with a sports team. However, one could question whether this is always true. What about cities with terrible teams? Could there be a negative impact on the quality of life? But even if the presence of an NFL team does have a positive impact on the quality of life, not everyone will benefit. Those that don’t care about football derive little or no benefit. And the funding doesn’t grow on trees: the tax revenue used to finance the stadium could have been used for other purposes, or left in the taxpayer’s pocket, both of which would impact quality of life.
Addendum: This is not the first attempt by a sports franchise to get Minnesotans to pick up the tab for a stadium. We wrote back in 2007 about the Twin’s new publicly funded stadium, which received $392 million in taxpayer dollars, funded through a local sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. .
Was it just a fluke that Twins billionaire owner Carl Pohlad, (ranked 107th richest person in America by Forbes) was able to extract almost $400 million from the taxpayers?
Unfortunately, it’s no fluke. This corruption of proper public finance is rampant at all levels of government. Politically left and right agree, Ralph Nader and Milton Friedman agree: corporate welfare is wrong, and stadium giveaways are the most egregious example. Benefits flow to millionaire athletes, billionaire owners, and high-income customers. The losers are residents who don’t like sports, taxpayers and the local economy as a whole.
We also noted 3 other instances of public funding for sports stadiums in Minnesota since 1995.
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