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Subsidies: The Gifts that (taxpayers) Keep on Giving

2009 December 25
by Brad Humphreys

Happy holidays, loyal TSE readers. Here at The Sports Economist, we like to keep track of who has been naughty and who has been nice in the sports economics world. And as a long time practitioner of the Dismal Science, I am obligated to provide an update on the naughty part of the list on this festive holiday occasion.

The New York Times has an interesting article today that serves as a reminder that you, the taxpayer, continue to pay, pay, pay to keep your local sports teams outfitted in the finest facilities that subsidy dollars can buy. The first paragraph of the article, titled “Stadium Boom Deepens Municipal Woes,” sums up the current state of sport facility subsidies quite nicely

Years after a wave of construction brought publicly financed stadiums costing billions of dollars to cities across the country, taxpayers are once again being asked to reach into their pockets.

From New Jersey to Ohio to Arizona, the stadiums were sold as a key to redevelopment and as the only way to retain sports franchises. But the deals that were used to persuade taxpayers to finance their construction have in many cases backfired, the result of overly optimistic revenue assumptions and the recession.

I couldn’t have said it better myself. The article goes on to describe events in Cincinnati, where sales taxes dedicated to paying for the new facilities built for the Reds and Bengals in the past 10 years have not generated enough money to pay for the facility operation and service the debt on the bonds floated to build these stadiums. In order to make up the $14 million annual deficit associated with these two facilities, Hamilton County now “plans to cut basic services, lower its legal bills and drain a bond reserve fund with no plan for paying it back.” Worse, the sweetheart deals given the Reds and Bengals only require the teams to pay rent on the facilities until 2014, at which point the deficit will get even bigger. A similar situation has arisen in Indianapolis, a city famous for its sports-led downtown redevelopment plan. Like Cincinnati, Indianapolis is struggling to find funds to operate Lucas Oil Stadium and Conseco Fieldhouse.

In this season of giving, the lesson to be learned from Cincinnati, Indianapolis, Columbus, and the other cities discussed in the article is that sports subsidies don’t necessarily end when the shiny new stadium is built and turned over to the local team. In many cases, the generous terms of the long term leases given to teams mean that taxpayers will continue giving the teams that play in theses facilities significant subsidies for decades.

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