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The Hidden, Unexpected Public Costs of a Stadium

2013 May 21
by Phil Miller

The state of Minnesota has found that it’s expected revenue stream from new e-gambling games will not be sufficient to fund a new Vikings stadium.   The practical problem for the state government to solve is how to get people interested in e-gambling.  The answer is: with a tour of state officials and other vested interests (HT Neil DeMause).

To drum up interest in the electronic games, Allied Charities will launch its tour June 10. Leaders from the Minnesota Gambling Control Board, the Minnesota Department of Revenue and the Minnesota Licensed Beverage Association will be available to answer questions. E-games manufacturers and vendors will also be available, Lund said.

The idea is to let charities get a firsthand look at the products now available, answer questions about installation, customer response, tax ramifications and more, he said.

Roughly 1,200 charities are licensed to sell the e-games in 2,800 bars and restaurants and fraternal halls across the state.

Since the games were launched last September, about 200 sites have made e-bingo and e-pulltabs available to customers.

…“Our hope [for the tour] is we increase money for our [charity] missions by selling more games, which in turn provides more tax revenue for the state, and ultimately we hope enough revenue to pay for the stadium,” Lund said.

Taxpayers were told that the new stadium would not be funded from the general fund, so the state created a new product to tax to fund the stadium.  But why couldn’t e-gambling revenues be put into the general fund?  Not putting them in the general fund is an opportunity cost to the state.

The money spent on e-gambling also doesn’t come out of thin air.  It probably would have been spent elsewhere in the state, probably on something taxable.   Here we have another opportunity cost to the state.

Also, the state officials presumably would have had better things to do with their time rather than touring the state, so time spent trying to drum up interest in e-gambling gives us another opportunity cost to the state.

To paraphrase, there ain’t no such thing as a free stadium.  Anybody who tells you otherwise is pulling your e-tabs legs.

 

10 Responses
  1. Ken permalink
    May 21, 2013

    I get what you’re saying about subsidies, but as a SuperSonics fan, I can tell you, there is no other option. If you don’t, they take away something you love. And guess what happens after that, you build them a new stadium anyways (although in Seattle’s case, the funding is private. I don’t think it was for Houston or Charlotte, etc.)

    Why are we so against stadium subsidies and not against opera subsidies?

  2. Robert E. Harris permalink
    May 22, 2013

    Ken: The opera I attend is presented in a privately funded performance space (the Kaufman Center in Kansas City.) The opera company is funded by private donations, On the other hand the professional football and baseball teams perform in stadiums funded by state and local revenues. I recall that when a stadium was built in St. Louis for the Rams, I ended up with a personal subsidy of $30 for it. (I have never been inside the taxpayer-supported stadiums of any professional sports teams in the state.)

    I’d far prefer opera companies subsided by the state, at least until the opera companies change hands at prices comparable to the professional sports teams. Is the Seattle Opera subsidized? If so, good for the State of Washington.

  3. pgl permalink
    May 22, 2013

    Would the Vikings get this stadium without this taxpayer subsidy? Probably but that would mean the owners of the Vikings wouldn’t make quite as much. So this question can easily be put forth as whether the average Joe in Minnesota should be asked to pay more in taxes so some rich owner of a football franchise can be even richer. Put that way – I doubt any of these proposals would ever pass.

  4. A Different Ken permalink
    May 22, 2013

    Perhaps because the opera isn’t run by billionaires bringing in billions of dollars in revenue from taxpayer-funded opera houses?

  5. dilbert dogbert permalink
    May 22, 2013

    I am always and forever against Sports Communism. The Central Committee should not spend the states money on stadiums.

  6. Mitch permalink
    May 22, 2013

    @Ken – I think the biggest issue is that stadium subsidies flow to the bottom line for businesses that are highly profitable, whereas opera doesn’t make quite as much money. It’s (generally) rich people that like the opera, though, so it’s still a subsidy for rich peoples’ leisure time, but I’d imagine that the scale is much smaller than sport stadium subsidies. I have no problem with municipalities deciding that they want to subsidize things which enhance quality of life for citizens (a park, sports stadium, and opera all generally fit that bill), but I do wish they’d just call it that. And figure out a way to keep the profits from flowing to the business; that’s called ‘corruption’ anywhere else in the world.

  7. Victor Matheson permalink
    May 22, 2013

    Multiple responses to Ken’s comments on opera.

    1. Opera companies are usually not for-profit institutions that use public money to enrich billionaires.

    2. Opera companies nationwide don’t actively restrict the number of opera companies nationwide in order to create monopoly rent and in order to pit cities against one another. When is the last time the Seattle opera company demanded a new theater or else they were moving to OK City,

    3. I am not quite sure if most major opera companies actually receive much in the way of public funding (other than being allowed to claim a non-profit status in order to avoid taxation, a right extended to a very wide array of organizations).

  8. May 23, 2013

    1. Donations to opera companies that are not-for-profits will be tax-deductible and form a tax expenditure: Government indirectly is paying for a part of that donation. (Ticket purchases, on the other hand, are not deductible.) This is probably more than what the arts typically get in direct aid (was $2b in 1997, can’t find a more up-to-date figure.)

    2. Sports allows this geographic cartelization because it takes two firms/teams to make a sporting event. It takes only one opera company to perform La Boheme.

    3. That said, opera companies (and the arts more generally) are no less likely to use sketchy economic multiplier analyses to advocate for subsidies than do sports teams.

  9. May 23, 2013

    really interesting indeed so interesting I am publicising it!

  10. Andrew permalink
    May 24, 2013

    Ken–

    I understand your plight as a Sonics fan losing a beloved team, but you can’t let fandom get in the way of the real issue behind taxpayers paying for a privately owned stadium. As a former resident of Minnesota and lifelong Vikings fan, I was adamantly opposed to the building of a new stadium for a billionaire owner. I do not, and will never support public financing for the building of stadiums. In the case of the Vikings new stadium, there were a few options:

    1-Build in St. Paul
    2-Build on the site where the Metrodome is erected
    3-Build in a suburb

    First option was never under strong consideration. The third option would have had more public funding and the land around the area for business (restaurant, entertainment, bars, etc.) would have been owned by you guessed it, Zygi Wilf. Option 2, which is what “won” the rights, cost a bit less in tax payer dollars, but was the last choice of Wilf. The reason Wilf opposed this idea and threatened to leave for Los Angeles is because he owns a chunk of that real estate surrounding the current site already, which leaves little to be desired as a businessman.

    The next question that needs to be asked in this debate, why would he threaten to move to LA?
    The same reason the late Art Modell moved his team to Baltimore from Cleveland, a free billion dollar stadium already paid for. Wilf tried and succeeded in putting pressure on the MN government to strike a deal or he walks. Minnesota should have let him walk. If the state had the idea to produce funds for a future stadium to bring a team back to MN, then that could be an option. That didn’t happen, though. Zygi Wilf got his stadium, paid for far less than he should have, and increased the value of his privately owned NFL team exponentially.

    Look around the country, specifically in DC where they are putting tax payer dollars to new stadiums or perhaps Louisiana where an historic hurricane wiped out a significant amount of New Orleans, valuable tax payer dollars aren’t being appropriated because infrastructure, education, etc. aren’t tangible, a brand spanking new stadium is. This blinds tax payers, they forget that they paid for something someone else benefits greatly from.

    It pains me to say the Green Bay Packers are the one organization to do it correctly, offering common stock to fans in order to raise funds for renovations on Lambeau Field. The funny thing is, now, the NFL doesn’t allow any other teams to do this. The Packers, and the Packers alone are the only organization allowed to sell common stock. Yes, I know they are considered a publicly owned team, but Joe Tax Payer who doesn’t like the Packers, yet lives in Wisconsin, is not helping pay for a stadium.

    I love sports, and support the building of modern stadiums, but not at the expense of taxpaying citizens. Why don’t owners take on “The Field of Dreams” motto?

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