Slide 10 -
Reverse Robin Hood: The Stadium Boondoggle Furthermore, owners do not have to bear the cost of modern-stadium construction. Public financing accounts for as much as 75% of all baseball stadium costs.
Most of this financing comes by way of local government issues of federal-tax-exempt bonds which permit an interest rate roughly 33% lower than it would otherwise be. Hence a $100 million subsidy is paid for by federal taxpayers for a new $300 million ballpark for a local team. To date, federal subsidies for local ballparks total nearly $2 billion. Every independent economic analysis on the impact of stadiums has found no predictable positive effect on net operating income or employment.
Some have characterized publicly financed stadiums as massive reverse Robin Hood schemes. The single largest source of public financing has been the sales tax. Since 1990 the sales tax accounted for nearly 1/3 of the public funds going to baseball stadium construction. The sale tax is regressive, falling disproportionately on lower-income families.
New stadiums generate tens of millions of dollars for teams annually. More than half of this goes to players and most of the other half goes to the owners. That is, this extra revenue—which comes disproportionately from lower-income families—ends up in the pockets of millionaires, or in some cases billionaires.
Further, new ballparks are gentrified. They cater especially to higher-income groups with their club seats, luxury suites, restaurants, and other amenities. Public money builds the parks, and the team, in turn, charges higher ticket prices to the public. It costs roughly $200 for a family of four to go to one ballgame which includes tickets, parking, food, and a souvenir.
And new ballparks are only short-term revenue generators for clubs. First-year attendance is always up as the public comes out to see the spectacle of the new stadium but in years two, three, four and so on, reality sets in and attendance depends on other factors such as star players and team performance. Witness the dramatic attendance fall-off in yea two of new stadiums in Detroit, Pittsburgh, Milwaukee, and Washington D.C.
Meanwhile, the sale of franchises dramatically escalates over time. For example, the Baltimore Orioles were sold for $12 million in 1979, for $70 million in 1989, and again for $173 million in 1993, when the franchise moved to the publically-funded “throwback” park Camden Yards. In another example, the Seattle Mariners were sold for $13 million in 1981, for $89.5 million in 1988, and again for $106 million in 1992. After the new owners threatened to move the team, in 1996 the people of Washington state paid $518 million for a new ballpark—Safeco Field.
Hence, public financing of new ballparks are a short-term boondoggle for wealthy owners, players, and fans – subsidized by the public and the poor.