What’s America to do about its stadium problem?
Over the past 15 years, more than $12 billion in public money has been spent on privately owned stadiums. Between 1991 and 2010, 101 new stadiums were opened across the country; nearly all those projects were funded by taxpayers. The loans most often used to pay for stadium construction—a variety of tax-exempt municipal bonds—will cost the federal government at least $4 billion in taxpayer subsidies to bondholders. Stadiums are built with money borrowed today, against public money spent tomorrow, at the expense of taxes that will never be collected. Economists almost universally agree that publicly financed stadiums are bad investments, yet cities and states still race to the chance to unload the cash. What gives?
To understand this stadium trend, and why it’s so hard for opponents to thwart public funding, look to Wisconsin. Last month, Governor Scott Walker signed a bill to spend $250 million on a new basketball arena for the Milwaukee Bucks. (The true cost of the project, including interest payments, will be more than $400 million.) Milwaukee Common Council, the city’s lawmaking body, will weigh the arena proposal on September 22, after a series of public hearings. If the council-members approve it—and if recent history is any indicator, they will—construction could begin as early as October. When the Bucks step onto the court to start the 2017–18 NBA season, they could very well do so in a shiny, subsidized, half-billion-dollar arena.
Stadiums are built with money borrowed today, against public money spent tomorrow, at the expense of taxes that will never be collected.
The story of what’s happening in Milwaukee is remarkable, if not already familiar. Step one: A down-on-its-luck team is purchased by a group of billionaire investors. Step two: The owners nod to their “moral responsibility” to keep the team in its hometown,while simultaneously lobbying for a new stadium. Step three: The team threatens to abandon its hometown for greener pastures—and newer facilities—in another city. Step four: The threat scares up hundreds of millions of public dollars in stadium financing. Step five: The new stadium opens, boosting the owners’ investment, while sloughing much of the financial risk onto taxpayers. As New York Times columnist Michael Powell wrote, “From start to desultory end, Milwaukee offered a case study in all that is wrong with our arena-shakedown age.”
That’s not to say the Bucks plan was entirely unopposed. Last year, a coalition of religious and community groups known as Southeastern Wisconsin Common Ground tried to fight the arena proposal. It called for a voter referendum on the bond issue, and lobbied for money to improve Milwaukee’s public parks and playing fields. Powell explains the rest:
The local business community—which includes several members who have ownership shares in the team—dismissed such ideas as impractical. “The Bucks took control of the strategy from the start,” said Bob Connolly, a member of Common Ground. “They pushed the referendum idea right to the side.” Months later, when Common Ground leaders turned to usually friendly local foundations for more funding, they found themselves turned away. You are, they were told several times, too political.
The lesson is clear: It is incredibly difficult to fight these projects. And Milwaukee is not alone. In St. Louis, for example, a judge recently struck down a city ordinance requiring voters to approve public spending on a new stadium for the Rams. Back in June, when Glendale, Arizona, tried to back out of its atrocious dealwith the National Hockey League’s Coyotes, the team quickly slapped the city with a lawsuit. Meanwhile, in building a new billion-dollar home in Minneapolis, the Minnesota Vikings found a loophole around a state law mandating that all public spending on sports teams be put to a vote.
Why is it so hard to oppose these deals? And why, despite overwhelming evidence that stadium subsidies are a poor use of public money, do cities and states agree to take on debt for the sake of wealthy team owners? Sociologists Rick Eckstein and Kevin Delaney, of Villanova and Temple universities, have studied this problem for years. The answer, they say, lies in the strategies through which stadium proposals are conceived and promoted. That is to say, public financing depends on the quiet, behind-the-scenes assembly of support from local plutocrats. The less often voters are involved, the better. “We disagree with the assumption that local government is a neutral party that sometimes gets extorted by local sports teams or local growth coalition,” Eckstein and Delaney wrote in a 2006 paper. “Instead the default position of local governments (with only rare exceptions) is to believe in the wonders of publicly subsidized sports stadiums.”
Not surprisingly, publicly funded stadiums face the least opposition in cities with strong growth coalitions, which Eckstein and Delaney define as the “institutionalized relationship between headquartered local corporations and the local government.” A coalition can claim to represent the interests of a community—not an outrageous claim on its face, since it comprises the powerful and prominent local leaders—while shielding team owners from both direct criticism and grassroots opposition. This is precisely what’s happening in Milwaukee. Here’s the Times’ Powell again:
The hedge fund owners proved deft with ownership shares, handing these out to prominent Wisconsin businessmen and Republicans, including the developer Jon Hammes. Hammes has become national finance co-chairman for Walker, a Republican presidential candidate. The Capital Times recently reported that a political action committee connected to Hammes contributed $150,000 to the governor in late spring.
Even President Obama has tried to challenge to status quo of public stadium financing. The budget proposal he sent to Congress last February would haveoutlawed the use of tax-exempt municipal bonds for stadium construction, closing a loophole that was accidentally created by the Tax Reform Act of 1986. Had that line item been adopted rather than ignored by Congress, as was the case with the rest of Obama’s budget, it would have marked the first successful attempt to reform the practice in years—though bond reform would be far from enough. Without tax-exempt bonds, cities and states wouldn’t stop borrowing money to build stadiums; they’d just borrow at higher interest rates.
Economists have proposed antitrust lawsuits against leagues and stricter naming rights for teams, as Slate suggested in March, but neither idea has gained much traction. A Florida proposal would have shared team revenues with the public—a somewhat radical idea that Deadspin boldly declared “The Best Idea for Stadium Financing We’ve Ever Heard“—but it was quickly deemed illegal. Of course, a wholesale reform of corporate subsidies could solve the stadium problem—while addressing a much, much bigger one—but that’s even more unlikely than Obama getting a budget through Congress.
Public financing depends on the quiet, behind-the-scenes assembly of support from local plutocrats. The less often voters are involved, the better.
Maybe the answer won’t be a silver bullet. A single policy change rarely solves a problem like publicly funded stadiums; as Andrew Sharp notes for Grantland, “[The Bucks’] stadium deal didn’t game the system; that is the system.” As long as team owners can threaten to move, and as long as they’re backed by strong coalitions of local politicians and business leaders, it’ll be tremendously difficult to change anything.
Look around the country, though, and you’ll see a smattering of victories for the anti-subsidy crowd. In Anaheim, Mayor Tom Tait played hardball with the Angels over stadium negotiations. Oakland Mayor Libby Schaaf won’t consider public funding for a new Raiders stadium. If hedge-fund manager Chris Hansen ever brings an NBA team back to Seattle, as he’s hoped to do for several years, a 2006 ballot initiative will limit the amount of money the city could kick toward his plans. And as bad as the fight in Glendale grew, the city negotiated last July for a new, better deal with the Coyotes. In Milwaukee, Common Ground has vowed to keep fighting the good fight. It’s far from a trend, to be sure, but it’s certainly a step forward.
If enough local and state politicians won’t say no excessive public financing—and as Eckstein and Delaney’s work suggests, a strong coalition gives lawmakers few reasons to even consider opposition—what can be done? Who can put an end to publicly funded stadiums?
In an insightful segment last July, HBO’s John Oliver turned his attention to this issue of stadium malfeasance, criticizing owners who soak taxpayers for subsidies. “[Municipal bonds are] supposed to be for things like roads or schools—public goods that private industry would not pay for,” Oliver said. “But they’ve been routinely misused to finance stadiums for decades, and often, cities do it because teams claim they can’t afford to build stadiums themselves.” On YouTube alone, the segment has been watched more than four million times. The involvement of a public figure like Oliver, whose Last Week Tonight has quickly attracted an audience of online activists, is as great a sign as any that public opinion could eventually turn against stadium financing.
Could that be it, then? Is the answer to the worst scam in sports as simple as … public awareness? We’ll know soon enough whether or not that’s the case. Voters will pressure politicians to oppose stadium deals, and sports fans may even vote against public financing with their wallets. And if it isn’t the answer to the stadium problem? Well, it certainly won’t make things any worse.