About 100 years ago in America, professional sports were just but a private undertaking even with the involvement of the American republic. The business of sports then was financed by private monies and used to take place in private arenas and stadiums. However, over the past few decades, the state and local governments have proliferated sports teams especially with subsidies. There have been several arguments to justify the reasons for and against this kind of proliferation of sports teams by the state and the local government. The aim of this essay is to give a brief history for sports teams subsidies while highlighting the problem statement. The paper will then give justification of public subsidies to sports teams. Finally, the paper will give support the case against public subsidies to sports teams.
Professional sports facilities do receive taxpayer subsidies. Projections in the year 2000 indicated that more than $20 billion was to be spent on a total of 95 stadiums with the state and local governments contributing two thirds of the amount. Until 1953, major sports facilities were constructed exclusively with private funds save for a few exceptions meant to lure Olympic Games. The big question is whether these public subsidies are justified for sports teams. Why is it that local government and the state are willing to provide subsidies for sports facilities? Do benefits outweigh the cost of such subdivides? (Thoms & Walden, p.213).
Justification of Public Subsidies to Sports Teams
Typically, public subsidies for sports teams are justified on a basis of promised economic benefits that the community will accrue as a result. However, little evidence exists that benefits do outweigh the costs (Thoms & Walden, p.213). In 1951, a baseball commissioner by the name Ford Frick argued that owners should insist that the local government and the state should provide for subsidies for new baseball stadiums. He felt that such a request was justified because baseball brings many benefits to the state economy beyond the game itself. Public officials embraced his idea and public subsidies for sports teams became a norm. an economic impact study analysis of the New Fenway Park such a project could create large number of jobs during construction and design and in general seemed to imply that the facility will create large economic benefits to the local Massachusetts economy (Tresch, p.3-5).
The Case against Public Subsidies to Sports Teams
According to Neil James, the following are some of the reasons against arguing in favor of subsidies to sports teams:
- In spite of frequent arguments to the contrary, investments in sports teams do not have a positive return on investments (ROI) with respect to economic activity;
- Public money is scarce. This simply means that subsidies to sports teams is not an appropriate use of limited tax money to promote recreational interests especially when the costs involved in enjoyment are not affordable to all people.;
- The cultural and economic benefits that a sports team may provide to a metropolitan area can easily be realized without having to go through the expensive public subsidization (James).
The author argues against the so called economic revitalization arguments arguing that there is little or no evidence of income or employment accruing as a result of introduction of professional sports or with building of new stadiums. Further evidence was from the fact that a study commissioned by Economic Research Associates (ERA) revealed that the Dallas Cowboys spent $325 million on a new stadium that could generate $238 million a year as returns. According to Demause, the slight economic impact was in the 1980s but is no more and therefore the government should stop such subsidies.
There have been several arguments to justify the reasons for and against local and state subsidy of sports teams in the US. Proponents for such a move present the case of economic benefits to the state and the local government with creation of jobs for the community. However, opponents suggest that the said economic rate of returns may be negative as few people do enjoy a facility funded by public tax money. If indeed there is return on such an investment, then the state and the government can be involved and if not, then owners should be compelled to develop such a facility and not by use of tax money.