New Lessons to Learn on the Risks of Sports Stadiums

When the Oakland A’s announced they were going to leave for Las Vegas, it represented a metaphorical third strike against the city of Oakland, California. That’s because the city has already lost its NBA franchise in 2019 and its NFL franchise to Las Vegas in 2020. The A’s would be the city’s third major professional sports team to pull up stakes and strike out for what they think might be a better deal elsewhere.

Because the Independent Institute is based in Oakland, California, we’ve had a front row seat for the drama of the Oakland A’s announcement stripping the city of its “major league” identity. To be honest, it’s almost the same story as for every other city that has seen a professional sports franchise come and go. Oakland is only unique in becoming a three-time loser in just four years.

That’s why I’m going to turn the focus toward Las Vegas, the city on the other side of two of Oakland’s losses, and how much it’s costing for what it’s winning.

The Cost of Winning a Professional Sports Team

When Las Vegas became the new home for the NFL’s Raiders franchise, it gave up $750 million in future hotel tax revenue to pay off the bonds the city issued to fund the building of Allegiant Stadium.

Bringing the Athletics to Las Vegas will mean giving up at least $500 million more in future city tax collections for a dedicated baseball stadium that will seat 30,000-35,000 fans. Over an entire year, major and minor league baseball games and other events at the new stadium are expected to draw an attendance of 2.6 million.

The $500 million in bonds Las Vegas would borrow to fund the baseball stadium’s construction may be paid back using city taxes collected within a special district set up around the new ballpark:

The tax district, which would be created only if the A’s end up constructing the $1.5 billion, 30,000- to 35,000-seat stadium, would generate taxes including sales, property, live entertainment and modified business levies.

“Any taxes that are generated by the district could be reinvested back into the project,” Aguero said. “The idea is that the construction of a $1.5 billion stadium is going to create value. That value is what we are going to reinvest back into the project. The stadium is not the only thing that’s in the district.”

That money would be paid back in a variety of ways, including the issuance of bonds that would be paid back over a period of 30 years. Tied to that, the A’s would be required to sign a 30-year nonrelocation agreement as part of any public financing deal.

A New Kind of Arrangement for Subsidizing Professional Sports

The kind of arrangement being discussed to direct public funds toward the A’s new stadium in Las Vegas is new for professional sports. Special tax districts have only started to be used like this in recent years to fund a minor league baseball stadium in Wichita, Kansas. A similar arrangement has been proposed to finance an NHL hockey arena in Tempe, Arizona. Still, that proposal raises red flags for that city’s taxpayers:

Grand Canyon Institute found for every $2.70 cents sent to pay off the bills of fixing the land and infrastructure, the city would only get back $1 in new revenue. They said other studies have used highly speculative numbers.

Supporters have studies that claim it will create 6,000 jobs and $690 million in economic benefits for the city. Opponents have said it will disrupt neighbors and only shift funds around instead of generating new money.

The Grand Canyon Institute report says any positive impact on Tempe would be negligible.

Another key factor in the study – they say all this will really do, is shift concerts and events in the Valley. There’s a steady flow of how many concerts we received in the metro, so it will likely take performances away from Glendale and Phoenix, instead of creating new concerts.

Looking at the A’s deal for Las Vegas, it could be worse. Las Vegas could have cut a deal like Nashville, Tennessee did last week to build a new NFL stadium. Reason‘s Jason Russell explains how bad that deal is:

The problem with the new stadium, like the current Nissan Stadium, is not just who pays for it, but who owns it, and that’s the The Metropolitan Council of Nashville and Davidson County. It’s unclear if the Metropolitan Council ever considered getting out of the stadium business and simply asking the billionaire owner of the Titans to pay for the team’s own upgrade. This is not an impossible task: SoFi Stadium outside Los Angeles is the most expensive stadium ever built and reportedly had no direct government subsidies. It’s probably the finest stadium in the world and routinely hosts special events.

Supporters say that with Nashville on the hook for the upkeep of the current stadium, it’s cheaper to start fresh instead of upgrading Nissan Stadium. But the government never really looked into how much an upgrade that fulfilled Nashville’s obligations would cost, only relying on one estimate provided by the Tennessee Titans owner of how much it would cost to build her dream stadium. …

Fans won’t even get a bigger stadium: The new one will seat 60,000 people, which is about 9,000 seats fewer than the current stadium and will be the smallest capacity in the NFL. The city is building a smaller stadium rather than renovating one the state owes money on through 2029.

Nashville’s $1.26 billion football stadium subsidy surpasses the $1 billion taxpayer subsidy for a new Buffalo Bills stadium approved last year. The stadium subsidy arms race never ends.

The newness of the special tax district approach to funding new sports stadiums is both an improvement and something of a warning. They have the potential to limit the cost to taxpayers, which is a good step forward. But with so little history behind them, it’s unclear how effective they will be at containing costs that still run in the hundreds of millions for taxpayers. Wouldn’t it be smarter to have the billionaire owners of professional sport franchises pay the full cost of accommodating their teams?

Craig Eyermann is a Research Fellow at the Independent Institute.
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