By Jackson Brainerd
Just days before the start of the New Year and the end of his term, Washington, D.C., Mayor Vincent Gray signed a bill approving public funding for the construction of a new $300 million stadium for the city’s professional soccer team, D.C. United.
An independent economic development analysis estimates the District’s contribution to the stadium will be about $131 million, nearly half of the total cost. The deal passed with unanimous support from the City Council, which believes it will serve as an important catalyst for economic growth.
When you think about fans filing into a stadium for a sporting event and paying for tickets, concessions and souvenirs, the economic benefits of such a project may seem apparent. Yet, some analysts are skeptical that using large amounts of taxpayer dollars to finance the construction of sports facilities results in the kind of economic growth that one would expect from such considerable public subsidies.
Professional sports stadiums are landmarks in every city that has them, but their footprint on state and local economies is much more difficult to discern.
For example, economist Robert Baade reported to Congress that “Chicago’s professional sports industry—which includes five teams—accounted for less than one-tenth of 1 percent of Chicago’s personal income.”
The primary reason for this marginal impact is simple: A professional team like D.C. United only plays 17 home games each year. This means stadium activity is either nonexistent or minimal the other 348 days of the year.
Furthermore, the money people spend at a game can mean a reduction in other types of local recreational spending, such as movies and restaurants. The same rule applies to tax collections: An increase in taxable revenue generated from stadium activity may mean a decrease in taxable revenue from other entertainment options, as they lose customers and profits to the sports team.
Supporters of D.C.’s new stadium point to the aforementioned economic analysis, which forecast an estimated $109.4 million in net fiscal benefits from taxes and fees and 1,683 full-time jobs.
However, critics contend these kinds of studies generally make rosy assumptions that can alter the results but cannot be substantiated by economic theory. Thus, many economists suggest that if economic development is the primary goal, and the evidence for professional sports-driven growth is uncertain, it would be more prudent for state and local governments to use taxpayer dollars to finance infrastructure improvements, education or even broad-based tax cuts.
Of course, there is an intrinsic value in the high-quality entertainment and civic pride that sports can create. So at the very least, Washington, D.C., residents will soon be able to watch some exciting displays of athleticism at a new, state-of-the-art facility.
Jackson Brainerd is a research analyst in NCSL’s Fiscal Affairs Program.