Why are the People Funding Billionaires’ Stadiums?

Over the past 27 years, the American taxpayer has paid more than two-thirds of the $21.7 billion spent towards financing stadiums and arenas of the four major professional sports. These contributions from state and local governments were not always the norm for stadium financing. Prior to 1953, the only stadiums that garnered public funding were those being used to attract the Olympic games. However, beginning in the early 1990s, due to a combination of false economic promises, a limited number of professional teams, and an easily mobilized political minority, billionaire owners have been able to shift one of their largest expenses onto the public. Recently, the public has begun to realize the economic burden that financing a stadium necessitates. Numerous obstacles have limited the public’s ability to mitigate negotiations between sports ownership and local government. A legal obstacle occurred in a 2015 Missouri Circuit Court opinion, which “invalidated a city ordinance that required a public vote on the use of any tax dollars for a potential new stadium.”
 
How Did We Get Here?
Before examining how the public’s voice is being removed from these negotiations, it is critical to understand how owners originally persuaded local government to participate in financing their professional stadiums. Promotional literature argues that having a professional sports team brings three primary added benefits. First, there will be a spike in spending within the city limits due to the individuals that the stadium will attract. Second, morale of the city will rise as the team will operate as a common topic of discussion for people in the area. Finally, there is an allure to being a “major-league city” which will result in national and international exposure, enhancing business opportunity.
However, these benefits alone have not led American cities to spend over $14.7 billion on stadiums. Although fervent sports fans are not the majority in American cities, they are a passionate minority who have a strong interest in retaining their local team. This, combined with the organization’s easy access to the media, is a potent combination. In addition, each of the four professional sports leagues in America only has approximately 30 franchises. By limiting the number of franchises available, organizations are able to pit multiple American cities against one another in search of the best offer. These factors led to rapid rise in public spending.
 
Why are Cities Turning Against this Spending?
Unfortunately, the economic promises of stadium spending were vastly overstated. In 2005, a random sample of American Economic Association members were asked to respond to a number of policy statements, they found the most agreement on a statement regarding public stadium financing. “Local and state governments in the U.S. should eliminate state subsidies to professional sports franchises.” Of the economists surveyed, 86% either strongly agreed (58%) or agreed (28%) to the aforementioned statement. Their statements comport with the economic reality of cities who have financed their professional sports organization’s stadium. Economists have found “no ‘tangible’ economic impact in terms of income or job creation.” The reasons for this are relatively simple. First, the economic activity surrounding a sports organization is a relatively minuscule portion of a city’s total economic activity. In “smaller” cities like St. Louis, a team represents 0.3% of the city’s economic activity, and in larger cities like New York, this percentage is even smaller at 0.03%. Furthermore, due to the average person’s budgetary constraints, the spending that the organization generates is often in lieu of other leisure spending within the city. Sports organizations often put a significant amount of their revenue back into the team, and high federal tax rates lead to much of their money ending up in Washington D.C. Overall, the lack of economic benefit has led the public to turn a critical eye on this form of public spending.
 
Public Being Shut Out of the Process
As the taxpayer becomes more aware of the economic worthlessness of public stadium financing, a disturbing trend has begun to emerge. In various cities, the public’s ability to influence the process has been curbed. Since 2005, more than $8 billion has been allocated to stadium financing without a public vote. This has been accomplished via numerous different unscrupulous tactics.  For D.C. United’s $287 million stadium, the chairman, up for election, withheld the release of a study on the matter, until the day after election day. In Minnesota, a bill passed allowing local officials to avoid a public referendum regarding an increase in taxes for financing the Minnesota Vikings new stadium. In Cobb County, $260 million will be redirected towards financing the Atlanta Braves new stadium. However, because Cobb County will only be re-apportioning the use of tax money, the county can proceed without a county-wide referendum. Most recently, the Missouri Circuit Court deemed an ordinance specifically created to ensure that the state lawmakers would receive the public’s consent before financing stadiums “too vague to enforce.” (Huffington Post)
 
St. Louis Rams Riverfront Stadium
In 2002 St. Louis established an ordinance requiring a public referendum before city funds were spent on stadium financing. This ordinance was enacted via voter referendum, gaining widespread support. The creation of an ordinance via voter referendum is an indication of a strong will of the people. Judge Thomas Frawley acknowledges this, pointing to Missouri case law, which states, “when courts are called upon to intervene in the initiative process, they must act with restraint, trepidation, and a healthy suspicion of the partisan who would use the judiciary to prevent the initiative process from taking its course.” In spite of this significant deference, the Court uses hyperbolic scenarios to invalidate the ordinance, even though the matter at hand clearly resided within its purview. In the current matter, the St. Louis Rams were attempting to build a brand-new riverfront stadium. The Court directly acknowledges that the ordinance was intended for this scenario, stating “the voters clearly intended that they would have an impact upon… whether the City participated in financing development of any professional sports facility.” Quizzically, the Court continues by rhetorically asking if the ordinance would restrict the City from conducting internal discussions or surveys without obtaining public approval. Next, the Court undermines the phrase, “any City assistance of value,” included in the ordinance, by insincerely debating whether this includes the police and fire protection that the venue receives. The ad absurdum hypotheticals used by the Court fall outside of a reasonable reading of the St. Louis ordinance.
For constituents to protect themselves from the various deceitful methods local officials may use to obtain public stadium funding, a broad ordinance is necessary. By striking down a broad ordinance, the Missouri Court opinion puts the taxpayer in a “no-win” situation. The impressive initiative shown by the people of St. Louis, to ensure that their voice was heard regarding stadium financing, is one that should have been respected. Considering the Court acknowledges the intent of the public, it should have shown more deference towards the ordinance. Regardless, if recent trends continue, it is likely that the people of more cities will take steps to ensure that stadium financing does not continue to drain their public coffers. Hopefully future Courts will uphold the taxpayers’ efforts to do so.
 
 
Malik Williams is a J.D. candidate, 2018, at NYU School of Law.