Saturday, January 17, 2015

Shocking Revelation: State Stadium Subsidies Don't Pay for Themselves

Sometimes you get to break stories, sometimes you get beat.  But just as I wrap up a couple months worth of work (a few hours here, a few hours there) on Florida's stadium subsidies, the state's economists put out a paper analyzing the effects of pro stadium funding...and it's not pretty.

The Office of Economic & Demographic Research (EDR) concluded the $16 million Florida contributes a year to eight MLB, NHL, NBA, and NFL stadiums across the state (plus more for spring training facilities) do not produce positive return on investment for taxpayers, largely because only 11% of ticket-buyers came from out-of-state:
The Professional Sports Facilities Incentive Program has a projected ROI of 0.30.  For every dollar spent through the incentive, the state of Florida received 30 cents in tax revenue. In addition, the state incentive caused Florida’s Real GDP to increase by about $369.9 million and caused Real Disposable Personal Income to grow by $295.1 million during the review window.
The study even slams the popular, rosy studies teams like to commission!
Economic studies commissioned by proponents of public subsidies for professional sports facilities are likely to fail to recognize or account for the substitution effect of consumer spending, leakages in both visitor and franchise spending, and the opportunity costs of public (or taxpayer) expenditures. Academic economists have identified additional “misapplications, omissions, and gratuitous assumptions” which contribute to overly-optimistic economic impact studies and inconsistencies with peer-reviewed research by academic economists.
It actually goes on quite a bit to discredit team-sponsored studies, touching upon issues they seldom cover, such as leakage (local spending disappearing to hotels and franchises owned by out-of-towners) and opportunity costs.

The state's report is certainly not without flaws.  For instance, it doesn't include the "intangibles," such as marketing exposure and civic pride.  But it should at least table any claims of robust economic impact of stadium handouts.

Interestingly enough, the report cast a very favorable view of subsidies to the Florida Sports Foundation, which promotes amateur events and Spring Training.  The study reported FSF subsidies return $5.61 for every $1 taxpayers spend to support them.  Why?  They draw out-of-state visitors and put "heads in beds" that few pro teams ever will.

It's a fascinating read - check it out.


  1. Where's Dufala at? Woulda thought he'd have already come out with some theory about the research being covertly carried out on behalf of the Cato Institute by now.

  2. I guess this is shocking news (yay, click bait) to some people. An organization offers you a story that is totally in its financial self-interest (see this economic impact chart with all of these pretty colors? alternatively, see these shiny jingly keys?). As a citizen, do you (a) gobble it up and hand out a couple hundred million dollars? or (b) think critically about the way this rent-seeking behavior impacts Florida and America every day? We are fortunate to have economists with credentialed opinions to counter-balance the vacuous journalistic log-rolling.

    1. It's sarcasm, not click-bait.

      And the organization offering the supposed self-serving study is the STATE OF FLORIDA. What interest is it trying to protect by showing spring training subsidies are better than year-round stadium subsidies?

  3. From context, the reference is probably to the sports organization, not the state.