In May 2011, Ramsey County officials announced they had reached an agreement with the Minnesota Vikings to be the team’s local partner for a new stadium which signaled to Minnesotans that the new stadium, which they had long desired for, was finally on it way. Amid the cheers, the Vikings announced that they wanted taxpayers to pay more than half the cost of the new stadium to replace the 29-year-old Metrodome, which Vikings executives say is not profitable enough compared to other NFL facilities. The county's share would be $350 million, to be financed by a half-cent sales tax increase. (http://abcnews.go.com/Sports/wireStory?id=13571724) The issue has been highly controversial and argued both for and against by republicans and democrats and has pitted urbanites vs. rural Minnesotans. So far, no one has been able to come to a clear consensus. The Vikings’ team website offers many links and studies which claim the positive impact the stadium will have (http://www.vikings.com/stadium/new-stadium.html) but ever since the 1980’s, economist have almost unanimously disagreed with almost all of these types of claims. Who is to be believed?
Are stadiums worth the investment? The answer is mixed. It certainly is to professional teams and leagues. They get a place to conduct their business and create their product (entertainment) and they rarely pay for it entirely. For the cities and their residents however, the benefits are seldom more than sentimental. The problem is, of course, who pays? If everyone who wanted to have a NFL team in Los Angeles simply pooled their money together and bought a stadium, there would be no issue but instead funds are usually raised by taxing an entire region. Furthermore, as seen in many cities, the very presence of stadiums is seen to harm the surrounding areas, not to mention the negative effect of the taxes. This seems to be both an example of injustice and inefficiency. How is it that the majority of benefits are localized around a small number of already very wealthy people? In order the fix this condondrum, I offer suggestions in three areas: facilities, leagues and government taxation policies.
A) Sports Facilities
It is my belief that the main reason facilities do not balance their costs and benefits is because they do not get enough use and do not have enough time to capture all their benefits. A stadium should be able to host a team for many years, but the constant relocation of teams and desire for new facilities has caused stadiums to be used for far less time then they ought to be. Americans have been so spoiled with the new stadiums lately, that they simply expect to get another when one gets a little shabby. The populace, however, rarely thinks about the implications of building another stadium and the costs involved. To combat this, stadiums should require longer leases from the teams they host. However, in order to make this possible, stadiums must also be very well built and able to stand the test of time. But quality craftsmanship and architecture would only add to the value of such a venue. This would be in the city’s and the facilities best interest. Having them both in the same corner would really help eliminate the imbalance between the league power and everyone else. As is the case in some cities, as real estate becomes ever more expensive, many stadium are becoming multi-sport facilities. This makes sense from a business point of view because stadiums do not make money by not operating in the off-season. At this point, they act as dead weight and add no value to the area. By having a multi-sport complex, doors can remain open longer and allow for a greater share of revenue without having to build another costly stadium down the road. Also, facilities can and often do host both collegiate and professional games simultaneously. When it comes to stadium location, because of real estate prices, it is probably better that stadiums be built on the outskirt of town rather than in their downtown areas. Rather than disrupt the internal economics in the heart of cities, building on the outskirts would be cheaper, safer, and allow for urban expansion to combat the suburbanization trend. The key is locating the site close to the city but not in a suburban area. Lastly and most importantly, stadiums should only be built if they have a community coalition behind them of guaranteed investment and partnerships from both profit and non-profit sectors.
B) Leagues
The problem with leagues is that they act as cartels and monopolies. Because business is unable to rise organically within them, and cities that want professional sports teams are unable to have them, the NFL, MLB and NHL need government intervention to see whether or not they are in violation of U.S. antitrust laws. It is ludicrous that if a city wants a team, they must undergo a brutal bidding war that will most likely harm them if they indeed do get the team in the end. A league should not be able to force higher taxes upon American citizens all in the name of keeping competitive balance. Furthermore, league expansion and franchise relocation had little to no effect of competitive balance. This is not to say that every major city needs a professional team in every sport, but at this point, I would conclude that there is a scarcity of teams and this scarcity is hurting citizens (both those who are fans of sports and not) by adding fuel to the bidding wars, which in turn result in higher taxes and less control for facilities over the teams they host.
C) Government Policies
Another solution that has been offered is tax reforms. On this point I would disagree. The problem with their suggestions is that they do not consider the effects of the tax codes other than in the sports industry. I have not studied their effects as a whole, but I think it is highly unadvisable to change a whole system of taxes for one sector; a sector which several other authors has defined as being comparatively small and outside of the normal business model. However, what government can control is where to place their taxes. In this, governments should avoid general taxes in which all people in a region are taxed for a benefit received by only a small percent. This is especially true in cases where only a 51% majority is needed to pass taxes. In fact, many of the ballot results in stadium measure reside around this 50% majority and in such cases we observe a vast tyranny of the majority in policy decisions. While this may be a novel idea, I propose a 2/3-majority vote for any tax increase that is .5% higher than the current level. And lastly, if stadiums are to be subsidized with public funds and taxes, the taxes should rest upon those who benefit from the stadiums. Therefore, taxes for stadiums ought to be placed on tickets, private seat licenses, concessions, luxury boxes, team merchandise, and, as seen in the recent ballot measures in Minnesota, on sporting goods in general. In conclusion, fairness in taxation requires an adherence to the benefits received principle. That is, consumers of a publicly provided service should be the ones who pay for it.
--Justin Luthey
KIN 577
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