Is a sports arena an investment or a subsidy?

Gigi Douban Aug 13, 2015
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Is a sports arena an investment or a subsidy?

Gigi Douban Aug 13, 2015
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Wisconsin Governor Scott Walker signed a bill calling for $250 million to go towards a new basketball arena for the Milwaukee Bucks. There’s been tons of debate over the question of how much economic benefit, if any, new stadiums bring.

When a government pours money into a sports venue, sometimes it’s hard to tell whether it’s a subsidy or an investment, Mark Rosentraub, sport management professor at the University of Michigan, says.

“It becomes an investment when there’s a clearly defined set of returns that are worth the risk of any investment,” he says.

Rosentraub says if the arena anchors a bigger redevelopment plan, that’s when it tends to make a city money. But arenas alone don’t equal jobs and new businesses, especially in a quiet city like Milwaukee, according to Andrew Zimbalist, economics professor at Smith College.

“If you’re hoping to promote the local economy by attracting or keeping a basketball team,” he says, “it’s not something that happens.”

And the more public money goes into a venture like this, the less it helps the local economy. This deal is 50/50 public and private money. The Bucks are owned by two New York hedge fund managers. Zimbalist says the average in the NBA is two-thirds public money.

“On the other hand,” he says, “some of the public money that they’re putting in is kind of shaky.”

Like collecting back taxes and visitor taxes — both dicey. Ted Gayer, vice president and director of economic studies at the Brookings Institution, says it doesn’t pay for cities. But it does for teams.

“Sports leagues are leagues, they’re actually pretty savvy about this,” Gayer says.

And if they know a city wants them to stay, he says, they have leverage in negotiating more money to stay…and that, to a lot of fans, is enough.

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