A stadium subsidy is a type of government subsidy given to professional sports franchises to help finance the construction or renovation of a sports venue. Stadium subsidies can come in the form of tax-free municipal bonds, cash payments, long-term tax exemptions, infrastructure improvements, and operating cost subsidies. Funding for stadium subsidies can come from all levels of government and remains controversial among legislators and citizens.
Surveys of economists show that 86% of them support eliminating public subsidies for professional sports franchises. According to economists, state and local subsidies to build stadiums for professional sports teams are unlikely to result in economic benefits that exceed the costs to taxpayers. Stadium subsidies have distributional effects, primarily benefitting wealthy owners, players and other staff of sports franchises while imposing costs on the public. Stadium subsidies are widely criticized for using taxpayer funds to benefit franchise owners, who are often billionaires, to the detriment of public schools and infrastructure.
Background
In the United States Prior to the 1950s, stadium subsidies were essentially unheard of, with funding for professional sports stadiums coming from private sources. In 1951, MLB commissioner Ford Frick decided that league teams were bringing large amounts of revenue to their host cities from which owners weren't able to profit. He announced that cities would need to start supporting their teams by building and maintaining venues through public subsidy. Most new or renovated professional sports stadiums are financed at least partly through stadium subsidies. While Frick may have been a catalyst, this change has been primarily caused by the increase in bargaining power of professional sports teams at the expense of their host cities.
Many studies suggest that there are a number of direct and indirect economic benefits associated with hosting a professional sports team, although each city experiences this to a different degree. Even so, a 2017 survey found that "83% of economists polled believed that a subsidy's cost to the public outweighed the economic benefits". The economics behind issuing billions of dollars to professional athletic organizations are still unclear, but cities have clearly showed that they are willing to assume the bets, as both the number of subsidies issued and the amount of money issued per subsidy have increased.
27 of the 30 stadiums built between 1953 and 1970 received more than $450 million in total public funding for construction. During this period, publicly funding a stadium grew in popularity as an effective incentive to attract professional sports teams to up and coming cities. Famous examples include the Brooklyn Dodgers leaving New York in exchange for 300 acres in Chavez Ravine and the New York Giants moving to San Francisco for what would eventually become Candlestick Park.
Over time, a market for subsidies has come into existence. Sports teams have realized their ability to relocate at lower and lower costs to their private contributors. Because local governments feel that keeping their sports teams around is critical to the success of their cities, they comply and grant teams subsidies. This creates a market for subsidies, where professional athletic organizations can shop between cities to see which municipality will provide them with the most resources. Teams in the NFL have a major incentive to keep their stadium up to date, as the NFL allows teams to bid to host the Super Bowl and takes recent and planned renovations into account. Many NFL teams in recent years have asked for subsidies for the construction of entirely new stadiums, like the Atlanta Falcons, who were subsequently awarded the contract for Super Bowl LIII.
In Europe Public subsidies for major league sports stadiums and arenas are far less common in Europe than in the United States. The relationship between the local clubs and the cities that host them is typically much stronger than in the United States, with the team being more intrinsic to the cities' identity. Cities would be significantly more upset at the departure of their beloved local teams, and viable alternative cities already have their own clubs to whom their residents are loyal. As a result, the leagues in Europe have significantly less bargaining power, and that the stadiums are largely privately funded instead. They will not threaten to relocate to another city if not provided with a subsidy, or at the very least the threat would not be credible.
Other factors to consider regarding the differences in the use of public subsidies for stadiums in North America and in Europe are both the differences in how the leagues are organized in their respective continents as well as the internal geographical differences between the United States and European countries. In North America, franchises operate inside of a closed league, in which the leagues have a fixed, maximum number of teams (e.g., 32 teams at maximum) for the sake of scheduling. This monopolistic structure, coupled with the large geographic size of both the United States and Canada, has resulted in a considerable imbalance between the number of teams in the four main North American sports leagues and the number of eligible major cities and/or metropolitan areas in the United States and Canada who desire and/or can sustain such teams. This disparity affords franchise owners significant bargaining power, as they have a considerable market of urban areas to which they could consider relocating their teams and request subsidies for new stadiums if their team's current host cities are unwilling or unable to do so. By contrast, European sports leagues generally use a league system and promotion and relegation, in which sports clubs from various cities can be promoted to higher leagues based on their performance in the completed season. This inclusive approach, coupled with the fact that most of the large cities in European countries would have their own clubs, deprives club owners in Europe of the effectiveness in the threats of relocating their clubs to other cities if their current city fails to provide subsidies for new stadiums.
Types of subsidies There are two primary ways that a city facilitates the construction of a stadium. The first, and most commonly used method, is a direct subsidy. This involves a city promising a certain amount of revenue to go towards the construction, maintenance, and renovation of a stadium. Other times, the city will give tax breaks to teams or stadium owners in lieu of a direct cash transfer. Over a period of time, a reduction in the taxes paid against the stadium generally saves the organization building the stadium around the same amount as a subsidy would be worth.
In the US, annual subsidies provided by states for the construction of stadiums range into billions of dollars. A 2005 study of all sports stadiums and facilities in use by the four major leagues from 1990 to 2001 calculated a total public subsidy of approximately $17 billion, or approx. $24 billion in 2018 dollars. The average annual subsidy during that period was $1.6 billion ($2.2 billion in 2018 dollars) for all 99 facilities included in the study, with an average of $16.2 million ($22.8 million in 2018 dollars) per facility annually. A 2012 Bloomberg analysis estimates that tax exemptions annually cost the U.S. Treasury $146 million. +Professional American Sports Stadium FundingTeams using stadiums that have not received taxpayer subsidies: Teams using taxpayer-subsidized stadiums: NBA NFLMLBNHL Sources: +Professional European Football Stadium Funding (2024–25) Teams using stadiums that have not received taxpayer subsidies: Teams using taxpayer-subsidized stadiums: Premier League (20) La Liga (20) Bundesliga (18) Serie A (20)
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