Should The Public Finance Sports Teams & Stadiums?

Uppity Peasants weighs in on Calgary Arena ultimatum. City given 1 week to accept deal, or the Flames may leave altogether. Not the most eloquent response in the tweet, but the point is clearly made. There are far more important things cities need than to be financing new stadiums or new arenas.

In a broader sense: to what degree should the public be financing private events or teams?

1. Important Links

CLICK HERE, for Rick Bell, & Calgary Flames’ ultimatum.
CLICK HERE, for a lawsuit against the Prince George Canada Winter Games Host Society, claiming breach of contract.

CLICK HERE, for $5.23B Calgary Olympic bid estimate.
CLICK HERE, for the $17.7M cost of Calgary’s Olympic bid.
CLICK HERE, for Montreal’s Olympic costs, 40 years on.
CLICK HERE, for Forbes article. Stadiums are a game that taxpayers will always lose.
CLICK HERE, for the subsidy drain of “public” sports teams.

2. Flames Show Calgary No Loyalty

The estimated cost of the Event Centre, aka the new arena. $550 million.
The Flames pay $275 million, which was always their number. The city will put up $275 million, which was not always their number.
The city will also pay out another $15.4 million, including the lion’s share of the tab for the Saddledome demolition.
The city will own the arena and for 35 years the Flames will cover the operating costs and they won’t leave town.

And to rub salt in the wound, the article closes off by saying this.

The arena deal hits the street less than 24 hours before city council chinwags over $60 million in cuts to the city budget in the dog days of summer when many Calgarians have scrammed out of town.

Apparently Calgary was $300 million for a new arena for the Flames to play hockey, but $60 million had to be cut from city services. Does this seem like a fair use of taxpayer dollars?

It’s not as if the Flames don’t have an arena to play in. They do. They just want a newer and better arena. What better way to turn off your fanbase by threatening to abandon them in what amounts to a shakedown?

Fair question to ask: does it serve the public to be pouring limited dollars into areas which a very small percentage will actually use? Wouldn’t it be better to spend it on things like: hospitals, fire services, and road maintenance? This is a theme that will come up throughout the article.

3. Olympics Are A Money Pit

Continuing to use Calgary as an example. Let’s note that the city bid to host the 2026 Winter Games, at was to be an estimated cost of $5.23 billion.

The costs would be allocated:

  • $1B from the city of Calgary
  • $1B for the Province of Alberta
  • $1B from the Federal Government
  • Rest from private sponsors

CALGARY—The Calgary Olympic Bid Corporation says the city needs a new mid-sized arena and field house — plus $3 billion of government funding — to host the 2026 Olympics, which it expects to cost a total of about $5.23 billion.

The BidCo’s draft hosting plan, released Tuesday, says eight existing Calgary venues and three mountain venues also need to be updated and “modernized” to prepare for the Winter Games. Those funds come from the urban development cost for the Games, which would total $1.6 billion. BidCo says security costs are estimated at $610 million.

The $3-billion public cost would be split between the city, province and federal government. The remaining cost would be paid for privately through ticket sales, corporate sponsorship and a contribution from the International Olympic Committee. All figures are in 2018 dollars.

The bid was eventually shot down when a majority of Calgarians voted against it. While there was agreement there would be a temporary boost to the local economy, concerns lingered that the debt would never fully be paid off

However, even to “bid” on the games ended up costing over $17 million. Just to make an official bid.

Governments spent a total of $17.7 million on Calgary’s scrapped bid for the 2026 Winter Olympics, according to the city’s final report on the project.
Initially, $30 million has been committed, with roughly a third coming from each level of government.
But the exploration was cancelled after Calgarians voted against it during a November 2018 plebiscite vote — which cost $2.2 million, $2 million from the province and the rest from the city, according to the report which is set to be presented to city council on Monday.

This was just “to bid on” the Olympic games for 2026. It should also be noted: the Alberta and Federal Governments (or rather, taxpayers) coughed up about 2/3 of that bill. Even if the bid were successful, it is an event that areas outside of Calgary would not actually benefit from.

For a Canadian example, let’s take Montreal, which hosted the 1976 Summer Olympics. It cost (in today’s dollars), about $4 billion. So comparable to the proposed situation with Calgary. From the Globe & Mail:

Montrealers can only look upon the Olympic Stadium (which alone cost about $4-billion in today’s dollars) the way modern-day Romans see the Colosseum. It remains an awe-inspiring testimony to a headier time, when an entire civilization dared to dream big, but now serves no practical purpose and costs a fortune to maintain. At least the Romans once had an empire to pay for it all.

The article notes that it needs a constant infusion on cash in order to be maintained, removing is impractical. The few events that it hosts annually come nowhere close to making it a viable enterprise.

43 years later, Montreal still has the regret. But at least tourists can get their pictures taken.

4. Stadiums In General Fleece Taxpayers

This Forbes article debunks the notion that building stadiums or other arenas are a boon for public coffers. It is based on 2 main reasons: economic activity doesn’t not equate tax revenue, and money spent here can’t be spent elsewhere.

Economic impact is not the same as tax revenue…. Some of that tax revenue has to go toward government costs associated with the holding of sports events: extra police, traffic control, perhaps more public transit, etc. At the end of the day, only a very small fraction of total spending associated with stadium events is left over to help pay back the taxpayers for building a stadium.

A valid argument. Just because people may come from out of town, it doesn’t mean all (or even most) of their money will be going to that sporting event. Very little may. Also, there are extra public costs associated with the running the stadium.

On to the second point. When people spend money to go to a sporting event, they cannot just pull that money out of thin air (tragic, but true). Rather, the money comes from their family budget, meaning something else has to give. If I buy tickets to an Atlanta Hawks game, the result of that spending might mean several fewer trips to the movies, not going to a local amusement park, or not going to a local restaurant or two.

Also true, but very obvious. If a person (or family) is spending money on an overpriced sporting event, is that not money that would still have been generating economic activity anyways?

One more consideration: the average person cannot afford to attend professional sports events other than very rarely, if ever. So is it fair to force them to chip in for something they might never be able to be a part of?

5. Reality: It’s Always Subsidised

From the NPR article, it makes the “public cost, private profit” argument. Interestingly enough, that is the same logic used to object to bank bailouts in 2008/2009.

“Public subsidies for stadiums are a great deal for team owners, league executives, developers, bond attorneys, construction firms, politicians and everyone in the stadium food chain, but a really terrible deal for everyone else,” concludes Frank Rashid, a lifelong Detroit Tigers fan and college English professor. Rashid co-founded the Tiger Stadium Fan Club in 1987, and for the next twelve years he fought an unsuccessful battle against Michigan’s plans to spend $145 million in public funds to replace that historic ballpark. “The case is so clear against this being a top priority for cities to be doing with their resources, I would have thought that wisdom would have prevailed by now.

Yes, a small number of people will get very rich off of starting and running a sports team. However, the public will keep paying, regardless of the percentage who are actually interested in the event.

One additional piece the article left out is the cost overruns. Construction projects are almost never completed on time and are typically well over budget. Contract language varies, but typically it is the public who eats the losses.

Sports fanatics would argue that the city or national prestige is worth it. However, those who have little interest would see it as a waste.

6. What Is City Or National Pride Worth?

This is something that each person has to answer on their own.

For the most diehard fans, this is worth it. For the average person, I suspect not.

Objectively speaking: “public” teams with private owners are always a losing deal financially for taxpayers. They require endless subsidies, cater to a niche crowd, and don’t offer anything concrete to the public. At best, a small number of seasonal jobs will be created. The tax revenue generated comes nowhere close to what the subsidies cost.

As seen with the Calgary Flames (though there are other examples), threat to pull a team from a city is a form of economic extortion. For most people it is an empty threat, though politicians will often cave.

When public services get cut to pay for sports events or subsidies, that is when people get angry.

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