Sports / Stadium Finance

Losing the Game

American professional sports have a tendency to get wrapped up in grand narratives. The N.B.A. star who was homeless in high school but now makes millions on the court. The baseball team that makes an improbable and unprecedented September run. The hat trick. The Cinderella story. The Hail Mary.

Professional sports have also created the narrative that they themselves are positive, unifying forces. Sports are supposed to transcend lines of class, race, and politics. People cheer for a team based on geographic proximity or family tradition; this allegiance gives them something in common with other fans of the same team despite social, economic, or political differences.

For example, amid racial tensions in Cleveland last summer after the acquittal of a police officer who had killed a black couple, N.B.A. star LeBron James sought to portray basketball as the force that would bring the city together:

“I think sports is one of the biggest healers in helping a city out,” James told ESPN. “Sports just does something to people, either if you’re a player, you’re a fan, if you just have something that has anything to do with that city… It just does that.”

But this idea—which James is hardly the only person to express—is misguided at best. If sports teams have some special connection with the cities in which they reside, that message has not reached team owners such as Stan Kroenke, principal owner of the Los Angeles Rams. The Rams left St. Louis, where they had resided since 1995, in part because the city could not afford the billion-dollar stadium the team had requested.

Stadium deals are one area where the narrative of professional sports as a positive force begins to deteriorate. Although professional sports franchise owners are very wealthy and teams themselves rake in hundreds of millions of dollars in revenue every year, most new stadiums are funded in part by local and state governments.

Last July, the Milwaukee Bucks (N.B.A.) threatened to leave Wisconsin if they did not receive a new stadium to replace the 27-year-old BMO Harris Bradley center. In August, the Wisconsin State Legislature approved $250 million for a new stadium. Coincidentally, one of the Bucks’s owners was one of the top campaign donors for Wisconsin Governor Scott Walker, who was running for president of the United States at the time.

Although a state legislature’s spending $250 million on a sports stadium for a team owned by a group of billionaires might seem excessive and unnecessary, Walker pointed out that the state collects roughly $6.5 million in tax revenue from the team each year. Assuming that tax revenue remains constant and the Bucks stay in Milwaukee for 38 years without requiring another stadium, the team will pay Wisconsin’s taxpayers back.

A similar story is unfolding in Pennsylvania, where the Pittsburgh Penguins (N.H.L.) opened a new stadium in 2012. Under an agreement reached in 2007 between the franchise and the State of Pennsylvania, the state would contribute $7.5 million per year for 30 years to cover stadium costs. But the construction costs exceeded expectations, so that number is now closer to $12 million per year.

While it is easy to fault Wisconsin or Pennsylvania for caving and paying, the stadium question puts many politicians in a bind. Most professional sports teams are popular in their hometowns; when they threaten to move, appeasing them is politically expedient. But the difficulty of the situation does not negate the fact that stadium expenditures have very real effects on state budgets. For instance, the same Wisconsin budget that approved the Bucks stadium also approved approximately $250 million in cuts to public higher education.

In what is perhaps the most egregious offense, Detroit approved about $280 million for a stadium for the Red Wings (N.H.L.) just six days after the city declared bankruptcy.

Major league teams are not the only ones to rely on public funding. A stadium for the Hartford Yard Goats (the minor league baseball affiliate of the Colorado Rockies) required $56 million from Connecticut taxpayers. Incidentally, cost overruns mean the stadium will not actually be finished in time for the team’s 2016 season opening, so the Goats will play their first 52 games on the road.

Although comprehensive statistics on state spending on sports stadiums do not exist, one Harvard professor found that between 2000 and 2010, stadiums cost taxpayers about $10 billion. This estimate was based on both public spending on stadiums and indirect benefits, such as tax-exempt land. For instance, the New York Mets and Yankees (M.L.B.) do not pay rent or property taxes; given the value of land in New York City, this amounts to a substantial government subsidy.

Of course sports teams claim that they bring innumerable benefits to their communities. And while some of these benefits—like the perceived social value of sports fandom—are not easy to quantify, franchise owners and politicians also argue that cities reap substantial economic benefits from sources like bars on gameday or out-of-state fans staying in hotels.

Evidence for this point is muddled. People spend a lot of money on sports. According to the New York Economic Development Council, the Mets’ 2015 playoff run contributed about $70 million to the New York economy in the form of wages for stadium employees, ticket sales, and tourism dollars from baseball fans.

But measuring the Mets’ economic effect is slightly more complicated than calculating wages, tickets, and hotel sales. Sports is an entertainment business, which means consumption is highly subject to the substitution effect: Money spent on sporting events often trades off with expenditures on other forms of entertainment. Therefore, Mets fans who sat in bars across New York to watch their team lose to the Royals in the World Series would have, on aggregate, spent their money elsewhere had the Mets not made the playoffs.

A 2001 study attempted to quantify this phenomenon based on analysis of employment and earning in 37 cities with professional sports teams. The researchers found that franchises did aid employment and wages in the amusement and recreation sector, but hurt both employment and earnings in other sectors.

Although the overall effect of these tradeoffs is debatable, sports franchises undeniably influence the character of the area around them. In Denver, for example, the opening of Coors Field for the Rockies in 1995 and the construction of the Pepsi Center for the Denver Nuggets (N.B.A.) and Colorado Avalanche (N.H.L.) in 1999 are often credited with revitalizing the city’s lower downtown.

While such revitalization in cities like Denver has been met with overwhelmingly positive reception from local politicians and business leaders, these feelings are hardly shared equally among the city’s inhabitants. A rise in property values in the area surrounding a new stadium can often price out longtime residents as a result of a process known as gentrification.

So even if publicly-funded stadiums might bring nicer restaurants and lower crime rates, the original community members are not the ones who benefit. Those who do benefit, the people who move in as a result of the neighborhood being desirable, are people who always had the choice about where to live anyway.

Over the last two decades, the gentrification of neighborhoods around stadiums has occurred in cities such as Cleveland, Detroit, and Atlanta.

Gentrification also makes publicly funded stadiums a symbol of ongoing social strife. Last summer, protests against police brutality near Camden Yards—itself located in a gentrified neighborhood—led the Baltimore Orioles (M.L.B.) to cancel several home games. The conflict between Orioles fans and protestors highlighted the deep racial and socioeconomic inequities that plague Baltimore—issues that cannot be resolved by common interest in a baseball team.

Just as neighborhoods around sports stadium favor certain groups, the social rewards provided by professional sports teams are hardly available to every citizen. For example, last June a Los Angeles Angels (M.L.B.) vice president said in an interview that the team was not concerned about falling ticket sales because raising ticket prices produced the same overall revenue. While many in the media were quick to criticize this comment, his honesty illustrated a point that is true but unspoken across teams and leagues: Sports prioritize business first.

Debates about gentrification and the economic role of professional sports teams will continue to be relevant because the cycle of sports teams building new stadiums shows no end. The Atlanta Braves (M.L.B.) and Falcons (N.F.L.) both have new stadiums opening in 2017, and teams such as the Oakland Athletics (M.L.B.) and the Buffalo Bills (N.F.L.) are seeking new stadiums, but do not have plans in place yet.

Southwest of Los Angeles, though, plans are in place: The Los Angeles Rams (N.F.L.) will be moving from St. Louis to the city of Inglewood, where the median income is in the lower third for Los Angeles County and 86 percent of the population is black or Latino. Professional sports are not new to Inglewood—the city is home to The Forum, which housed the Los Angeles Lakers (N.B.A.) until 1999.

Memories of the Lakers’ time in Inglewood are one of the reasons that Inglewood native and writer Erin Aubry Kaplan is skeptical about the benefits of the new stadium. “We’ve had sport venues before and franchises here,” she told the Los Angeles Times in January. “It did not automatically translate into a better Inglewood.”

The explanation for this lack of impact is simple, as Kaplan wrote in 2015: “At the end of the day, the Lakers, like the Kings and the many big musical acts that played the Forum, came and went, all of them operating in a kind of glamorous alternative universe to Inglewood itself.”

Indeed, neither the Lakers’ presence nor exit seemed to have a profound economic effect on Inglewood. From 2000 to 2007, economic indicators for Inglewood remained relatively constant, with no statistically significant change in median income, according to U.S. census data. Inglewood’s unemployment rate, though higher than the rate for the United States as a whole, was actually closer to the national average from 2000 to 2007 than it was during the 1990s.

With the arrival of the Rams in Inglewood, the city faces two potential outcomes. The new franchise could operate like the Lakers of the 1990s, which existed within the community, but still felt segregated, or the new presence could drive up property values.

As Kaplan wrote in January 2015, “But for the sake of argument, let’s assume the opposite, and that my town is about to become what real estate people call ‘desirable,’ which means attractive not just to the upwardly mobile, but to upwardly mobile white people… property that was once relatively affordable becomes sought after and expensive, and the people who could always afford to live here suddenly can’t.”

While it is too early to determine how Inglewood will play out, LA Weekly recently reported that “homes are selling much faster in Inglewood” than in the rest of Greater Los Angeles.

Ultimately, the construction of stadiums in low-income neighborhoods often hurts local residents. So while sports teams may like to focus on the positive narratives, for every N.B.A. player who rises from nothing, there are many more inner-city kids who attend underfunded schools or who are forced to move around the city in search of cheap rent after their neighborhood becomes too expensive.

Of course, there is no Hail Mary for urban poverty, and professional sports teams are only one of many factors contributing to the problem. Nonetheless, acknowledging the effect that sports franchises have on the problem is at least a starting point. If public opinion turns strongly against state-subsidized stadiums, teams will be forced to pay for them themselves. Likewise, careful urban planning and development might mitigate the harmful effects of stadiums on local residents.

These propositions may seem unlikely—after all, sports franchises themselves do not necessarily have an incentive to change the status quo. At the same time, people care profoundly about professional sports teams, even if their devotion serves them no economic interest. Perhaps some of that passion could be channeled into asking teams and leagues to serve their communities a bit better.

Ultimately, professional sports are profoundly American and will not disappearing anytime soon. But if sports franchises are going to continue to portray themselves as a source of unity and good, they must change how they interact with their communities. Rather than seeking publicly funded stadiums and maintaining exclusive ticket prices, franchises should begin considering their economic and spatial effects on their local communities. Only after making these changes can teams live up to their grand narratives.