Stadiums in Cities
The economics of urban arenas, or how the Buffalo Bills bill Buffalo
Today’s read is ~7-9 minutes
Today we’re doing something that I wish I could have done when I was 15 years old and growing up in America; talk about sports.
Last month the city of Buffalo, New York (known for their wings and once-great steel industry) announced plans to build a $1.4 billion (USD) stadium for their American football team the Buffalo Bills.While diehard fans and politicians celebrated this news, others have criticized the hefty price tag and burden to taxpayers.
In today's update we’ll look at the alleged benefits of building stadiums, examine some obvious and not-so-obvious costs, and talk about the sometimes complex relationship between sports teams, cities, and their residents. Let's dive in.
Buffalo’s new stadium won’t be the biggest or most expensive one ever built, but it’s newsworthy (and controversial) because it will include the largest ever public contribution to an American football stadium in history.
A whopping $850 million of its $1.4 billion price tag will come from public funds and go towards construction fees, and after factoring in long-term maintenance and upkeep costs the total taxpayer contribution will actually be closer to $1.1 billion.
Supporters of the new stadium like New York State Governor Kathy Hochul and Buffalo Mayor Byron Brown focus on:
The jobs that will be created
The increased economic activity
And the public pride and entertainment value of the new stadium
On the other hand, opponents of the move criticize:
The burden to taxpayers
The legitimacy of the purported economic impacts
The opportunity costs of not using these funds for other public goods
Let’s break down both sides and see what makes sense.
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How’d we get here
First off there are a few important things to understand about the business of US sports teams.
Teams are privately owned, either by institutional investors like private equity firms or individual billionaires like Buffalo Bills owners Terry and Kim Pegula.
Cities (and states) often compete with one another to attract and retain sports franchises for various alleged benefits.
Since the year 2000 there have been 19 new NFL stadiums built (out of 32 total teams in the league), which have collectively received ~7.3 billion (USD) in public money.
Teams do not have to stay in a particular city or venue after their contract is up. If no new agreement is reached, teams often move to new cities.
Now the Bills have been in their existing stadium in Buffalo since 1973, which makes the venue relatively old by NFL standards. This is important because the inability (or unwillingness) of governments to build new stadiums has often been a reason for teams to leave a particular city. For example:
In 2008 the NBA’s Seattle Supersonics moved to Oklahoma City in part because the city did not want to contribute $220 million for a new stadium update.
Los Angeles’s $5 billion SoFi stadium was a major reason for NFL teams from St. Louis and San Diego to leave those cities and relocate to LA in 2016 and 2017 respectively.
Because of this, included in the Bills’ stadium construction deal is an agreement between the Bills organization, the city, county, and the state to keep the team playing in Buffalo for another 30 years.
Governor Hochul, an outspoken Bills fan, is a major proponent of the plan and has touted the deal as a victory for the state and the Western New York region in particular.
But. The question still remains.
Why do cities want to attract teams anyway? Let’s take a look at some of the supposed benefits.
Claim #1: Is your name Steve? Because Jobs
The first claim is that stadium construction creates jobs. Governor Hochul predicts the new Bills stadium will support ~10,000 union construction jobs, as well as additional employment opportunities for stadium staff after its completion.
And this sounds great but like many political soundbites it’s A) hard to prove and B) there’s not many repercussions if these numbers turn out to be exaggerated… which they usually are.
For example, back in 2016 supporters of Las Vegas' planned Allegiant Stadium said the new arena would bring 25,000 construction jobs to the area, and politicians like state senator Aaron Ford voted to use $750 million in public funds for the stadium. His justification was that:
“I couldn’t leave this chamber and look a laborer in the eye and say I had a chance to give you a job but I didn’t.” (source)
But oh wait, a year later that number was down to 18,000 construction jobs, only about 72% of the original projection.
And a few years later when the construction was finally completed it turned out the whole project actually only created about 2,719 full-time construction jobs.
Did you guys…
Hear what the fuck I just said?
Promising 25,000 jobs and then only creating 2,700 isn’t a rounding error, it is either gross incompetence or willful misleading. And this isn’t unique to Las Vegas! Cincinatti’s new stadium was projected to support 7,645 new jobs, but only ended up creating 3,530 (46% of promised). Brooklyn’s Atlantic Yards project (including the Barclays Center arena) promised 10,000 to 15,000 construction jobs, but when applications opened up there were only 2,000 available, 95% of which were part time.
And if you’re thinking “well hey Max, at least they’re still creating SOME jobs” yes that is true, but literally any infrastructure project will “create some jobs.” So IMO that’s not a good argument to prioritize stadiums above say, crumbling state infrastructure or repairing the trash (pun intended) conditions of the NYC subway.
Okay then what about after the stadium is built? Doesn’t it support jobs like concession stand workers, ushers, etc? For comparison we can look at Levi's stadium, the home of fellow NFL team the San Francisco 49ers. Levi’s stadium employs about 4,500 people on game days which is a high number, but consider that:
Most of these jobs are low-paid, temporary gigs
NFL teams only play 9 home games per year
So it’s not like these opportunities are steady employment, meaning many of these workers still need additional jobs to make ends meet. Other events at the stadium like concerts, rallies etc. are similarly unpredictable, and wouldn’t constitute huge numbers of quality employment opportunities for the same reasons.
Lastly, stadiums do create a handful of full-time positions for marketing, event coordinators, etc. but don’t get your hopes for this kickstarting an economic revival. Levi's Stadium for example employs only about 60 people full time. Obviously there's variance for each stadium, and maybe Buffalo will employ a slightly higher number, though it’s projected capacity is ~8,000 LESS than Levi’s stadium, so that’s unlikely.
So it seems that:
Construction jobs are vastly overestimated
Temporary game day jobs are infrequent and low paying
and full-time salaried positions are few and far between.
Hardly the employment boom that your city would hope for from a $1.1 billion investment.
Claim #2: Stadiums create more economic activity and tax revenue
Okay so maybe the job promises aren’t exactly watertight, but stadiums do bring in revenue right? Right?
Sort of. So I will happily admit that stadiums do provide tax revenue to cities/states. Buffalo’s new stadium will generate ~$27 million in annual revenue for the city of Buffalo and the state of New York thanks to income taxes, revenue taxes, etc. Maybe not a huge pay off considering they’re spending $1.1 billion on it but it’s not nothing.
However, the second claim, that stadiums actually generate more total economic activity is a bit more dubious. The argument is that having a stadium encourages people to spend money in the city through parking, eating at local restaurants, staying at hotels, etc. but this is hard to prove. How can you determine if stadiums actually induce more total economic activity or if people just take the money they would have spent at local movie theaters, restaurants etc. and instead spend it at the stadium?
Economists Andrew Zimbalist and Roger G. Noll, who literally wrote the book on sport stadium revenue and their impacts, note that:
"Most spending inside a stadium is a substitute for other local recreational spending, such as movies and restaurants. Similarly, most tax collections inside a stadium are substitutes: as other entertainment businesses decline, tax collections from them fall." (source)
Another option is that maybe the stadium attracts people from out of town to come and spend money in a new city. It’s a bit harder to find stats for this, but one example from Zimbalist and Noll’s book indicates that Oriole Park, home to the MLB’s Baltimore Orioles, used to draw ~1/3 of attendees from outside the Baltimore area. They calculated that the net gain to Baltimore’s economy was only about ~$5.2 million per year, not a huge payoff from a $1.1 billion investment. Also, MLB teams play 81 games at home a year, compared just 9 for NFL teams. So again, probably not a life-changing economic impact even if these numbers were replicated in Buffalo.
Lastly we should remember that the teams are privately owned, meaning revenue from ticket sales goes largely to the owners, not exactly the same as supporting a local mom and pop small business. Using public funds to build stadiums that disproportionately generate revenue for teams and their already-rich private owners seems odd, and even more so when you consider that there are still millions of New Yorkers who struggle with healthcare, homelessness, etc.
Claim #3: Cultural value, public good
So it seems the jobs they promise and the economic impact they have is negligible (or nonexistent), so what gives? Do stadiums do any good at all?
Depends who you ask. Believe it not I actually do enjoy going to games and appreciate the cultural and entertainment value they bring. I lived in downtown Chicago when the 2016 Chicago Cubs won the World Series for the first time in over 100 years and it was incredible.Whether you want to say that a sports team can bring a city together in joy or sorrow, or that it's just a fun thing to do in the city, I definitely do appreciate the intangible value they can bring. And if that’s the case, if they bring an intangible public value to a city, then maybe it isn’t fair to look at this on purely financial terms.
In previous articles I've argued that services/public goods shouldn’t be measured on the basis of profitability. Instead cities should try to evaluate the results more holistically in terms of, does this investment make people’s lives easier or more enjoyable? Does it increase the pride one takes in their city, forge community bonds, or at least deliver some measure of happiness? These are important things! And good goals for cities to strive for.
But, in this case I would still argue that while stadiums do provide cultural value, they are not nearly as utilitarian, accessible, or as heavily utilized when compared to other options. This is one area that pro-stadium advocates leave out of their analysis; opportunity costs. What chances do Buffalo/New York squander by funding this stadium instead? In a previous article I mentioned that Boston could make their entire public bus network free for ~$70 million dollars. So for me it’s hard to feel good about using $1.1 billion dollars for a stadium instead of say, looking at the NYC subway and making carriage upgrades, improving safety measures, or at least trying to address the rodent problem.
There are also political/identity-related reasons to want to attract or keep teams. It’s a point of pride for many residents to consider their city “big enough” to have a professional sports team, not to mention politically embarrassing for mayors or governors to be the ones to “lose” a team during their tenure. Nola Agha, a professor of sport management at the University of San Francisco notes that
"A lot of it (stadium bidding) has to just do with politics, in the sense that somebody’s wanting to get reelected, no one ever wants to be the mayor that lost the team because they didn’t sign the funding package” (source)
But we should be able to acknowledge that something brings high cultural value without pretending that they are also going to pay for themselves in pure financial terms (because, as we just discussed they pretty much never do). There needs to be a more honest accounting of what “good” these kind of massive stadium investments actually bring.
So what did we learn today? Stadiums can be kind of a mixed bag for cities.
They often don’t provide as many jobs as they say they do
They often don’t have the promised positive economic impact
But they do carry immense cultural value, city pride, etc.
For now, with Buffalo’s latest announcement I’m unfortunately only seeing the same old promises, the same old claims, and not much in terms of real evidence to convince them that they’re anything but
I’ll leave you on a slightly positive note though, which is that a few friends of mine in real life actually are from Buffalo, and are lifelong Buffalo Bills fans. I asked them how they felt about the new stadium and they couldn’t be happier. So while I think it might be a poor use of money, maybe those who actually live there and will benefit from it are the ones whose opinions matter most.
That’s it for today, thanks for reading!
In high school I couldn’t name a single player on the Buffalo Bills but I did know every single member of the Jedi Council which I feel like is just as important.
Fun fact: the formal, official name of the Buffalo Bills is the Buffalo Williams.
Some teams like the Green Bay Packers offer the ability to purchase “shares” of a team but this is 100% a marketing gimmick, with no real ownership impact. The shares “have no value, pay no dividend and allow no say in team matters” so sorry to my friend Greg but those shares are meaningless.
This one actually resulted in a lawsuit but you know, after the millions in tax dollars were already committed to the project.
I have adjusted this $5.2 million dollar number for inflation, up from $3 million in 1999 when Noll and Zimbalist’s book was published.
Whether or not the Chicago Cubs winning in 2016 was worth the preceding 108 years of sorrow is another question that I’ll leave for each person to decide on their own.