Sports facilities and economic development.

• Author: Zimbalist, Andrew
• Position: Commentary

Independent scholarly studies have found that a city, country or state should not anticipate a positive economic or fiscal impact from a new stadium or arena, or from a new team) That is, a new sports facility by itself should not be expected to raise employment or per capita income levels in a community.

FOUR REASONS

The primary reasons for this outcome are fourfold.

1. Sports Teams Are Modestly Sized Businesses. Despite their enormous cultural presence, sports teams are modestly sized businesses. In 2011-12, for instance, the average NBA team generated approximately $130 million in revenue. This equals less than 0.03 percent of the disposable income of New York City. The typical front office of a team employs 70 to 140 people on a full-time basis. Most of the other employees work game days, meaning roughly four hours per game for between 10 and 81 home games per year, depending on the sport. Game day workers (in concessions, catering, ticket sales, ushering, grounds keeping, security) generally number between 800 and 2,000. In the NFL, for instance, with 1,500 game day employees, each working 40 hours per season, there's a total of 60,000 hours per year of work, or the equivalent of 30 full-time, year-round jobs. Moreover, these jobs are basically low-skill, low-wage, and without benefits.

2. Family Budgets Are Relatively Fixed. Most families have a relatively fixed budget for leisure activities. If a family spends $300 going to a basketball game, that is $300 it does not have to spend at local theaters, concert halls, museums, bowling alleys, or restaurants. Thus, a good share of the money spent at sporting contests is money that is not spent elsewhere in the local economy--one form of entertainment expenditure substitutes for another.

3. There Are Leakages. There are generally larger leakages out of the local economy associated with the professional sports dollar. For instance, NBA players earn about 50 percent of league revenue. The average NBA player earns approximately $5.2 million in salary. His nominal, federal marginal tax rate is close to 40 percent, and he normally has a high savings rate. Fewer than one-third of NBA players make their permanent residence in the same city in which they play. (2) Federal taxes, of course, go to Washington and leave the local economy. Savings enter the world's money market and, generally, also leave the local economy. A significant share of a player's income finds its way back to his hometown or vacation spots. Thus, a lower share of the money spent at professional sports stadiums and arenas relative to other entertainment venues stays in the city.

   Promotional studies hired for public relations purposes by stadium proponents typically...