The NFL season kicked off with a surprise. The underdog Kansas City Chiefs scored more points against the Super Bowl champion New England Patriots than any other team in the last 17 years — to the joy of many fans across the country. But regardless of how much 160 million football fans will enjoy the current season — it’ll be the taxpayers who inevitably lose.
Last month, the Atlanta Falcons opened Mercedes-Benz Stadium, the 22nd new NFL stadium built or renovated over the last 20 years. Almost half of the total cost of new stadiums — $5.9 billion — came from public funding from state and local governments. And that doesn’t even include the $750 million that Nevada’s legislature gave to the Raiders last fall.
New England’s Gillette Stadium opened in 2002 for a comparatively modest $542 million. Local taxpayers paid “only” $72 million of that — a bargain considering that the average public subsidy for NFL stadiums is $266 million. In comparison, the Chiefs updated Arrowhead Stadium with a $375 million renovation in 2010, with state and local governments covering two-thirds of the cost. But that’s not all Missouri taxpayers are on the hook for.
Kansas City, Jackson County, and the state of Missouri also contribute around $8.5 million annually to a special maintenance fund for stadium upkeep. But here’s the real kicker: In 2012 a whistleblower revealed that an amendment to the stadium lease contract allows the team to use the money for management and operations expenses. From 2007 through 2012 the Chiefs spent $18.3 million on non-maintenance purposes, including more than $800,000 in payroll taxes.
That’s right, the Chiefs are using taxpayer money to pay their own taxes.
Even more infuriating, the public subsidies given to the Chiefs could have bought taxpayers every ticket in the stadium for the last seven seasons.
That suggestion is absurd, of course — just like the idea that people who will never tangibly benefit from a stadium should pay for it. But it illustrates an important tradeoff: Public money spent on professional sports can’t support schools, police or roads.
Beyond lost public services, a large body of academic research conclusively shows that the “economic development” promised by stadium subsidy advocates never materializes. Instead, fans simply shift their spending from one kind of entertainment to another, creating winners and losers among local bars, restaurants and entertainment venues.
Sadly, this problem is not new. In the 1986 tax reform, Congress tried to reduce the amount of public money spent on private projects. Instead, it made the problem much worse by increasing the incentive to use tax-exempt municipal bonds for stadium subsidies. Then-Sen. Daniel Patrick Moynihan, D-New York, spent the rest of his career trying to close the loophole he accidentally helped create, to no avail.
Now, research by the Brookings Institution estimates that the 17 NFL stadiums built since 2000 have effectively collected $1.1 billion in federal subsidies.
Earlier this year, Sens. Cory Booker, D-New Jersey, and James Lankford, R-Oklahoma, picked up Moynihan’s torch with a bipartisan proposal to remove the tax exemption for sports facility funding. It’s not a silver bullet — like economist Art Rolnick’s suggestion that the IRS tax any stadium subsidy at a rate of 100 percent — but it’s a first step.
Polls suggest 70 percent of Americans are against stadium subsidies, so it seems strange that the special interests who advocate for them would have a winning record. This is a classic case of “concentrated benefits and dispersed costs,” meaning the costs of any stadium subsidy are spread out over a large number of people, while the benefits go toward a select few.
So team owners have good reason to fight hard for the handout, while each individual taxpayer has less motivation to avoid their small share of costs. In situations like this, it’s actually more surprising when the underdog wins, like when San Diego voters rejected a stadium subsidy for the Chargers last year.
But to paraphrase Ice-T, we shouldn’t hate the players, we should hate the game. Our political system is set up to allow sports teams to pursue government handouts. That’s why broad reforms addressing the root of the problem, like ending the municipal bond tax exemption, are so important. Just like the NFL tweaks the rules each year, policymakers need to address how to make football fair for taxpayers.
Michael Farren is a research fellow and Anne Philpot is a research assistant with the Mercatus Center at George Mason University’s Study of American Capitalism.