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How Seattle Slew the Raid on Its Treasury Font Size: 
By Martin Fridson : BIO| 29 Nov 2020
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November's elections brought a small, but encouraging bit of news for disbelievers of the proposition that government exists to advantage the already advantaged. Voters in Seattle overwhelmingly approved a ballot measure ending taxpayer subsidies for professional sports franchises.

The tide began to turn against public financing of athletic facilities when the Seattle SuperSonics basketball team's previous owner offered to put up a mighty $18 million to renovate KeyArena, on condition that the city kick in $200 million. Following the defeat at the polls, Clayton Bennett, chairman of the team's present ownership group, whined that the city had turned its back on the National Basketball Association. Residents now widely expect the Sonics to decamp for Bennett's home base of Oklahoma City.

False Claims of Economic Benefits

Leaving aside integrity-challenged "research" paid for by team owners, studies of publicly funded facilities over the past 30 years have consistently shown that municipalities do not earn back their foregone tax revenues. Increasingly over that period, stadiums have failed even to recover their operating expenses, much less their debt service.

As a fallback position, proponents have tried to justify subsidies on grounds of a positive economic spillover to the community at large. The most common way to test that thesis depends critically on an arbitrary decision about how large a multiplier to apply to team employees' salaries in estimating newly created demand for goods and services. An alternative approach is to compare economic growth in cities that did and did not attract new franchises or build new taxpayer-funded stadiums. This methodology finds that taxpayers achieve no positive payback on building sports facilities. Taxpayers lose out even when "psychic benefits" to the community are quantified and factored into the calculations.

Contrary to the myths perpetrated by the drinkers at the public trough, attracting a professional sports team to a city does not generate new entertainment expenditures. It merely shifts consumers' dollars from other forms of entertainment. Modern sports complexes are designed to make as few of those dollars as possible flow to pubs and eateries in the surrounding neighborhood. League rules require the owners to split ticket revenues with the visiting team, so they strive to capture as much ancillary revenue as they can through luxury suites and in-stadium restaurants. As for the "job creation" for which the subsidy-collectors claim credit, it consists in large part of temporary construction jobs. Under any pretext other than bringing big-league sports to town, local politicians could not get away with spending tax dollars to generate the low-paying service jobs associated with athletic facilities.

Big Bucks Trump the Facts

Despite the empirical evidence, and even though American professional sports thrived for the first 90 years without taxpayer subsidies, the outcome of Seattle's vote is sadly the exception. Recognizing that the value of their franchises can be spectacularly enhanced by public provision of a rent-free stadium, team owners bankroll massive public relations campaigns to assure victory in referendums. They generally receive backing from constructions unions and enthusiastic editorial support from local newspapers, which stand to gain readership (and therefore higher advertising rates) from the presence of a professional sports team.

If this powerful coalition fails in its first attempt, it immediately begins beating the drum for a new referendum. The ragtag assemblage on the other side—ant-tax activists, small businesses threatened with displacement, and neighborhood groups that object to a stadium's intrusive presence—usually lacks the resources to continue contesting the issue.

Seattle's Effective Advocates

Seattle's taxpayers were lucky to have an effective advocate in November's vote. Chris Van Dyk founded a group to oppose public subsidization of professional sports teams and enlisted the support of a statewide health care union. The organization had $60,000 available to place the initiative on the ballot and make its case to the voters.

My only quibble is with the name of Van Dyk's outfit, "Citizens for More Important Things." It derives from the notion that investments in schools, transportation, and health care represent preferred uses of taxpayers' money. The argument against taxpayer-supported sports stadiums, however, is not that athletics is inherently less important than other things in life. For some diehard fans, the fortunes of their team surely do matter more than the frequency of bus service. The test that any proposed public expenditure must meet is whether it rectifies a demonstrable market failure.

Still, it is correct to say that investments in other, genuine public goods are more important than subsidizing already-rich sports team owners, from the viewpoint of attracting corporate plants and headquarters to a region. Companies find that recruiting qualified employees depends little on their access to major league ballgames but a lot on access to good schools and low crime rates.

Whatever line of reasoning carried the day in Seattle, supporters of sensible government everywhere should rejoice in the precedent. Perhaps it is not too optimistic to hope that the city that led the way in grunge rock and gourmet coffee will also help to establish a new trend of turning down billionaire panhandlers who constitute the primary constituency for taxpayer-supported stadiums.

Martin Fridson is author of Unwarranted Intrusions: The Case Against Government Intervention in the Marketplace (John Wiley & Sons).

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