Taxpayer-Funded Stadiums a Lose-Lose Proposition

The owners of the Detroit Red Wings are looking to building a new $650-million entertainment district for the team in downtown Detroit with the help of state and local taxpayers.

The plan is in its early stages and details are scarce, but the overwhelming economic consensus is that subsidized stadiums are huge losers for taxpayers.

Amidst all the other excitement in Lansing, a bill to exempt certain businesses from state and local taxes via the Downtown Development Act was signed by Gov. Rick Snyder recently. According to MIRS Capitol Capsule, this “paves the way” for a replacement for Joe Louis Arena.

Despite statements from legislators (“8,300 construction jobs”), local “economic development officers (“makes good business sense”) and business leaders involved in the deal (“$1.8 billion in economic impact”), it is important to remember that there are almost no economic studies that find that stadium deals via direct subsidies or tax incentives are a good deal for taxpayers.

As Jeff Wattrick of Deadline Detroit points out, Andrew Zimbalist, the Robert A. Woods professor of economics at Smith College, "is arguably the best known and among the most respected economists studying the value of public investment in sporting venues and their ancillary developments … Zimbalist, like virtually every other serious scholar who has reviewed the data, came to the conclusion that the economic benefit to the community is an illusion."

Zimbalist writes, “All of the independent, scholarly research on the issue of whether sports teams and facilities have a positive economic impact has come to the same conclusion: One should not anticipate that a team or a facility by itself will either increase employment or raise per capita income in a metropolitan area.”

Flashy projects have not helped the city in the past. Remember the Renaissance Center, which was supposed to “anchor Detroit’s revival”? How about the money taxpayers put up for the stadiums for the Detroit Lions and Detroit Tigers? State and local citizens are still subsidizing the local teams.

The Pontiac Silverdome, where the Detroit Lions played before moving into Ford Field in Detroit, was built in 1975 for $55.7 million ($227 million today). Besides tax benefits from the city of Pontiac, the Lions received $800,000 per year from state taxpayers. After the Lions moved, Pontiac paid $1.5 million a year in upkeep and eventually sold the stadium to a Canadian developer for $583,000 in 2009.

Michigan residents can take solace that this is far from the worst stadium deal among the many around the country: That honor belongs to New Jersey taxpayers. As I wrote last summer:

In 2010, the New York Giants and New York Jets football teams (who actually play in New Jersey) broke ground on their shared New Meadowlands Stadium. In the meantime, the old Giants Stadium, which was demolished to make room for the New Meadowlands, still carries $110 million in debt from when it was built in 1976. In sum: The bill for a now-demolished stadium is being subsidized by New Jersey residents who are, again, subsidizing a new stadium on top of the old one for two teams named for New York.

New York, East Rutherford, Kansas City, Miami, Seattle, Indianapolis, Philadelphia, Houston, Memphis, Pittsburgh — all those cities and more are home to stadiums and arenas abandoned by teams that residents are still paying for. It doesn't make sense to add Detroit to the list.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.