Stadiums and Economic Growth—or Not
Some governments are building stadiums they don’t need with money they don’t have.
Fiscally unsustainable policies now threaten democracy around the world. Awash in red ink, some governments have responded by building stadiums they don't need with money they don't have.
The hope is that if you build it, the economy will thrive. This hope is often accompanied by a consulting study that shows, thanks to a magic multiplier effect, the economy will boom. A recent article in The Wall Street Journal tells a different story:
In 1999, Fresno conceived plans to revive its downtown area with various projects, including a baseball stadium for the minor-league Grizzlies, which it had lured from Phoenix. The city's redevelopment agency floated some $46 million in bonds to build the stadium. But the Grizzlies fizzled in their new home, demanded a break on rent, threatening to skip town and stick taxpayers with the entire $3.4 million annual bond payment on the facility. The team is now receiving $700,000 in annual subsidies to stay in the city.
Do you think Fresno taxpayers enjoy paying for a minor league baseball team? Hardly. Optimism is a fine thing, but it makes you wonder if democracy can survive its own wishful thinking. Just because something is called an "investment" doesn't mean it will generate a positive return.
Greece, the nation now in the international equivalent of bankruptcy, built roughly 30 sports facilities as hosts of the 2004 Olympics at a cost of between $7 to $12 billion dollars. Many of them are now padlocked, such as a 5,000 seat stadium built for rhythmic gymnastics and ping-pong. As debt crushes the nation, these white elephants have become symbols of unjustified borrowing.
There is another way, and the football rivalry between the New York Giants and the New England Patriots illustrate a contrast in approach.
In the late 1990s, Patriots owner Bob Kraft announced he was moving the team from Foxboro, Mass., to Hartford, Conn., largely because the state had agreed to subsidize construction. Angst among local sports fans was high. But under the leadership of Massachusetts House Speaker Tom Finneran, the state's response was basically, "I hope you enjoy Connecticut!
In the end, the Patriots used private funds to build a beautiful new stadium in Massachusetts, along with a sports-themed shopping plaza, while the state agreed to contribute about $70 million in needed infrastructure enhancements. Without any public debt, the new complex is an economic engine for the region, hosting football, soccer, concerts and events in addition to shops and restaurants.
The Giants and New Jersey took another route. "Nearly 40 years ago, the Garden State borrowed $302 million to begin construction of the Meadowlands. The goal was to pay off the debt in 25 years," reports Steve Malanga. "Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, had to assume interest payments -- about $100 million this year on bonds that will stretch for decades."
It's not just stadiums. Charlotte, N.C., coughed up $154 million to become the home of the new NASCAR Hall of Fame -- which employs just 115 people. Other communities build museums, convention centers and concert halls. It's hard to measure, but it's unlikely they all return equal value to taxpayers.
In an era of red ink, the "edifice complex" can spell financial doom.