Economists say Rams, Chargers leaving could be good decision
Earlier this month, NFL owners approved a plan allowing the St. Louis Rams to relocate to Los Angeles, with the Chargers given a one-year option to join them. The Rams will likely play in the L.A. Coliseum before a new stadium is built in Inglewood.
The city of St. Louis made a concerted effort to keep the Rams in town, offering a deal to the team for a new stadium. The new stadium—for which the city also negotiated a naming rights deal—would have cost more than $1 billion, $400 million of which would have come from taxpayers.
San Diego citizens will vote in June on a proposal the city made to the team. A potential San Diego stadium will also cost more than $1 billion and includes $350 million in public money, pending the vote.
Are keeping teams worth the money? SI.com spoke to five economists specializing in sports who all agreed: From a purely economic perspective, letting the Chargers and Rams leave could ultimately be best for both cities.
SI: What sort of economic impact does building an NFL stadium and having an NFL franchise have on its city?
Andrew Zimbalist, sports economist and professor at Smith College: Typically a stadium by itself doesn’t have an economic impact on a city. It’s also true that the typical stadium in the NFL is 65 to 70% publicly financed and therefore only 30 to 35% privately financed. The normal situation where you have that majority of public financing is that there is no impact.
Victor Matheson, sports economist and professor at College of the Holy Cross: Generally the economics literature, people who have studied this who are not connected with the league, we can almost never find any tangible economic benefits with bringing an NFL team to town or with building new stadiums.
Peter Von Allmen, president of the North American Association of Sports Economists: There is no proof that hosting an NFL franchise leads to a substantial positive economic impact.
Brad Humphreys, sports economist and professor at the University of West Virginia: There is no evidence in any peer-reviewed scholarly journal that a professional football team will generate any tangible positive economic impact on a city. There is no evidence that the departure of a football team ever harmed a city's economy.
Daniel Rascher, sports economist and professor at the University of San Francisco: If an owner is willing to put up most of the costs of construction and operation of the stadium, then the community can benefit. Given the relatively low number of events that are typically hosted at a football stadium (compared to an arena or baseball stadium), the economic benefits are not that large.
SI: Do you think it’s fair to use taxpayer money on NFL stadiums?
Matheson: If the city is saying we need to do this because this is a multi-billion dollar industry and spending this money is a good investment that is going to pay off for the city, that is almost certainly wrong and all of the economic evidence suggests that that’s wrong. However, if a government were to say, we are going to put this money in because it increases the quality of life, and we’re willing to pay money to make our citizens happier, most economists would be okay with that.
Zimbalist: Whether it’s right or not depends on the people in the town. If they’re doing it because somebody comes along and says, "This is going to be the cat’s meow for the local economy, it’s going to generate jobs, it’s going to generate income," then it’s not right. They’re being misled and the scholarly evidence suggests that there is no positive economic impact. If they understand that there is no economic jolt from it, but what they do get is a football team that’s fun and creates a greater sense of community, then they have to make a choice.
SI: Does it ever make sense for taxpayers to pay for stadiums? Will taxpayers ever make back the hundreds of millions they spend on stadiums?
Von Allmen: There is a substantial body of economic research indicating that funding stadiums is not a successful economic development strategy. That said, if we think of hosting a football team as more of a consumption good instead of an economic development engine, taxpayers may decide that they would like to subsidize a team. City parks, for example, don’t generate revenue, but they are important resources that improve the quality of life for residents.
Humphreys: New teams and facilities do not generate tangible positive economic benefits. However, it may make sense for taxpayers to subsidize stadiums because of the intangible "feel-good" effects like sense of community pride, world class city status, etc.
Rascher: The outlay of public funding for a stadium won't likely come back into the government's coffers. If the local residents who are indirectly paying for the public's portion of the funding (via taxes collected) want a team because it makes them happier, then that might be a reason to fund it. Think of a public park—it might not make money directly for the local government, but it provides an increased quality of life and that has a value.
SI: Why do cities continue to allow public money to be used toward stadiums?
Humphreys: Cities continue to provide subsidies because, as a matter of public policy, we have given teams and leagues special status under anti-trust law that gives them the upper hand in negotiations with cities over subsidies. L.A. had no team for 20-plus years because the NFL controls where teams are located and left that market open so that owners could threaten to move. If the NFL did not enjoy special anti-trust status, a new team would have opened in L.A. immediately after the Rams left in 1994. Again, the U.S. has in place a policy which aids teams in extracting subsidies from local taxpayers. Until this policy is changed, teams will continue to get subsidies.
SI: If you had been advising San Diego and St. Louis throughout this process, what would you have told them?
Matheson: I would advise them to let the teams go. I don’t think these teams are worth that amount of money. We don’t spend that sort of money on anything else. Way more people go to movies every year than go to NFL games, yet we don’t have the government build movie theaters. I would also say government should make it as easy possible to let people build stadiums how they want, when they want and where they want. Make things easy. If they want to build a stadium with their own money, make it easy.
Zimbalist: If they’re doing it because they think it’s going to help the economy, I’d say don’t do it. If they’re doing it because they think it’s an important cultural and social value to the community, then I’d say okay, do it, but you’re going to have to spend a lot of money. Because the NFL, they’ll put up a $200 million [loan] to the stadium, and maybe the Spanos’s will put up a little bit—they’re not particularly wealthy, as NFL owners go—and to balance the stadium with the land and the infrastructure is ultimately going to cost close to a billion dollars, and maybe more. Is it worth it to your community?
Von Allmen: I would simply recommend that the city think carefully about the opportunity cost of providing those funds. Cities do not have an endless supply of funds or capacity to raise them. Money that is spent on one thing is not available for anything else.
Humphreys: I would tell them to let the team owner and league build the stadium, or let the teams leave. Subsidies for pro sports have opportunity costs. St. Louis and San Diego have many, many more pressing and important things to spend $300-plus million on than a new football stadium.