Do Sporting Cities Spur Economic Growth?

Being from Boston, I would argue that the city is one of the greatest in the nations in spectator sports. I am sure that Yankees fans would beg to differ. Sports cities nationwide are economically primed and ready for investment in professional teams. Others that currently host a major-league sports franchise are way overextended. Are professional sports a drain on public resources or a pump for economic growth and urban development?

A recent study on shares the results on America’s most viable sports markets. The study analyzes 82 markets in the United States and Canada to determine if they have the financial ability to support professional teams in baseball, football, basketball, hockey and soccer. The analysis is based on each area’s total personal income (TPI), the sum of all money earned by all residents in a year. For example, Los Angeles, despite having an impressive metro population of 12.9 million and combined annual income of $552 billion the city does not have a professional football team. According to the study, L.A. is the most attractive place to bring a new professional sports franchise or expand and relocate a struggling team. Its TPI is large enough to support not just one NFL team, but five of them.

L.A. already has eight franchises in four other spots. On the surface, a new facility or franchise is a prime candidate for an economic development project aimed at revitalizing urban neighborhoods. Unlike abstract economic development tools like tax credits or incentive zones, arenas and stadiums are highly visible structures. Besides being wildly popular with city residents, sports franchises are frequently cited as sources of job creation and income generation. They also provide non pecuniary benefits like civic pride and solidarity. Cities provide the owners of professional sports franchises with huge subsidies for the construction of facilities and expect returns that far outweigh the costs. But some economic impact studies argue that these projects are not viable and waste public funds that should be used toward more pressing needs like education and housing. Opportunity costs in public spending should be considered carefully as funding spent on sports rather than education could even reduce earnings in the long run.

It seems the key to sports as an engine for economic growth is finding the right team at the right price in the right place.  Cities like Denver, Cleveland, Pittsburgh and Tampa are already way overextended. Providing exorbitant public subsidies for professional sports teams seems rather irresponsible while cities struggle to pay down their deficits. Perhaps voting on referendums would suggest that taxpayers favor subsidies for professional sports teams despite the potential costs. Could league-wide regulations regarding price gouging and employee compensation be an option? As a sports fan, I certainly want to believe in the benefits that a great franchise can bring to a struggling neighborhood if they act as a responsible community member. Go Sox!

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