Little economic benefit from new stadium
A new stadium for the Buffalo Bills would boost the Western New York economy as much as a new Target store.
Which is to say, very little.
While some supporting construction of a new stadium maintain it would be an economic boon, research by economists across the political spectrum has found stadiums generate limited new spending.
Rather, they simply redirect how leisure dollars are spent.
“All you are doing is moving time and money around. People are going to the game instead of the movies,” said Greg LeRoy, executive director of Good Jobs First, a national subsidy watchdog group.
Nor do most stadium deals enable government funders to recoup their investment of tax dollars.
“They are very much just a money pit for taxpayers,” said Pat Garofalo, director state and public policy for the American Economic Liberties Project, a non-profit group that frequently analyzes public subsidy deals while advocating for greater corporate accountability.
NFL stadiums offer far fewer opportunities to generate economic activity than other major sports leagues that play more games.
“The typical baseball team has no more impact on the local economy than a mid-sized department store and a football team, which is there for only eight or nine games per year, has even less,” said Micheal Leeds, a sports economist with Temple University and co-author of the book “The Economics of Sports.”
“So, they’re really not that big a business but, because they are so much a part of the sort of cultural fabric of a city, we don’t realize just how small potatoes they are.”
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While it may not make sound financial sense, for fans, building stadiums for their favorite sports teams is about more than dollars and cents.
No politician, especially one from Western New York, wants to be holding public office when a beloved National Football League franchise packs up and leaves town.
There are those who argue that the community’s connection to the NFL — arguably the premiere sports league in the world — provides national and international exposure and other intangible benefits that offset any stadium cost.
“Rightfully or wrongfully, I’d say one of our main pieces of identity is the Buffalo Bills,” said Larry Quinn, the former Buffalo Sabres executive who supports building a new stadium to keep the Bills in Buffalo.
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From a return-on-investment standpoint, economists and researchers almost universally agree that stadiums are unlikely to generate anywhere near the level of tax revenue needed to offset the public subsidies tied to their construction.
Doing so would require a stadium to generate a lot of spending from people outside the community who attend games. But the vast majority of Bills fans live in the region, and the money they spend on tickets, concessions and the like are dollars that would otherwise be spent on other activities, such as dining or attending a show.
That’s why many economic development programs, including local industrial development agencies, don’t offer subsidies to retail businesses that fail to grow the local economy.
“Pretty much any study done by anyone anywhere that is credible and independent looking at sports stadiums finds that they have next to no impact on the local economy,” said Garofalo, who has done extensive research on subsidies for sports stadiums.
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While stadium construction does create jobs, LeRoy of Good Jobs First said it is only a benefit to the local community if the stadium is built under agreements that guarantee the hiring of local companies and workers.
Once a stadium is built, LeRoy said they tend to offer primarily low-wage jobs that are only available, in the NFL’s case, for less than a total of two weeks per year.
“The big ripple effect issue is that you don’t have continuous employment except for security guards and groundskeepers,” LeRoy said.
Leeds, the Temple University economist, found little to no ripple effect when he assessed the impact of sports stadiums in Chicago, home to five major league franchises, including: the Cubs and White Sox (baseball), the Bears (football), the Blackhawks (hockey) and the Bulls (basketball). He found that the income generated by those teams had an impact on the city’s economy of less than 1 percent.
So why have so many communities poured so many millions — and even billions — of dollars into the construction of pro sports stadiums, ballparks and arenas?
“Our perception of sports occupies far more attention and time than the pure finances of the sport would merit,” Leeds said.
With so much research suggesting stadiums are bad investments for the public, why would taxpayers in New York consider investing upwards of $1 billion to build a new stadium in Western New York for the Bills?
“I’m at a loss. I’m really at a loss,” Leeds said. “I cannot think of any reasonable argument to justify a billion dollars going towards this stadium.”
A study commissioned by the state and conducted by the private consulting firm AECOM found that the Bills generate more than $25 million a year in various taxes. The bulk of that money — $19.5 million — is state income tax paid by players, coaches and staff.
Garofalo, the sports subsidy expert, characterized the study as “one of the more honest assessments of an NFL stadium’s economic impact that you’ll see.”
“I think that this is actually a really useful tool for folks to argue against publicly funding the stadium because the document shows that the impact of the Bills on the local economy is actually pretty negligible,” Garofalo said.
In most other cases, he said stadium impact studies, especially those commissioned by team owners and the league, include “wild claims” about teams and stadiums generating hundreds of millions of dollars of economic impact in the communities where they are located.
Indeed, a fiscal impact study commissioned by Pegula Sports and Entertainment concluded the Bills generate $361 million annually in spending, wages and taxes in Western New York.
The state study, however, found a much smaller direct fiscal impact.
Neil deMause, an editor with Field of Schemes, a website that has been tracking sports stadium subsidies since 1998, said Western New Yorkers should view even the $25 million tax figure with skepticism.
DeMause said it’s important to note that the values in the study involve “marginal tax rates” — the amount of tax applied for each level of personal income — rather than “effective tax rates,” which represent the share of the total annual income player, coaches and other team personnel are required to pay in taxes.
“I take all of these studies with a grain of salt,” he said.
Quinn, the former Sabres executive, understands what most of the studies show about public investment in NFL stadiums. But he believes there’s no discounting the intangible benefits that come with the region’s connection to one of the premier sports leagues on the planet.
“You are one of 32 cities in the world that are part of this,” he said. “Us being a small market team, I think it’s critical that we stay part of that network.”
Quinn doesn’t believe taxpayers should be deterred by helping to finance a stadium. He noted that the cost will be paid off over a long period, likely 20 or 30 years, in manageable annual installments. In his view, the final numbers — whatever they end up being — would be partly offset by contributions from the team, including game day spending and taxes paid by players and staff.
“It’s not hard to come up with the fact that there’s a direct benefit to the state,” he said.
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Erie County Legislator Kevin Hardwick, who was elected county comptroller in November, said that while building a new stadium will likely come at a high public cost, he believes the benefits of having an NFL team — both tangible and intangible — must be factored into the decision-making process.
He said constituents who have talked to him about the stadium aren’t prepared to give the team’s owners everything they want, but are open to getting a “reasonable” deal to keep the team here.
“Certainly, I don’t think most people want to lose the Bills,” he said.
Erie County Legislature Minority Leader Joseph Lorigo, C-West Seneca, said it’s difficult at this stage of the negotiations to determine what level of buy-in might be expected from taxpayers because officials involved in the negotiations haven’t shared many details.
Lorigo described the team’s fiscal impact cited in the state report as a “drop in the bucket,” and not enough to warrant the public picking up a tab that could be as high as $1 billion. Lorigo said he believes the team’s owners are in a position to cover a large portion of the cost and also share revenue with the county on items including naming rights, concessions and parking.
“I think you have to weigh how much of the intangible benefit of having an NFL team and having that culture and how much that’s actually worth,” Lorigo said. “I don’t think you can put a dollar on that, but I do think that any deal that’s put forward to the Legislature has to include additional revenue sources for the county to make up for whatever cost we’re being asked to expend.”
LeRoy, of Good Jobs First, said spending upwards of $1 billion on a new NFL stadium will result in more revenue for the league and team, and an increase of the franchise value for the Pegulas. The Pegula’s bought the Bills in 2014 for $1.4 billion and Forbes magazine estimated in August that the team is now worth $2.27 billion.
LeRoy argued that the community would be better served by investing in areas of need that offer greater public return, including education and infrastructure.
“There are obviously so many other better things Buffalo could do with that much money,” he said.
Henry Taylor, director of the University at Buffalo’s Center for Urban Studies, said he finds it interesting that some of the same public officials who shy away from borrowing money or raising taxes to tackle problems like poverty appear eager to do so to benefit a professional sports franchise.
While not necessarily opposed to spending public money into a new stadium, Taylor — who is a Bills season-ticket holder — said he believes taxpayers should have assurances that there will be direct returns on the investment for the community.
“It’s not in opposition to that as an economic development project. It’s saying ‘Why would we spend all this money on this type of project that will not benefit residents?’” Taylor said.
Any stadium deal should include provisions for contracting with local companies and training and hiring of local residents, including those of color, for construction jobs to build the stadium, he said.
“My question is who gets the billion? Who are the workers? Who are the owners of the companies? What are the communities they live in?”