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Over the last few decades the number of U.S. metropolitan areas large enough to host a franchise from one of the four major professional sports leagues has soared. Even as the National Football League, Major League Baseball, the National Basketball Association, and the National Hockey League have expanded to include more franchises, demand by metro areas continues to exceed supply. As a result, metro areas have been forced to compete with each other to retain and attract franchises.
Large public expenditures on the construction of new sports facilities have been the main form of this competition. Sports stadiums and arenas are extremely expensive. A new football or baseball stadium costs approximately $325 million; a new basketball or hockey arena costs approximately $200 million. The public's share of these costs has averaged $200 million and $100 million, respectively. During the 1990s more than $6 billion in public funds was spent on construction of sports stadiums and arenas. Almost $4 billion has already been allocated toward new facilities scheduled to open by the end of 2004.
The large public spending on sports facilities has been controversial. Usually these costly projects are justified by claims that hosting a sports franchise spurs local economic development by creating numerous new jobs and boosting local tax revenue. However, independent economic studies suggest that taxpayers may not be getting such a good deal. In seeking to quantify the job creation and tax revenue benefits produced by a sports franchise, these studies overwhelmingly find that the benefits are much smaller than the outlay of public funds.
Does this mean that public funding of sports franchises is not justified? Perhaps not. An important element missing in the debate is the impact of a sports franchise on a metro area's quality of life. While difficult to measure, the contribution of a sports franchise to quality of life may exceed more traditional job creation and tax revenue benefits. If so, when quality-of-life benefits are included in the calculation, public spending may not appear to be such a bad investment for some metro areas.
The first section of this article reviews the current rush by metro areas to build sports facilities and lays out the arguments both in favor of and against using public funds to do...