How Sports Stadiums Negatively Affect the Local Economic Growth - Research Paper Example

How sports stadiums negatively affect the local Economic growth. Building of sports stadiums is a very expensive activity. The government finances the construction using a stadium subsidy, which is a form of a government subsidy issued to professional types of sports franchises. These stadium subsidies are either in terms of cash payments, improvements of infrastructure, subsidies of operating cost and tax instatements. The funds used in the construction of the stadium could be used in construction of facilities such as schools, hospitals, roads, and other infrastructure. However, the income generated in the stadiums does not directly benefit the taxpayers and the residents of the city. The amount that the fans spend when watching a match does not benefit those who work in the stadiums. The amount does not lead to increased growth of the local economy because the amount is not included in the local economy. The employees, who work in the stadiums and other sources of the stadiums like the taxpayers, do not benefit from the money earned. Instead, the biggest share of the amount pays the players. However, most of these players in many cases do not belong to the local community. Therefore, the local community, which pays tax to help in construction of the stadiums, does not benefit too. Though the stadiums collect large amounts of money, the money is spent in other locations (Barros et al. 42). Taxpayers who contribute towards the construction of the stadiums do not attend the events that take place in the stadiums yet they pay for the events indirectly through tax. Stadiums fail to improve and develop the local economy because it concentrates more on the intensity of labour. In this case, low levels of unskilled type of labour activities take place within the metropolitan area. The people who benefit from this type of unskilled labour do not get high wages or salaries. This leads to a fall in the share of the income of the region because those who are highly skilled do not get a chance to get a job in the stadiums. The jobs that the local community gets are either temporary types of jobs or part time jobs, which are not effective to improve the economy of the local region that has the stadium facility. Construction of a stadium assists a team from the community. However, the players who play for the city do not live in the city. The assumption made by the metropolitan is that even if the players do not contribute much in building of the stadium, maybe they spend their money doing shopping and paying house taxes (Andreff and Szymanski 56). However, most players have houses far away from the cities in where they live with their families, do shopping, and spend their leisure time. The space used to construct the stadium is large enough hinder expansion and development of a city. Those people whose land is taken to cater for the area of construction of the stadium get angry and leave the city (Morris 67). However, the people who leave the city may be good businesspeople who can invest and create job opportunities for the local community and by doing so; the economy of the city can grow to a higher level. Some of those people could be good investors, and this hinders them from investing in construction of commercial buildings, which would bring more income to the city through tax and to the dwellers of the city. When a city lacks potential investor to invest in the transportation sector and other smart type of investments, which lead to economic growth, the economy is likely to go downwards. Therefore, construction of the stadium does not support a city’s expansion and development. The cost of operating the stadium is very high. However, this amount used in maintenance and operations in the stadium could be of great benefit if used in other income generating activities. The citizens who contribute towards the construction of the city are the same people who contribute towards the maintenance and operations in the stadium by paying tax. It is not important to pay for what one does not get any income (Schmidt 77). The money the citizens pay could be used in another way like investing and satisfying their needs. During an event, what the participants and viewers spend in the stadium and in the city is the same as what they would spend in another form of entertainment, which does not involve so much capital. Therefore, there being an event in the stadium does not increase the consumption in the city as compared to when there is another form of entertainment in the city. That is the reason as to why the consumption may have a zero increase or an increase slightly above zero, which cannot mark any economic growth. The initial construction is every high. Figure 1. NFL Stadiums Construction Costs Reached the Billions Retrieved on 29 October 2012, from http://www.athleticbusiness.com/articlefiles/NFL-Stadium-Chart2_web.jpg Figure 2: MLB Stadiums Construction Costs Reached the Billions Retrieved on 29 October 2012, from http://www.athleticbusiness.com/articlefiles/MLB-Stadium-Chart2_web.jpg The benefits associated with the stadium are not only felt within the city but within a whole entire region. However, when contributing towards the construction of the stadium, only the dwellers of a city contribute but not the people from an entire region. Therefore, the dwellers help other places to grow economically and since the city does not realize huge profits, this means that the dwellers go at a loss (Morris 81). Therefore, it would be wise if the funds collected from the dwellers were to do something that will benefit the dwellers only. In this circumstance, the money earned by the stadium is not a source of reinvestment in the city. Those who earn more from the stadium do not reinvest in the city because they do not live in the city (Barros et al. 62). The city dwellers earn very little amounts that cannot be reinvested back in the city. Subsidizing of the sports facilities hinders subsidizing of other important aspects that would be of economic value to the cities and the dwellers. If subsidizing of the training of jobs, effectively addressed, there is a likelihood that the people in the city can get jobs in the city and other places. Through this, the persons trained are in a position to earn more since they have skills of a high level and in return, they will be in a position to improve their living standards. Some sectors like transportation are good and smart type of investment, that when subsidized can produce high returns to the city (Andreff and Szymanski 93). This subsidizing of the sports facilities hinders subsidizing of other better income generating activities, which can greatly assist and develop the economy of the city. There are a few benefits of a stadium in a city but the benefits are not enough to support economic growth of a city. A stadium located in a city creates job opportunities to the dwellers. The jobs created are in the shops, hotels, and restaurants. Since there are many people who reside in the city during a sports event, the transport industry benefits a lot due to the increased commuting of the participants of the event (Noll, et al. 17). Stadiums create a room for creation of small businesses, which pay tax to the city council. Through this, the city is able to realize increased revenue but these businesses are temporal or short-term type of businesses. Long-term businesses are the best to have in a city in order to maintain a stable growth of the economy of a city. From the increased revenue from the tax, the city is in a position to clear the subsidies of the city. The stadiums are used as a tool of marketing other sectors such as tourism and business investing. When people come to the stadium for a sport event, they tend to adventure to tourist sites. Those who love investing in foreign places realize an opportunity to invest in the city. This results to positive economic growth (Noll & Zimbalist, 2). The attendance dictates the financial outcome as illustrated in the figure below. Figure 3: Stadium Attendance Graph Retrieved on 29 October 2012, from http://www.stateofthebrand.com/Images/StadiumAttendance-JSE2005.gif Figure 4: stadium operations Retrieved on 29 October 2012, from http://blog.timesunion.com/christopher/files/2009/09/Total-Attendance-2002-2009.jpg When the salaries of those working in the stadiums go up, the costs of operating the stadium goes high yet the stadium does not realize much revenue from an event held. Therefore, there is no need for the public to contribute towards the funds of constructing a new stadium. If the stadiums realize an increase in revenue, there will be no need of using money from taxpayer. Private owned stadiums yield good returns to the owner after selling it. The people who earn more from the stadiums are owners of teams, but the public incur huge amounts of cost. A burden added to the taxpayers is that there is provision of additional taxes used to settle down the costs of operations of the stadiums. The fact being that the people who benefit most from the stadiums are the owners of teams and the players involved in the leagues and other sports, it is their duty to construct and upgrade the stadiums. This will relieve the public the burden of funding and the funds can do something worthy for the future (Andreff and Szymanski 57). The funds used in attracting several sports teams in a particular city through construction of new stadiums can help the local government improve the necessary services of a community like building of schools, decent libraries, catering for security of a city and many other important infrastructures in the city. On the contrary, stadiums like Metrodome in Minneapolis and Gillette Stadium have operated at a loss for a while and are due to replacement. Public money should improve the economy and living standards of the citizens. However, use of public money in stadiums is a real burden to the taxpayers and a bad use of the money. There is no direct gain of the taxpayers from the stadiums, which they fund during the construction. Several millions of dollars are used during construction, but the returns from the stadiums are very low. The revenue realized is not enough to cater for the operation costs of the stadiums. The model used tries to argue that, the consumption increases the welfare of the dwellers of the location of the stadium. This model argues that during an event, the demand is high and prices of goods and services go high, but this is what generally happens even during other entertainment events. Input and output analysis does not apply in the stadiums construction. The amount that the public contributes as an input does realize lots of money, but the revenue is not wholly a property of the public. This type of an investment just aims at publicity and wide recognition of the city to other places. It is a type of a losing investment where the profits of the investors are relatively low (Schmidt 68). Proper use of public funds should assist in the economic growth of the community that contributes the funds. Many cities are constructing new and modern stadiums. In many cases, the teams prefer using the modern and well-facilitated stadiums. This becomes a burden to the taxpayers because there are so many proposals of construction of new stadiums. Therefore, taxpayers will always spend on the stadiums today and in the future too since competition will always exist. The competition of the stadiums is very high hence; there is a need for improvement of the stadiums in order to attract more sports events to a particular city. The stadiums raise the profiles of the cities, but this does not influence the economic growth of a city. High profile helps in attracting new and foreign investors to a city (Johnson 95). In conclusion, the benefits associated with the construction, running and operation of stadiums are minimal and unreasonable. Comparing the capital applied to establish a stadium with the economic effect of the stadium to the local community, there is no positive impact. The stadiums do not help in developing the economy of the local community whereby the people contribute the funds. Therefore, it is not important for the government to invest in an infrastructure that causes a burden to the public yet, there are important, good income generating activities that can earn more revenue for a long term. Stadiums are just short term and temporary type of investments that affect the economy of a local community in a season. Public funds should be used wisely in the perspective of earning more revenue and raising the living standards of the public at large. This is achieved if the funds are used in a good income generating investments, which will affect the economic growth of a city positively Work cited Andreff, W. and Szymanski, S. (2006). Handbook on the Economics of Sport. Cheltenham: Edward Elgar Publishing. Barros, P. C. et al. (2002). Transatlantic Sport: The Comparative Economics of North American and European Sports. Cheltenham: Edward Elgar Publishing. Fizel, J, Gustafson, E & Hadley, L. (1999). Sports Economics: Current Research. Westport: Greenwood Publishing Group, Inc. Print. Johnson, T. Arthur. (1995). Minor League Baseball and Local Economic Development. Chicago: University of Illinois Press. Print. Morris, C. (2012). Code clash with cash implications. Otago Daily Times. Retrieved on 29 October, 2012, from http://www.odt.co.nz/news/dunedin/231834/code-clash-cash-implications Noll, G. Roger & Zimbalist, S. Andrew. (1997). Sports, Jobs and Taxes: The Economic Impact of Sports, Teams and Stadiums. Washington D.C. Brooking Institution Press. Print. Schmidt, R. (2007). Shaping College Football: The Transformation of an American Sport, 1919-1930. New York: Syracuse University Press. Read More