Financing sports facilities

Major league sports is big business, and both teams and fans like up-to-date stadiums and arenas. But a longtime issue is, Who should finance these facilities — the team or the public? N.C. State University economist Mike Walden takes a look around the country at patterns to this financing decision.

“First of all … , we’ve seen many, many stadiums and arenas built in the last 25 years. In fact, most major league cities – including, for example, Raleigh and Charlotte — have seen new stadiums and or arenas constructed over this time period. And … there’s often a debate about who should put the money in. Should the public put it in? Or should the team and other private investors put it in?

And on this debate, we see a big distinction — a very interesting distinction: … If you look around the country, what you find is in the smaller cities — cities like Cincinnati, Indianapolis, Milwaukee, the smaller market cities — the public actually puts in a much higher percentage of the cost of building those stadiums and arenas, as opposed to the big metro areas like the New Yorks and the Chicagos and the Los Angeleses.

“There, what you typically find is that the team or other private investors are putting up the bulk of the money. And the question is why. And I think the answer actually is pretty easy, and that has to do with the teams threatening to move. No team probably is going to go forward on moving out of a big metropolitan area like New York or Los Angeles. I mean, the revenue stream is just too great there. But if you take the smaller metropolitan areas, those cities do stand a chance that if the team is not happy, they’ll pick up and move. And so, therefore, to keep the team, the publics in those areas are likely to ante up and say, ‘Hey, we will pour in most of the money to build that new stadium or arena.’

“So, very, very interesting pattern we see on financing these venues across the country.”