How does professional sports affect the economy

While sports subsidies might ow from externalities, their primary cause is the monopolistic structure of sports. To attract teams, cities must compete through a bidding war, whereby each bids its willingness to pay to have a team, not the amount necessary to make a team viable. Teams are not required to take advantage of this opportunity, and in two cases—the Charlotte Panthers and, to a lesser extent, the San Francisco Giants—the financial exposure of the city has been the relatively modest costs of site acquisition and infrastructural investments.

The tendency of sports teams to seek new homes has been intensified by new stadium technology. The rather ordinary cookie-cutter, multipurpose facility of the s and s has given way to the elaborate, single-sport facility that features numerous new revenue opportunities: luxury suites, club boxes, elaborate concessions, catering, signage, advertising, theme activities, and even bars, restaurants, and apartments with a view of the field.

Because new stadiums produce substantially more revenues, more cities are now economically viable franchise sites—which explains why Charlotte, Jacksonville, and Nashville have become NFL cities.

As more localities bid for teams, cities are forced to offer ever larger subsidies. Abuses from exorbitant stadium packages, sweetheart leases, and footloose franchises have left many citizens and politicians crying foul.

What remedy, if any, is available to curb escalating subsidies and to protect the emotional and financial investments of fans and cities? In practice, this strategy is unlikely to work. Efforts by cities to form a sports-host association have failed. The temptation to cheat by secretly negotiating with a mobile team is too strong to preserve concerted behavior.

Another strategy is to insert provisions in a facility lease that deter team relocation. Many cities have tried this approach, but most leases have escape clauses that allow the team to move if attendance falls too low or if the facility is not in state-of-the-art condition. Other teams have provisions requiring them to pay tens of millions of dollars if they vacate a facility prior to lease expiration, but these provisions also come with qualifying covenants.

Of course, all clubs legally must carry out the terms of their lease, but with or without these safeguard provisions, teams generally have not viewed their lease terms as binding. Rather, teams claim that breach of contract by the city or stadium authority releases them from their obligations. Almost always these provisions do not prevent a team from moving. Some leases grant the city a right of first refusal to buy the team or to designate who will buy it before the team is relocated.

The big problem here is the price. Owners usually want to move a team because it is worth more elsewhere, either because another city is building a new facility with strong revenue potential or because another city is a better sports market. If the price is the value of the franchise in its present home, the old owner is deprived of his property rights if he cannot sell to the highest bidder. In practice, these provisions typically specify a right of first refusal at market price, which does not protect against losing a team.

Cities trying to hold on to a franchise can also invoke eminent domain, as did Oakland when the Raiders moved to Los Angeles in and Baltimore when the Colts moved to Indianapolis in In the Oakland case, the California Court of Appeals ruled that condemning a football franchise violates the commerce clause of the U.

District Court ruled that Maryland lacked jurisdiction because the team had left the state by the time the condemnation was declared. Eminent domain, even if constitutionally feasible, is not a promising vehicle for cities to retain sports teams.

Whatever the costs and benefits to a city of attracting a professional sports team, there is no rationale whatsoever for the federal government to subsidize the financial tug-of-war among the cities to host teams. In , Congress apparently became convinced of the irrationality of granting tax exemptions for interest on municipal bonds that financed projects primarily benefiting private interests. The Tax Reform Act denies federal subsidies for sports facilities if more than 10 percent of the debt service is covered by revenues from the stadium.

If Congress intended that this would reduce sports subsidies, it was sadly mistaken. If anything, the law increased local subsidies by cutting rents below 10 percent of debt service.

Although cities might respond this way, they would still compete among each other for scarce franchises, so to some extent the likely effect of the bill is to pass higher interest charges on to cities, not teams. Congress has considered several proposals to regulate team movement and league expansion. The first came in the early s, when the Washington Senators left for Texas. Unhappy baseball fans on Capitol Hill commissioned an inquiry into professional sports.

Another round of ineffectual inquiry came in , following the relocations of the Oakland Raiders and Baltimore Colts. As before, nothing came of the congressional interest. This bill, too, never came to a vote. The relevance of antitrust to the problem of stadium subsidies is indirect but important. Private antitrust actions have significantly limited the ability of leagues to prevent teams from relocating. Teams relocate to improve their financial performance, which in turn improves their ability to compete with other teams for players and coaches.

Hence, a team has an incentive to prevent competitors from relocating. Baseball, because it enjoys an antitrust exemption, is freer to limit team movements than the other sports. Relocation rules can affect competition for teams because, by making relocation more difficult, they can limit the number of teams usually to one that a city is allowed to bid for.

This means that professional and collegiate athletes often spend time performing service in their communities. They dressed up like characters from the Disney movie Frozen to help cheer up patients. Make-A-Wish has partnered with many sports teams and athletes over the years to make dreams come true for young people with life-threatening illnesses. One wish recently helped a young boy became a national phenomenon known as Batkid.

Miles Scott, a five-year-old leukemia patient from northern California, wished to be Batkid, and Make-A-Wish made it happen. Batkid saved the Giants mascot, Lou Seal. Later, Miles was invited back to throw out the first pitch on Opening Day. On Veterans Day , , NHL teams wore military-inspired jerseys and hosted pregame ceremonies to honor servicemen and women.

In the first Red Sox home game following the Boston Marathon bombings, the team hosted a pregame ceremony that honored victims, first responders and volunteers. Many professional athletes have foundations. There are hundreds , in fact, with causes ranging from promoting healthy lifestyles to diabetes awareness.

Most professional teams also have charitable arms that raise money to fund grants and community programs. I know this sounds hokey, but one of the most positive things about sports is the pure, unadulterated joy that can result—for the players, coaches, fans and everyone involved.

Sports are emotional, and they can incite great passion. But think about it. In March , the professional sports world stopped. European soccer, professional US basketball and baseball, and world cricket all suspended play. It was a huge blow to fans and athletes all over the world who rely on sports for pleasure and camaraderie. Despite the hype about sports teams generating growth , sports economists generally agree that professional sports teams play a surprisingly small role in the economy of their cities.

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