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Governments have become increasingly responsible for financing arenas and stadiums. It has now become commonplace to use broad-based or special taxes to build or operate these facilities with teams retaining most or all of the revenues. Some communities have invested more than $500 million in such facilities.
To justify the use of tax dollars proponents point to economic and intangible benefits. This study reviews the economic benefits from teams and analyzes, for the first time, the intangible benefits. The results indicate that fans, players, and owners are the prime beneficiaries ofa team's presence. As a result, investments by the public sector in facilities should rely on a special user tax district that insures that those who benefit from the facilities bear the cost. A financing plan is presented that any city or county could follow to find an arena or stadium.
State and local governments have become increasingly responsible for financing many of the new arenas and stadiums demanded by professional sports teams (Olbermann, 1997). While local officials have a long history of efforts to attract teams to their communities, the task of securing the funds needed to build the required playing facilities is relatively new. During the early years of professional sports through the 1950s, most teams played their home games in a privately owned stadium or arena. Team owners wanted little involvement from the public sector in their business affairs. Later, when publicly funded facilities became more common, the teams and other users paid rental fees that helped offset the public sector's capital and operating costs for the facilities (Swindell, 1996). It has now become commonplace for cities, counties, and states to use a combination of broad-based taxes (e.g., sales and property taxes) or special taxes (e.g., taxes on alcohol and tobacco consumption, hotel rooms, and car rentals) to help build or operate these facilities. In most cases, team owners receive the vast majority, if not all, of the revenues produced by each facility. There are some privately built arenas and stadiums, but these are the exception. Arenas and stadiums have become large capital responsibilities for most of the governments that host one of North America's major sports franchises; several local governments now have invested more than $500 million in these facilities.