Are Intangible Benefits A Considerable Factor To Stadium Building Economics?

Most of the rhetoric now around public subsidies for professional sports stadiums opposes the practice. Critics argue over countless examples and years of failed attempts and money wasted on projects that were sold to cities and taxpayers with illusions of grandeur, yet never met their mark. Often the arguments around the topic of such stadium construction and subsidies lack good data and any quantifiable way to measure the pros and cons.

When I found a scholarly article with a data driven approach advocating for the unforeseen benefits of such stadium projects, I was captivated. Jeffrey Owens, an economics professor at Indiana State University, recently published a paper titled “The Intangible Benefits of Sports Teams.” Owen contends that his findings don’t necessarily imply that cities should spend tax dollars on stadiums, but they suggest the focus on economic impact misses the true source of value teams have for cities as public goods. Using survey valuation data and other economic models, he tackles the issue. Through a myriad of pros and cons he offers a fresh perspective and possibly the best argument in favor of public subsidies.

More than a scholarly article, Jeffrey Owens uses a valuation survey related to professional sports teams in Michigan and Minnesota to gather data. One key factor he points out in the responses is the strong relationship between the willingness of fans to pay and their interest in a team. He states this doesn’t come as a surprise, yet despite being obvious, it is ignored by proponents of stadium subsidies. “Instead the economic benefits of jobs and tourist dollars are emphasized. The results of the survey suggest that supporters of subsidies may be more interested in their own consumption benefit than providing a projected economic boost.” Thus individual interest in a team is an important determinant of whether someone favors public subsidies and likely propels the approval of such projects. Owens argues these “intangible benefits” are a greater factor to the voting public rather than the actual or perceived economic benefits and impact studies.

Through Owen’s various economic models and Contingent Valuation Method (CVM), he concludes his study finds aggregate willingness to pay values are not large enough to cover the cost of sports facilities or these average public subsidies, but are large enough to be considered an important factor in the stadium financing debate. The willingness to pay variable along with using the method of contingent valuation, in short, allow Owen to factor the “intangible benefits” into an advanced economic impact model. He correlates the interest level in a team to the perceived valuation and willingness to pay.

Owen’s article offers the best argument for subsidies by the way he contends the intangible benefits are a key factor in overall benefits often not perceived as such. Where many other critics undermine and discount this argument as merely bolstering civic pride, Owen takes a strong position that this should play into the larger considerations in the debate and when evaluating a given project.

Owen points out examples of Camden Yard in Baltimore as a gateway to redevelopment marketed to potential tourists and investors. These “intangible benefits” are rooted in the philosophy that greater positive civic attitude increases productivity and encourages more to become engaged or invested. The intangibles are hard to quantify in this effect, but may offer utility beyond the subsidies.

Economic impact models do not adequately factor in the benefits that franchises and stadiums provide to a region and its constituents. And as Owen points out, the public interest in a team will typically have a larger precedent over subsidies than economic impact studies.

Owen concurs with many other critics that the economic impact model is a divisive tool and a “fantasy” that maintains so much staying power. According to Owen, the economic impact model is a “protective veil” yet a thin one; “When support for a stadium is in doubt, owners and city officials remind local citizens of the implications of a failed vote — their local team playing somewhere else.” Owen argues small market teams experience this proportionally higher than larger cities who realize the value of their market to a team. Thus smaller cities often have less bargaining power and offer larger subsidies to keep their team. Coupled with “take-away all or nothing” ballot box planning, voters are often left with all or nothing proposals and no compromise. Such by accepting the projections of economic impact subsidies, a public subsidy for the wealthy becomes a noble public works project. “Team owners are providing the centerpiece for economic growth. City officials are creating a monument to their active pursuit of a great economic future for their community. Each fan is making his contribution to the city’s future as well. You are not voting for the stadium because you want the team to stay and the owner has backed you into a corner; you are voting for it because it will benefit the entire community.”