SHOULD THE CONSTRUCTION OF NEW PROFESSIONAL SPORTS FACILITIES BE SUBSIDIZED?

North American governments subsidize the construction of new professional sports facilities. Since 1970, 129 new or replacement stadiums and arenas for Major League Baseball (MLB), National Basketball Association (NBA), National Football League (NFL), and National Hockey Association (NHL) teams opened in Canada and the United States at a cost of 52.44 billion (in 2017 dollars). Total direct state and local subsidies accounted for $32.5 billion, about 65 percent of costs.1 Gold et al. (2016) estimated that the federal government provided an implicit $3.2 billion subsidy and lost $3.7 billion in forgone tax revenues on 36 new facilities that opened since 2000; the use of tax exempt bonds to finance construction generates indirect subsidies. New professional sports facility construction projects will likely increase over the next 10 to 15 years. Figure 1, which shows the average age of the existing facilities replaced by a new stadium or arena since 1970, suggests why. The trend line drawn through these data has a negative, statistically significant slope of about −0.4. The average age at which an existing sports facility was replaced with a new one has steadily declined over the last 50 years. The vertical line on Figure 1 at 1992 marks the opening of Camden Yards in Baltimore, home of the MLB Orioles, which generally defines the modern era in sports facility design. Note the clear increase in replacement facilities after 1992. This explosion of facility construction included replacement of many existing facilities less than 25 years old. The average age of a replaced facility is currently about 27 years; 20 new facilities built between 1995 and 2005 will turn 25 years old between 2020 and 2030 and, based on recent experience, many of the owners of teams that play in these facilities will demand public subsidies for their replacements. Stadium subsidies require some economic justification because private activities (professional sports events) take place in these facilities and professional sports are clearly not pure public goods. The most common justification made by subsidy proponents, net new economic benefits directly generated by professional sports, has been extensively disproven in a large body of peer-reviewed research (Coates & Humphreys, 2008). Despite substantial evidence to the contrary, subsidy proponents continue to claim that professional sports increase local income, wages, employment, and tax revenues. Subsidy proponents now also point to urban revitalization as an additional important reason for public subsidization of this private activity (Rosentraub, 2014). I argue that neighborhood revitalization, an urban place-based policy, cannot justify these subsidies if spatial equilibrium models of the urban economy represent a reasonable description of urban outcomes. In addition, a growing body of research