How New Stadiums Sabotage Communities, With Sports Economist Victor Matheson

According to the experts, like sports economist Victor Matheson, publicly funding stadiums doesn't make any sense.

Every week in her Good Form column, Natalie Weiner explores the ways in which the sports world’s structural inequalities and injustices illuminate those outside it — and the ways in which they’re inextricably connected. You can read previous columns here.

Stadium and arena financing don’t typically get much play in this column because in a lot of ways, they feel like old news. It’s not hard for most people to understand why millions and millions of taxpayer dollars going to something that is not only unnecessary, but actively making rich people richer, is bad — which is why the recent fiasco in Buffalo, in which the Pegulas effectively conned the New York State government into fronting $600 million for a new Bills stadium. Combined with the $250 million Erie County is supplying, that’s the most public money to go towards a stadium ever

Sports economist Victor Matheson, who is a professor at the College of the Holy Cross, wrote about the flawed deal and agreed to expand on his piece in this interview. Just this week, and about a month after our interview, this ProPublica report spotlighted another relevant sweetheart deal between public officials and a professional sports team — showcasing how crucial it is to stay abreast of this issue.

We also covered other topics about the sports economy, which will be published as the second of this two-part series next week. 

How do you think an economics perspective in particular helps us have a better understanding of the way sports work in our culture?

The reason I stay in this is because it’s an interesting public policy question, right? We’ve had something like $50 billion  spent on new stadium construction over the last 25 years, and a little more than half of that has come from public money. Anytime you have a group of people asking for a handout, you have to be asking, “Is that a good use of public money?” I think it’s an even tougher question when you have a group of billionaire owners and millionaire players coming to regular taxpayers and saying, “Hey, hand over some of your hard-earned money, because the billions I already have aren’t enough.” Exactly the opposite sort of handout that we think we should be giving most of the time in public policy.

new buffalo bills stadium courtesy espn

When I was looking over the textbook that you co-wrote, I was sort of shocked — like, “Oh, these are sort of a laundry list of the kinds of issues that I find myself coming back to in my writing.” Labor policies and the NCAA, and all this other stuff…do you think that when we’re talking about these issues in general that people are considering the actual financial consequences? Or are there things that people overlook when it comes to those questions?

First of all, I think that people wildly overestimate how important sports are from an economic standpoint. As we know, they’re important from a sociological standpoint. Everyone sits around Monday morning talking about how their team did over the weekend. But from a dollars and cents standpoint, they’re actually not very big, right? The NFL is about the same size as Sherwin Williams paint store in terms of total revenue, and all spectator sports in the United States put together is about the same size as Johnson and Johnson. 

This is not gigantic in terms of dollars, and I think that’s one of the big misperceptions. So they say, “Well, of course throwing $850 million at a new stadium in Buffalo, that’s gotta be a good investment — think how important [the Bills] are to our economy,” when the reality is they’re not really very important to your economy at all. We would never consider throwing $850 million at 850 random restaurant owners in Buffalo, but that would probably be a better return on your investments. 

There’s also the idea that you have to actually agree with your competitors to kind of collude in some ways just to make the sport happen. The Yankees and the Red Sox, they’re kind of separate companies, but they have to do a whole lot of collusion with each other, to produce the product. Samsung doesn’t have to collude with Apple to make sure phones get built. But the Red Sox and the Yankees have to agree to work together in order to produce any product. Lots of things happening in sports from an economic standpoint that you don’t see in a lot of other places.

If we grant that there is a point at which somebody needs a new stadium — which may or may not be true — what sort of models do you think are more sustainable than what just happened in Buffalo, for example? 

So model number one is exactly the model we saw in New England, exactly the model we saw in San Jose, exactly the model we saw in Los Angeles, where if the owners want a new stadium, they build it themselves. I think a lot of the time, I also see it couched in the media. I just saw one this morning: The Cincinnati Bengals “need” a new stadium. No, they don’t need a new stadium, right? They want a new stadium. 

The total number of teams that I can think of that actually needed a new stadium is… your team was up there. The Mariners needed a new stadium, because the Kingdom was literally unsafe. That is a legitimate concern. Every other concern for needing a new stadium is, “I could charge more money if I had a nicer stadium to offer to people.” That’s not need, that’s want, right?

This is not COVID regulations, or something else pressing. We could get by without a new stadium for years and not have to deal with it. This doesn’t require backroom negotiations with no transparency and one week to vote on it.

Where do you feel like Buffalo fell on that spectrum?

I mean, they had an old, aging stadium, it was not as nice as other folks’. They were driving the equivalent of a 2002 Honda Accord with 150,000 miles on it. I don’t begrudge the owners for saying, “Look at some of these cool stadiums I get to go to on the road, and I don’t have the same nice thing here.” But that shouldn’t be on the taxpayers of New York. It certainly shouldn’t be on the taxpayers in New York City. 

The taxpayers of Buffalo can ask themselves if they want to do that. But I would certainly rather see this go to an election, where you actually have a couple of months to weigh out the issues. Then you can have the pros and cons and decide if that’s something you want to pay for, instead of having this totally non-transparent thing where you’ve got a week to look at the deal and say, “Hey, you got to pass this — by the way, it’s tangled up in the whole rest of the budget, so if you don’t give the richest people in Western New York $850 million, you’re gonna shut down schools in the entire state.” That’s just bad governance.

This is not COVID regulations, or something else pressing. We could get by without a new stadium for years and not have to deal with it. This doesn’t require backroom negotiations with no transparency and one week to vote on it.

Living in Dallas, I have certainly become even more aware of the power of sports and backroom negotiations. Here, the thing that bothers me the most is that the NFL stadium is completely inaccessible from the city itself. It’s all part of the grand grift for parking: There’s no public transit from Dallas or Fort Worth to AT&T Stadium, which I just find the most profane and horrible thing imaginable — especially considering climate change.

The other issue is, the more you make it about parking lots, the harder it is to actually generate any real economic benefits around the stadium. A modern stadium is designed to drive all of the economic activity inside the stadium in many cases, because you don’t necessarily make money by having a thriving neighborhood around the stadium. The team owners don’t really want you to go to that popular corner bar before and after the game. They don’t want you to leave in the seventh inning and go drink beer in Wrigleyville, they want you to drink that expensive beer inside the stadium. They want that revenue you generate from the parking, and they want you to be driven inside the stadium. That’s exactly the wrong thing if you really believed the stadium could be a way to generate neighborhood economic benefits. 

I’m a little bit more positive on arenas than I am on stadiums, because they’re much more useful for things besides just the billionaire owner, who’s the primary tenant. So you can be a non-basketball fan, but you can say, “Oh, cool. Bruno Mars is coming,” or “Cirque du Soleil is coming” or take your choice of big events that happen in arenas. It has some use. Meanwhile, it sure looks like the gates are opening up again for money sloshing into publicly-financed stadiums in a way that they hadn’t been — or at least had slowed way down for the last 10 or 15 years.