Study: Taxpayer-Financed Basketball Arenas Don’t Spur Local Economic Growth

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"Study: Taxpayer-Financed Basketball Arenas Don’t Spur Local Economic Growth"

Brooklyn's Barclays Center

States and cities across the United States have used generous taxpayer subsidies to build new sports facilities. But as ThinkProgress has noted, those deals often fail to live up to the economic promises cities make in order to get taxpayers to sign off on the funding. Instead, cities are often left in debt, even as the franchises come calling for more generous deals.

Most of the research proving that these deals aren’t friendly to taxpayers, however, has focused on football and baseball facilities and not on basketball arenas, which are more often built with multi-use purposes in mind. But a new study from George Washington University’s Geoffrey Propheter looked exclusively at basketball arenas and found similar results: the arenas generally don’t add economic value to a city, and in certain circumstances, they can actually hurt a city’s economy, as The Atlantic Cities’ Richard Florida writes:

The results suggest that basketball arenas do not add economic value on their own but instead are highly dependent on the local economic, social, and cultural context where they are located. The basic version of the model, covering three decades from 1979 to 2009, found “no statistically significant association between having an NBA arena or an NBA franchise and MSA regional personal income.” […]

The cities with the newest arenas took the biggest economic hit — a “decline in per capita income of about $2,430, a larger decline than in any other period, according to the study.” Alarmingly, the magnitudes of the income declines in this study “are generally larger than what has previously been observed,” the study finds.

Taxpayer subsidies often wipe out miniscule economic gains some cities do see, and in other instances, economic gains were actually “income transfers from the suburban area around the central city,” meaning the metro area as a whole did not benefit.

Arenas, Propheter concludes, “are not primary catalysts of economic development but are instead economic complements,” more likely an effect of economic development rather than a cause. Still, cities around the country continue to peg their economic hopes on these projects, even as evidence mounts that the returns almost never justify the investment.

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