The Increasing Cost of Professional Sports

This past week, Mayor Kevin Faulconer proposed his funding plan for the new Mission Valley Chargers Stadium. The proposed budget tops out at a total of $1.4 billion for the construction of the stadium which includes $200 million funded by the NFL, $300 million by the Chargers, and $173 million from bonds based on future rent.

The Mayor, who gleefully proposed the plan as a huge step in the right direction of continued cooperation, stated how important it was that the Chargers themselves pledged $300 million of their money to help fund the stadium.

What the Mayor chooses to ignore in his highlights of the plan, is the large portion of the funding which neither the NFL nor the Chargers are responsible for.

As it stands right now, the NFL and the Chargers would be on the hook for only 48% of the cost to build the stadium. Seems fair enough on the face of it, but if examined closer, the majority of the funding comes from sources not associated with the NFL or the Chargers, which seems odd because the main beneficiaries of this deal would be the NFL and the Chargers.

The graph to the right breaks down the funding by source, and while the Chargers and the NFL top the chart, a closer look at the bottom shows funding that the city, or its citizens would be on the hook for.

Outside of the private and public funding directly from the city and county, funding at the bottom reveals a cost spreading tactic we know all too well as sports fans.

The bottom portion of the chart is sourced out to those who are neither the NFL or the city of San Diego. It has become an increasing trend in pro-sports that stadiums no longer are funded by driven entrenpenuers who seek to bring a certain sport to their city. A large portion of professional sports continue to be funded by none other than you and me, the tax payers/fans.

New stadiums usually double dip in a citizen's wallet by using taxpayer money to fund the stadium, and by simply charging more to go see a game. The other secret use of public funding most stadiums benefit from is tax forgiveness for a duration of a couple decades. Suppresed interest rates on bonds and loans equals lost revenue from taxes which increases pressure to be collected somewhere else; and almost always at a cost to the tax payer.

Most recently, new stadiums for NFL teams are continually leaning on public financing to build stadiums. The top three in the past 10 years include the Indianapolis (86% public financing), Pittsburgh (78.7%), and Cleveland (74%). (Numbers courtesy of MPR)

The high cost to the public is usually sold with the overtones that stadiums are an economic boom for the city. As the saying went up north in the Bay Area "Build the stadium - Create the jobs!" However in a study done by Brooks Briefing, this rationale may be more than a little flawed.

The economic rationale that stadiums are a huge boom to the local economy is mostly overstated. In basic economic terms, a sports facility is only a good idea when the land, resources, and labor are best used through the use of sports facility. This can hold true for cities where the main export is a sport.

For example in Baltimore, Camden Yards is a main attraction for tourists and people travelling to see the team. In San Diego though, you would be hard pressed to say people travel here solely for the Chargers. Couple this realization with the fact that most stadiums are hard to keep up and maintain, the costs continue to outweight the benefits.

Most promotional studies also over estimate the amount of money stadiums bring in. They are quick to show the big number. For example, in Cincinnatti, a promotional study states that the combined revenue of the Reds and the Bengals was 245 million. Convienently they ignore what the actual net revenue stream is after all is said and done.

Another economic rationale cited by the Brooks Brief is that the stadium will be so lucrative through ticket sales and auxillary revenue streams it will basically pay for itself.

It is no secret, it costs a small fortune and a portion of your child's college fund to go see a professional sports game, and the NFL is at the top of the list for the worst offenders. This proposed budget pulls $60 million dollars from PSLs. PSLs are Personal Seat Licenses and are sold to fans to have a right to even purchase a ticket to that seat. You have to pay to even pay to get a ticket to a game.

The list continutes with ticket surcharges, parking surcharges, increased SDSU rent (which will result in higher ticket prices for Aztecs games) and "additional funding generated by the stadium", whatever that means. Keep in mind, a good portion of this funding needed to build this stadium is based solely on speculation. Not to mention, funding that will only materialize after the construction of the stadium, not before.

It is no secret that San Diego is desperate to keep the Chargers. But it is becoming a trend where professional teams threaten to leave and push these cities to bend over backwards to appease them. This is due to the monopoly leagues we have in our nation. If another football league that competed with the NFL could come in and say to San Diego, "Hey we'll build a stadium here and play here all no our own dime." it's likely in the spirit of good old fashioned American capitalism the other league would win and the Chargers would be homeless. But when you're the only game in town (no pun intended), it makes it a little harder to negotiate.

The Chargers are only doing what's in their best interest which is to get a new stadium built for them at minimal cost. It's no surprise they are following in the footsteps of other teams who got new stadiums built for them. What would be a surprise to the entire sports world, is if the city of San Diego refuses to fall for it.

#chargers #sandiego #nfl #stadium